The Georgia Trying to Eliminate Appraisal Subcommittee

[David C. Johnson]

Well Said, Tom!

You are responding to Frank's post several responses up where he writes in part (and where I may take the liberty -- with Frank's indulgence -- of inserting a brash comment here and there just to make the point) :

<span style='color:black'>"Not quite sure what you mean by uniformity
among the states and not sure if that is the goal."</span>

Yes, it's absolutely a goal.

<span style='color:black'>"Uniformity with respect to Appraisal Standards? Fine.

Expecting or Demanding above average knowledge of
State Law and the USPAP on the part of State Regulators?
Agreed."</span>

<span style='color:darkblue'>In fact, such "above average knowledge" must be Mandatory and Verifiable via Rigorous TESTING ("trust, but verify..." kind of thing).

Can't pass? -- Can't serve. Sorry.

Right, life's not fair. But just to keep it as fair as possible: No Can Pass? -- No Can Enforce. No Exceptions.

Of course, such testing's real function -- heretofore never to be uttered or scribbled again for the sake of politically correct (non)sensibilities -- will be as an IQ Test / Bum Detector. Not quite quick enough to pass muster? Don't plan on judging any of the nation's appraisers for any federally related work. Too lazy or derlict to learn and understand what you are to enforce? Don't plan on judging any of the nation's appraisers for any federally related work...

The Combination of a Lack of Knowledge and a Lack of Ethics is an insurmountable problem -- a powerful Synergy for System Failure. We cannot do much about the later, but we can sure fix the former; and thereby fix well over half the problem in a half a nanosecond: By fixing the Lack of Knowledge issue, we have just eradicated the Synergy issue.</span>

<span style='color:black'>"Uniformity with respect to enforcement? Not sure if it can be
accomplished or if that should be the goal. It might just be
unattainable..."</span>

<span style='color:darkblue'>It IS the goal, and it IS NOT attainable even with the best of efforts; with no effort, we have little more than a sad joke of a profession (admittedly I may be somewhat "hyper-aware" these days how "ununiform" it can actually become). Time is running out in this country for tolerating nonsense (yep, Steven Santora, I saw 60 Minutes last Sunday and also the week before -- both were pretty disgusting). A little common sense and decency sometimes goes a long way. This has to happen. Yes, it is my understanding there are few problems in states like Florida, Georgia and at least several others -- at least not currently -- but appointment mistakes can and do happen to the best of states. Trust me on this.</span>

<span style='color:black'>"...Take a look at other laws with respect to criminal
behavior. Is there uniform enforcement?"</span>

Makes my argument.

The nation's appraisers have NO CHOICE but to adhere to the way our rules and regulations are ENFORCED, as opposed to how they are INSTRUCTED. None of the country's appraisers should have to make such a choice; many or most do. ENFORCEMENT and INSTRUCTION must be as identical as humanly possible, and both should be as consistent across the country as humanly possible.

If the Appraisal Subcommittee has the Authority (they sure do -- and not just the authority, but the Congressional Mandate) to see that USPAP is properly INSTRUCTED, surely they have the authority to see that it is properly ENFORCED.

I believe they do. And I know they have the means:

Got appointed but cannot pass our mandatory three-day-long USPAP Regulator/ENFORCER Test? (Yep, as grueling as the CPA's final hurdle.) Don't feel bad, most don't pass. But you can sure take it again, this time next year, and once a year for the next 20 or 30 years if you like -- we're fair people here at the ASC. We know you are too, and that's why you support us completely with this effort. No need to thank us, we're just doing our job responsibly as we know you would do yours as an Enforcer.

Frank could pass such a three-day-long test in less than two -- finishing up several reports at the same time -- while nursing a slight Kentucky's Finest Straight Bourbon Wild Turkey 101 Hangover in-between, if he wanted (and if he's not a teetotaler). And I know of no one who would question his ethics or his intent. Worse case, such testing might be a rather substantial inconvenience to him -- but nothing more.

However, I'm convenienced I've met a few current Enforcers who would not pass a no-time-limit take-home version with complete sets of pre-typed, indexed cheatsheets provided -- even on the umpteenth attempt. These good fellas would not only consider such testing to be inconvenient, they'd never bother to show up. And that's fine.

Enforcing is a real tough job (to do right); a true sacrifice; and it should always be considered to be just what it was intended to be: a public service -- not a self-service.

Our profession can become a tremendous contributor to the future health and wealth of our country and our world; it just needs -- we just need, half a chance...

Just some thoughts.

Regards,

David C. Johnson

 

[Fred]

Tom,
While I normally find your observations to be both astute and accurate, I have to disagree with a couple of your points.

You comment that the ASB produces the USPAP on "behalf" of appraisers is simply not true. Yes, that is what it says in the front of the USPAP book and in other ASB advertisements, but Title XI s says the ASB is to make standards for FRTs - only. Any legs that USPAP has to run beyond the FRT boundary is created by the decisions of someone else. Read the Preamble starting at line 194. This is the truth. The state can adopt it, parties to the appraisal can agree to it, professional organizations can adopt it.

Tom, it is my fervent belief that in the light of the events and USPAP changes of the last five years, that no reasonable adjudication would find the ASB to be a automatically credible source of standards or standards theory; or find that the current USPAP text to be prevailing.

