• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.
Status
Not open for further replies.

PropTaxMan

Freshman Member
Joined
Feb 2, 2014
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
California
Been a while since I have been on the forum. I formerly worked as a property tax appraiser, then as an institutional appraiser for State Trust Land Management and now I am a Right-of-Way Agent.

My boss handed me an appraisal yesterday and asked me to analyze it. This is right up my alley since my education background is political science. However, I am not licensed. The "review" was not so much to determine USPAP compliance, but rather to get a feel for if I thought the Appraiser's opinion of value would be supportable. I work for a public agency that is seeking to buy the land for environmental mitigation measures. The property in covered with rare plants, wetlands and oak canopy. Attempting to improve this parcel would require County, State and Federal sign-off. It is currently located in an area zoned for Light Industrial.

I open the appraisal and immediately notice issues: namely, it is signed by two people, only one of whom is licensed by the State of CA, and there is no mention that the other signatory provided significant assistance. In fact, it says no one provided significant assistance. Each page footnote only has the name of the unlicensed appraiser on it. The unlicensed appraiser lists a different address and city than the licensed appraiser. The unlicensed appraiser has a ton of stuff in his CV at the end of the appraisal report, but the most recent entry is USPAP class from 2007. He states he is qualified to perform the appraisal. None of his CV mention anything about appraising properties with environmental burdens etc.

The appraisal says they used MLS and County records to verify sale data...in my experience, these records can often be incomplete or even inaccurate.

The appraiser, in determining HBU, says that determining HBU is an element in determining HBU (I am not kidding on this). He says the HBU is industrial because that is what the area is zoned for. He says industrial is feasible because that's what it is zoned for, but that the environmental issues would need to be cured. At no point does he address what the potential costs to cure in either time or money might be. He also states this has been the hardest assignment of his career, which leads me to wonder if there's a competency issue here. his HBU also does not list as vacant or improved.

Furthermore, all of his comparable sales are anywhere from 18 to 38 acres smaller than the subject (subject is 52.123 acres), and they are all located at least 35 miles away from the subject. This seems important to me because the comparable sales area is flat land valley, while the subject is located in the foothills. There is no mention of a location adjustment (or reason why not). Also, the comparables don't all have the same zoning (there are a couple of agriculture zoned/in-use) comparables. On a couple of comps, he rates them as superior DUE TO SIZE compared to the subject, while rating the others as inferior DUE TO SIZE relative to the subject. 3 of the sales are over a year old and there is no adjustment for time, nor is there a discussion as to why a time discussion might be warranted (or not). The appraiser also didn't mention anywhere in his report how the environmental issues with the subject would affect the value, despite stating that he would. The appraisal report does not contain an adjustment grid.

Also, the statement of assumptions and limiting conditions the appraiser says that they assume there are no unknown soil issues that could affect the value, but later in the report they say that an in-depth soil analysis would be required to determine suitability for development.

So my question is this: I'm not a licensed appraiser, nor am I a trained review appraiser, but I feel convinced that there are several USPAP violations in the appraisal report and that the appraisal report is in some places misleading, incomplete or inaccurate. Should I contact my state board for appraiser licensing about this? Our agency is NOT the client on this, the appraisal report was passed to us by the client so that we could entertain purchasing the parcel from them.
 
Last edited:

BRCJR

Elite Member
Gold Supporting Member
Joined
Sep 20, 2005
Professional Status
Licensed Appraiser
State
Virginia
You have formed an opinion about the appraisal not being worthy of belief, it appears.
Have you told your employer, "we cannot rely on this for our purchasing decision?"
Is there a statement indicating you should not be relying on the document, anyway, because you are not the Intended User?
What are the USPAP violations you believe exist?
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
There are a number of issues here.

My boss handed me an appraisal yesterday and asked me to analyze it. This is right up my alley since my education background is political science. However, I am not licensed. The "review" was not so much to determine USPAP compliance, but rather to get a feel for if I thought the Appraiser's opinion of value would be supportable. I work for a public agency that is seeking to buy the land for environmental mitigation measures. The property in covered with rare plants, wetlands and oak canopy. Attempting to improve this parcel would require County, State and Federal sign-off. It is currently located in an area zoned for Light Industrial.
First, the USPAP applies to licensed appraisers engaged as such as well as non-licensed appraisers who voluntarily accept it as the standards. Depending on other regulations, you don't necessarily need to be a licensed appraiser to complete a Standards Rule 3 USPAP compliant review. From what I read, that isn't what you are expected to do; so, you can review a report just as anyone else can (that's not your question as I understand it, but it is good to set the premise up because it may apply below).

