A former member of the State Board has given me permission to post her open letter to Arizona appraisers:
February 21, 2016
The Board of Appraisal was abruptly abolished last year and there is a lot of confusion and discontent surrounding the new regulatory process. As a former AZ Board of Appraisal member (2005-2007), a Certified Residential Appraiser, and someone who used to do land use enforcement for a state regulatory agency (not Arizona), I would like to share my perspective on some of the issues facing our appraiser community. The following comments are mine and mine alone.
The Board of Appraisal was abolished last year. Appraiser regulatory functions now fall under the Department of Financial Institutions (DFI). The Superintendent of DFI now has the authority that the Board used to have. This situation has advantages and disadvantages.
1. The new system is more flexible and generally faster, because there are no requirements for public notice. Under the old system, all meetings and informal hearings had to comply with the open meeting rules. Meetings required published agendas with sufficient notice. Meeting agendas could not be adjusted on the fly in response to changing conditions. Now meetings and informal hearings can be held on a flexible schedule at the mutual convenience of everyone involved. That is a big improvement over the old system.
2. DFI's approach to handling complaints is more confidential than the prior Board of Appraisal process. DFI meetings and informal hearings are private. Appraisers on the hot seat are no longer on public display during the process. This is a good thing. Everyone makes mistakes. There is no such thing as a perfect report. Do you really want everyone knowing the nitty-gritty details of how you messed up that one time? Private hearings have a lot of advantages.
3. The actual complaint process is nearly identical to what had been in place prior to the move, except that the Superintendent of DFI has replaced the Board of Appraisal in the process. The following process is based on information provided to me by Debra Rudd, the Appraisal Division Manager, with my comments added:
- When a complaint comes in it is screened for minimal criteria. This has not changed.
- A case number is assigned and letter sent to Respondent (aka the appraiser who is the subject of the complaint.) The Respondent has 30 days to respond to the complaint, send in their appraisal & workfile. This has not changed.
- A one-time 30 day extension is allowed if needed by the Respondent. This has not changed.
- The complaint is given to a staff investigator or subject matter expert if deemed necessary. This has not changed.
- When the investigation is complete it is now given to the Appraisal Division Manager (currently Debra Rudd) for review. It used to go to the Board of Appraisal for the Initial File Review.
- The Manager reviews the investigation report if there was one, and makes a recommendation to the Superintendent for resolution. Recommendation options are either to dismiss, offer a consent agreement, or ask for more investigation. The investigation report used to go to the Board instead, but the recommendation process was similar.
- If Respondent wants to meet or if there are questions by staff, a meeting is set up with a mutually agreed on time and place. The meeting can take place either before or after the consent agreement is offered. This is the appraiser's chance to present their case. Remember that consent agreements are by CONSENT. Terms can be negotiated. This meeting takes the place of the old "Informal Hearing" in front of the Board.
- If a consent agreement cannot be negotiated, the next step is a formal hearing at OAH (Office of Administrative Hearings), in front of an Administrative Law Judge (ALJ). Previously there was an option for a formal hearing in front of the Board, but there is no longer a Board so the formal hearing process is likely to be at OAH. This is not necessarily a bad thing, because there are now better opportunities for informal discussions/meetings/hearings than there used to be. Formal OAH hearings result in the ALJ making findings, with recommendations back to the regulatory agency. It is still the regulatory agency (formerly the Board, now the Superintendent) that makes the final decision. That process has not changed.
- The Board used to have the power to make all final decisions. Now it is the Superintendent of DFI who makes the final decisions.
- If warranted for the health, safety or welfare of the public, an order of Summary Suspension could be done almost immediately, with a hearing to follow at OAH within 60 days. This option is rarely used and is only for extremely severe issues.
4. Some appraisers have complained that the Appraisal Division Manager (currently Debra Rudd) is now "judge, jury and executioner." Actually, it is the Superintendent of DFI who has the final say. The Division Manager makes recommendations to the Superintendent. Superintendents don't always follow the recommendations of their underlings. Yes, an appraiser can wind up at an impasse with regulators during the complaint resolution process. Is that really different from before? The complaint resolution process is basically the same as what we used to have, except it is the Superintendent and not the Board making the final decisions.
5. The Superintendent of DFI will expect appraisers to know the rules, follow proper appraisal techniques, and behave like the responsible professionals we claim to be. It is a reasonable expectation.
If you do have a complaint filed against you, be open to the possibility that you might have made an error. We all make mistakes. There is no perfect report.
Arrogance and belligerence will likely earn you a difficult path through the complaint resolution process. If you disagree with DFI's findings, present your case calmly and logically and support your position with facts. Behaving like a professional is likely to be more productive than butting heads with whoever is in charge, or complaining about unfairness in the system. That hasn't changed.
6. Several people have been demanding institution of a volunteer peer review system. Volunteer peer review systems have significant drawbacks.
Reviewing a report for complaint resolution requires much more time and effort than reviewing a report for a typical lender client. How many appraisers understand the difference? How many can afford to do that advanced level of review work without being compensated? How often are they willing to do so? WHY would a truly competent appraiser be willing to take on that extra workload more than once or twice if they get no compensation? How many truly competent, altruistic review appraisers exist in Arizona? Enough to handle the complaint load for the entire state, year after year? Probably not.
Residential appraisers have been asking for residential peer reviewers. Reviewing a report for complaint resolution exposes the reviewer to more liability than a typical review assignment. Would a typical residential E&O policy cover an appraiser for that level of review work? Probably not. Obtaining the appropriate insurance coverage is expensive. Many certified general appraisers have the appropriate level of coverage. Few residential appraisers do. WHY would a competent residential reviewer take on that extra liability with no compensation? If they don't realize there is additional liability, are they truly competent for the assignment?
Finding competent peer reviewers is no easy task. Finding enough competent peer reviewers willing to take on the additional workload and liability - for free - is nearly impossible.
7. The current system is much more volatile than the previous system. The Superintendent position appears to be a revolving door. The Appraisal Division Manager and staff must provide the continuity. Previously there was a certain level of institutional memory on the Board. Now the institutional memory can disappear with one or two people leaving.
Superintendents of DFI are political appointees. Few will have a deep understanding of USPAP or appraisal issues when they come into the position. The Appraisal Division Manager will have to make sure that incoming Superintendents understand the issues, since the Superintendent is the final arbiter of the complaint process. Training a supervisor is a delicate and often frustrating process. Whoever is managing the Appraisal Division deserves our support, especially through these times of transition.
Thanks for listening.
Sarah Vetault
AZ Certified Residential Real Estate Appraiser
Tucson, AZ