I open the appraisal and immediately notice issues: namely, it is signed by two people, only one of whom is licensed by the State of CA, and there is no mention that the other signatory provided significant assistance. In fact, it says no one provided significant assistance. Each page footnote only has the name of the unlicensed appraiser on it. The unlicensed appraiser lists a different address and city than the licensed appraiser. The unlicensed appraiser has a ton of stuff in his CV at the end of the appraisal report, but the most recent entry is USPAP class from 2007. He states he is qualified to perform the appraisal. None of his CV mention anything about appraising properties with environmental burdens etc.
Depending on the assignment, it is not necessary for the signatories of an appraisal to be licensed appraisers (as I discussed above). If both persons signed the certification, they are certifying that they have followed the USPAP. The USPAP requires that signers of the letter of transmittal also must sign the certification; so I'll assume the two signed in both places (assuming there was a letter of transmittal).
While it is good practice to identify which signers did what duties, it is not required... except for the part in the certification that asks the signers if they inspected the property.

The appraisal says they used MLS and County records to verify sale data...in my experience, these records can often be incomplete or even inaccurate.
That's true in many cases. This would go to the reliability of the data. You may determine that simply relying on these documents is insufficient given the intended use of the assignment.

The appraiser, in determining HBU, says that determining HBU is an element in determining HBU (I am not kidding on this). He says the HBU is industrial because that is what the area is zoned for. He says industrial is feasible because that's what it is zoned for, but that the environmental issues would need to be cured. At no point does he address what the potential costs to cure in either time or money might be. He also states this has been the hardest assignment of his career, which leads me to wonder if there's a competency issue here. his HBU also does not list as vacant or improved.
This is a problem, and would call into the credibility of the H&BU analysis. If the report gets this one wrong, that's when big problems can pop up.

Furthermore, all of his comparable sales are anywhere from 18 to 38 acres smaller than the subject (subject is 52.123 acres), and they are all located at least 35 miles away from the subject. This seems important to me because the comparable sales area is flat land valley, while the subject is located in the foothills. There is no mention of a location adjustment (or reason why not). Also, the comparables don't all have the same zoning (there are a couple of agriculture zoned/in-use) comparables. On a couple of comps, he rates them as superior DUE TO SIZE compared to the subject, while rating the others as inferior DUE TO SIZE relative to the subject. 3 of the sales are over a year old and there is no adjustment for time, nor is there a discussion as to why a time discussion might be warranted (or not). The appraiser also didn't mention anywhere in his report how the environmental issues with the subject would affect the value, despite stating that he would. The appraisal report does not contain an adjustment grid.
The presentation of the data (grid or no grid) isn't a significant issue IMO... although the expectations of what such a report should convey is part of the SOW decision.
The bigger issue (as you likely conclude) is the lack of analysis/commentary supporting how the data was evaluated and reconciled.
One key item here is, who are the intended users? Based on that, the report should provide sufficient commentary and analysis so that they can rely on it for whatever their intended use is.
(Also, is this an "appraisal report" or "restricted appraisal report"? I assume it is an appraisal report. That report-format also can explain some of the things you bring up.)

Also, the statement of assumptions and limiting conditions the appraiser says that they assume there are no unknown soil issues that could affect the value, but later in the report they say that an in-depth soil analysis would be required to determine suitability for development.
I don't see this as a contradiction.
The report states that it assumes there are no soil issues. It later states that an in-depth soil analysis would be required to determine development suitability.
If these two statements were combined in the general assumptions to begin with (like this):
The report assumes that there are no soil issues that could affect the value. To determine development suitability, an in-depth soil analysis is required.​
You'd probably not have an issue. Such comments are common in the general assumptions section. However, if information is known to the contrary (or, I'd go so far as to say if it is reasonable to believe there is something to the contrary), then making a blanket general assumption would be problematical.

So my question is this: I'm not a licensed appraiser, nor am I a trained review appraiser, but I feel convinced that there are several USPAP violations in the appraisal report and that the appraisal report is in some places misleading, incomplete or inaccurate. Should I contact my state board for appraiser licensing about this? Our agency is NOT the client on this, the appraisal report was passed to us by the client so that we could entertain purchasing the parcel from them.

Anyone can file a complaint. You raise some potentially serious issues.
For a fact, if I were in your shoes, I would recommend not relying on this appraisal as it is presented.

My own litmus test for filing a complaint is this:
A crappy report does not necessarily meet the complaint-filing threshold. If I think the report is intentionally misleading (and I'm the client/intended user), then I recommend a complaint be filed (that's an ethics violation, which is the most serious). If I think it is a competency issue, then I'm going to think a little further on it. If I think the appraiser had a one-off, and no harm was done (to me, as the client/intended user) I'm going to contact the appraiser directly and share with them my concerns, but likely not file a complaint.

You are not the client but are you an intended user (stated in the report)? If an identified intended user, the report is supposed to be of such quality that you can rely upon it for the intended use. If it is materially deficient, such that you cannot, then a complaint may be warranted. Before I submitted a complaint, I'd raise my concerns with the appraisers. But be sure that your concerns are legitimate (like, a non-licensed appraiser signing the report; that may not be an issue).

You could tell the property owner that this is one of the worst reports your agency has seen, and you wouldn't rely on it to line a birdcage. That if they want to provide evidence of value to you, they better get another appraisal from a different source and it better be credible. They are the one that has been harmed here; they may choose to file a complaint.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
He says the HBU is industrial because that is what the area is zoned for.
If so zoned, then "as is" it cannot be used for anything else, right? So if it needs mitigated to be Industrial, here its not a big deal to swap this land for reclaimed "wetlands" usually at a relatively low cost.

Curious how many sales you expect to find near the subject that are wetlands zoned industrial...or even sold wetlands or sold industrials. What kind of comps are you expecting? Laydown comps? The Alaska v Wold case is a classic example where there simply are very few comparables. It resulted in a sanction of the appraiser, who appealed and won, and the courts basically repudiated the testimony of a holy-than-thou CG working for the state.

Sounds like you are too biased to be making this assessment, licensed or not. Send it for review from someone else. After all, you have a dog in this fight if you are trying to kick this back because you disagree with the value... ROW agents here are paid bonus for leasing/ buying ROW within budget.
 

PropTaxMan

Freshman Member
Joined
Feb 2, 2014
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
California
You have formed an opinion about the appraisal not being worthy of belief, it appears.
Have you told your employer, "we cannot rely on this for our purchasing decision?"
Is there a statement indicating you should not be relying on the document, anyway, because you are not the Intended User?
What are the USPAP violations you believe exist?

My boss says he will also review the appraisal and we will discuss it on Monday. I am not well-acquainted with the market area so I do not know whether the value is truly representative of a market appraisal, but based on reading the appraisal I believe there is sufficient reason to believe that the results may not be credible.

I believe there may be a potential violation of the following USPAP rule(s):

1. Competency Rule

2. Licensed appraiser signing off unlicensed appraiser's work, but no statement of assistance provided in report. Even a trainee has to have a permit. (Standards Rule 2-3)

3. Appraisal is potentially misleading for not adequately addressing the impact of the environmental constraints on the subject parcel and no explanation given as to how those constraints might affect the subject's value despite a statement from appraiser that they would address that aspect.

4. Serious deficiency in performing HBU analysis and stating a HBU as vacant or as improved. Appraiser just says HBU is industrial because it is zoned industrial. It's physically possible to use it as industrial because it's zoned industrial. It's legally permissible to use it as industrial because it's zoned as industrial. It's feasible to use it as industrial because it is zoned as industrial and because industrial parcels are not widely available in the subject market area. The appraiser completely ignores whether it is financially feasible to use it as zoned in their HBU analysis other than to say if the environmental issues are cured it could be used. However, at another place in the report, they say that a thorough soil analysis would be required to determine whether the parcel could be developed (again, making me wonder about competency). Failure to identify HBU-Vacant and HBU-As improved would constitute a violation of USPAP Rule 1-3 a & b I think.

5. Comparable sales analysis seems inconsistent and flawed. All parcels are smaller than subject, it is stated that some are rated superior to subject due to size, and some are rated as inferior to subject due to size. No mention of time adjustments for comps older than a year (or why they didn't adjust for age). 2 of the comps are zoned for agricultural...a different use than the subject altogether. The appraiser does not even acknowledge this difference, much less address why they chose to include them. 5 out of 7 comparable sales are located on a flatland within a 10-15 minute drive of a major urban area with proximity to two major US Interstates and a US hwy, while the subject is located about 35 miles away in the foothills with access only to a highway, but no adjustments are given or discussed for what, IMO, is a huge consideration for a potential buyer looking for this type of property.

6. Not a USPAP violation, but reliance on MLS and County records to verify sales is a questionable decision, IMO. I have found them to be at times incomplete or inaccurate.
 

PropTaxMan

Freshman Member
Joined
Feb 2, 2014
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
California
If so zoned, then "as is" it cannot be used for anything else, right? So if it needs mitigated to be Industrial, here its not a big deal to swap this land for reclaimed "wetlands" usually at a relatively low cost.

Curious how many sales you expect to find near the subject that are wetlands zoned industrial...or even sold wetlands or sold industrials. What kind of comps are you expecting? Laydown comps? The Alaska v Wold case is a classic example where there simply are very few comparables. It resulted in a sanction of the appraiser, who appealed and won, and the courts basically repudiated the testimony of a holy-than-thou CG working for the state.

Sounds like you are too biased to be making this assessment, licensed or not. Send it for review from someone else. After all, you have a dog in this fight if you are trying to kick this back because you disagree with the value... ROW agents here are paid bonus for leasing/ buying ROW within budget.

I work for a public agency. While the county may in fact have a dog in the fight, I do not care one way or the other what the county pays for the property. I don't receive any bonuses and I don't get my pay docked based on how much they spend or save. I don't know whether the value is accurate or not. It seems hard to justify the value on that parcel once you look at the appraisal and see the types of comps used and the (lack of) adjustments made. My issue really is that the appraiser seemed to be using other ag and industrial comps within a 10-15 minute drive of a major metro flatland area to support a value opinion of foothills parcel with environmental issues with no discussion of adjustments or lack thereof, no discussion of how the environmental issues might affect the value of the parcel, and that the HBU analysis seemed incomplete.
 

BRCJR

Elite Member
Gold Supporting Member
Joined
Sep 20, 2005
Professional Status
Licensed Appraiser
State
Virginia
My boss says he will also review the appraisal and we will discuss it on Monday. I am not well-acquainted with the market area so I do not know whether the value is truly representative of a market appraisal, but based on reading the appraisal I believe there is sufficient reason to believe that the results may not be credible.

I believe there may be a potential violation of the following USPAP rule(s):

1. Competency Rule

2. Licensed appraiser signing off unlicensed appraiser's work, but no statement of assistance provided in report. Even a trainee has to have a permit. (Standards Rule 2-3)

3. Appraisal is potentially misleading for not adequately addressing the impact of the environmental constraints on the subject parcel and no explanation given as to how those constraints might affect the subject's value despite a statement from appraiser that they would address that aspect.

4. Serious deficiency in performing HBU analysis and stating a HBU as vacant or as improved. Appraiser just says HBU is industrial because it is zoned industrial. It's physically possible to use it as industrial because it's zoned industrial. It's legally permissible to use it as industrial because it's zoned as industrial. It's feasible to use it as industrial because it is zoned as industrial and because industrial parcels are not widely available in the subject market area. The appraiser completely ignores whether it is financially feasible to use it as zoned in their HBU analysis other than to say if the environmental issues are cured it could be used. However, at another place in the report, they say that a thorough soil analysis would be required to determine whether the parcel could be developed (again, making me wonder about competency). Failure to identify HBU-Vacant and HBU-As improved would constitute a violation of USPAP Rule 1-3 a & b I think.

5. Comparable sales analysis seems inconsistent and flawed. All parcels are smaller than subject, it is stated that some are rated superior to subject due to size, and some are rated as inferior to subject due to size. No mention of time adjustments for comps older than a year (or why they didn't adjust for age). 2 of the comps are zoned for agricultural...a different use than the subject altogether. The appraiser does not even acknowledge this difference, much less address why they chose to include them. 5 out of 7 comparable sales are located on a flatland within a 10-15 minute drive of a major urban area with proximity to two major US Interstates and a US hwy, while the subject is located about 35 miles away in the foothills with access only to a highway, but no adjustments are given or discussed for what, IMO, is a huge consideration for a potential buyer looking for this type of property.

6. Not a USPAP violation, but reliance on MLS and County records to verify sales is a questionable decision, IMO. I have found them to be at times incomplete or inaccurate.


Looks like you have looked and critiqued with detail. Can't fault you on that.

I do think Unlicensed Trainees are permitted unless otherwise agreed upon.

If the Appraiser's peers would use the MLS and County records I don't think this Appraiser could be faulted for doing so themselves.
 

PropTaxMan

Freshman Member
Joined
Feb 2, 2014
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
California
There are a number of issues here.


First, the USPAP applies to licensed appraisers engaged as such as well as non-licensed appraisers who voluntarily accept it as the standards. Depending on other regulations, you don't necessarily need to be a licensed appraiser to complete a Standards Rule 3 USPAP compliant review. From what I read, that isn't what you are expected to do; so, you can review a report just as anyone else can (that's not your question as I understand it, but it is good to set the premise up because it may apply below).


Depending on the assignment, it is not necessary for the signatories of an appraisal to be licensed appraisers (as I discussed above). If both persons signed the certification, they are certifying that they have followed the USPAP. The USPAP requires that signers of the letter of transmittal also must sign the certification; so I'll assume the two signed in both places (assuming there was a letter of transmittal).
While it is good practice to identify which signers did what duties, it is not required... except for the part in the certification that asks the signers if they inspected the property.


That's true in many cases. This would go to the reliability of the data. You may determine that simply relying on these documents is insufficient given the intended use of the assignment.


This is a problem, and would call into the credibility of the H&BU analysis. If the report gets this one wrong, that's when big problems can pop up.


The presentation of the data (grid or no grid) isn't a significant issue IMO... although the expectations of what such a report should convey is part of the SOW decision.
The bigger issue (as you likely conclude) is the lack of analysis/commentary supporting how the data was evaluated and reconciled.
One key item here is, who are the intended users? Based on that, the report should provide sufficient commentary and analysis so that they can rely on it for whatever their intended use is.
(Also, is this an "appraisal report" or "restricted appraisal report"? I assume it is an appraisal report. That report-format also can explain some of the things you bring up.)


I don't see this as a contradiction.
The report states that it assumes there are no soil issues. It later states that an in-depth soil analysis would be required to determine development suitability.
If these two statements were combined in the general assumptions to begin with (like this):
The report assumes that there are no soil issues that could affect the value. To determine development suitability, an in-depth soil analysis is required.​
You'd probably not have an issue. Such comments are common in the general assumptions section. However, if information is known to the contrary (or, I'd go so far as to say if it is reasonable to believe there is something to the contrary), then making a blanket general assumption would be problematical.



Anyone can file a complaint. You raise some potentially serious issues.
For a fact, if I were in your shoes, I would recommend not relying on this appraisal as it is presented.

My own litmus test for filing a complaint is this:
A crappy report does not necessarily meet the complaint-filing threshold. If I think the report is intentionally misleading (and I'm the client/intended user), then I recommend a complaint be filed (that's an ethics violation, which is the most serious). If I think it is a competency issue, then I'm going to think a little further on it. If I think the appraiser had a one-off, and no harm was done (to me, as the client/intended user) I'm going to contact the appraiser directly and share with them my concerns, but likely not file a complaint.

You are not the client but are you an intended user (stated in the report)? If an identified intended user, the report is supposed to be of such quality that you can rely upon it for the intended use. If it is materially deficient, such that you cannot, then a complaint may be warranted. Before I submitted a complaint, I'd raise my concerns with the appraisers. But be sure that your concerns are legitimate (like, a non-licensed appraiser signing the report; that may not be an issue).

You could tell the property owner that this is one of the worst reports your agency has seen, and you wouldn't rely on it to line a birdcage. That if they want to provide evidence of value to you, they better get another appraisal from a different source and it better be credible. They are the one that has been harmed here; they may choose to file a complaint.

Thanks for taking the time to dissect my lengthy post and address the various aspects. I appreciate your analysis and pretty much concur with it.
 

TRESinc

Elite Member
Joined
Dec 1, 2011
Professional Status
Licensed Appraiser
State
Ohio
2. Licensed appraiser signing off unlicensed appraiser's work, but no statement of assistance provided in report. Even a trainee has to have a permit. (Standards Rule 2-3)

you may want to brush up on your state laws about licensing requirements. in CA a license is only required in a federally related transactions and real estate related financial transactions when Federal law requires the services of such appraisers.

https://www.ASC.gov/State-Appraiser-Regulatory-Programs/StateOperationsAndRequirements.aspx
 

PropTaxMan

Freshman Member
Joined
Feb 2, 2014
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
California
Quick update...spoke to my boss about mt issues with the appraisal over lunch.

I work for County DOT, but it is another agency altogether seeking to acquire the property. To be candid, the parcel is perfectly suited for the reason they want to acquire it. However, in this particular instance, I would think that the County would be an atypical buyer seeking this type of property compared to the average buyer. At the end of the day, DOT has no vested interest in the outcome of the transaction either way, so I think that would resolve potential questions as to bias.

My boss was asked by the head of the other agency to give feedback on the appraisal, (which he subsequently delegated to me, LOL). Over lunch we both concurred that the best course of action is to explain why we think the appraisal is suspect to the agency head and recommend that he order his own appraisal of the subject property. We also decided that it's not really our role or purpose to file any sort of complaint against the appraiser(s) that performed the work. Thanks to everyone that chimed in, I really appreciate your feedback.
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Top

AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock
No Thanks