I would enjoy very much to hear your thoughts on these posts..
http://www.naifa.com/chat/USPAP/index.cgi?read=2125
http://www.naifa.com/chat/USPAP/index.cgi?read=2126

Steven Santora

 

[Tom Hildebrandt]

Steve

If I am reading the referenced posts correctly, your position is that USPAP does not contrevene law in these instances, that in fact USPAP requires the appraiser, as part of "defining the appraisal problem" and in deciding the "relevant Scope or work", to define the relevant definition of value and other factors that are required to successfully solve the appraisal problem.

I agree with that premise. It is not juridictional exception to define the appraisal problem in accordance with an appropriate jusridictions requirements. That is what USPAP requires. It is juridicitional exception if the jurisdiction requires you not to comply with a standard or rule. The fact that different jurisdictions define values in many different ways is why appraisers need to be diligent in determining exactly what the relevant definitions are. USPAP should never be defining these things, just setting forth the requirements for the appraiser to identify and correctly deal with those issues.

My favorite example of juridictional exception is in the LIPHRA program, in which the guidelines require that a cost approach be accomplished in determining market value but that you ignore depreciation (25-30 year old multi-unit subsidized apartments). The value definitions sought are market value (which was not specifically set forth in the guidelines) and preservation value (which was are spelled out) as were the procedures and methodologies to get to preservation value.

On the same level, I would argue that in condemnation appraising, the requirement for considering the impact of the project on the value of the subject is not a jurisdictional exception as many suggest. The fact that USPAP requires us to consider anticipated public or private improvements is not a contradiction to this, but merely reaffirms our obligation to consider these issues. The law also tells us we must consider them and it provides for specific guidance on how to treat these issues. I see no jurisdictional exception, just another assignment condition, one often overlooked by many "experts."

Regarding the ASB's mandate, if I understand the sequence correctly, the ASB did not create USPAP just for Title XI and FRT's, but USPAP was intended to have a broader range of application than just some limited lending work. You are correct that the ASB does not direct who adopts the standards, but encourages all appraisers and users to adopt it. That is exactly what has happened.

Are you suggesting that Title XI is the only reason USPAP and the Appraisal Foundation exist, and if so, why in the world would there have been the impetous to include other valuation services (personal property, business, etc) in USPAP?

Regards

Tom Hildebrandt GAA

 

[George Hatch]

I think we can all agree that there were a number of oragnizations that espoused similar, but slightly different, codes of ethics prior to the S&L bailout of the 1980's and FIRREA. USPAP is merely an evolution of those different codes, homogenized into a common standard and adopted by those different organizations. It could hardly be considered a contrived or artificial set of constraints developed solely for use in FRTs. This is not to say that the Appraisal Foundation works in isolation or that it doesn't respond to the needs of various users and user groups. It surely does both.

Let me address the States Rights vs. Federal Rights question yet again. Federally Regulated Transactions are, by definition, protected and ultimately underwritten by the federal government and the U.S. taxpayer, not the states. When there is a failure, the feds pay the price, not the states. We may very well sympathize with the states' position that they have been dicated the responsibilities of regulating appraisers from the feds without the federal funds to finance those activities. Further, the states have had almost no say in how the standards for appraisals and licensing are set. However, these situations are not without recourse under the present system.

The states have the authority to fund their activities by imposing licensing fees on appraisers. Which they already do. The states can also finance their enforcement costs by imposing fines, penalties and costs of enforcement on those found guilty. Which they can already do. If a state board is unable to adequately finance their operations, it is either because their licensing fees and fines are insufficient to the task, or more likely, because their method of operation is so inefficient that the money is not being spent wisely. The concept that a government agency is fiscally irresponsible would hardly be considered by many to be surprising. As a possible solution, it might be possible for these government entities to follow some business practices already proven in the private sector.

Let's consider the issue of investigator competency. I think we can all agree that there is no such thing as a super-appraiser (state investigator), competent in every single aspect of appraisal for every single property type and location. Everyone in the private sector knows that an appraiser (investigator) given a task that exceeds their competency will surely lose money relative to the fees/fines they can charge. Not only that, but the results will likely be less than satisfactory (enforceable) and it will take longer to receive. Far better in such a circumstance to hand the valuation portion (investigative review) of the deal over to someone who is demonstrably competent, on a fee basis. Voila, the deal comes in at or under budget and reasonably on time. Then the Client (state board) can focus their time productively doing what they do best, that is, to underwrite (build a case) and make a decision. Now I'm not necessarily suggesting that the state boards fee out all of their reviews, but I'm sure there are ways they can emulate the private sector and use their resources more efficiently. Chasing a weak case is expensive. Chasing a strong case in an incompetent and/or ineffcient manner is also expensive.

The other issue, the lack of state board input to the ASC and the Appraisal Foundation is, in my mind, more a function of their obstinance and desire to be free and independent of all oversight than actual lack of clout. The problem the states are fighting isn't that the Feds or the Appraisal Foundation don't care what they think. The problem is that the Feds and the AF have no practical way to respond to 50 different sets of requests and complaints. This, because each state wants to have it their own way, different from every other state. The state boards already have an organization of their own, AARO, that can speak for them as a unified group. If they would use AARO as a unified voice the same way the appraisal industry uses the Appraisal Foundation, they would find their voice and that voice would definitely be heard. Just as each of the different professional organizations had to compromise a little to adopt a common set of ethics and minimum standards (USPAP), the states could achieve similar and maybe even better results by participating more in AARO, including some compromise, and adopting their own common standards and guidelines. If done responsively and proactively, those guidelines could exceed the Federal and USPAP minimums and successfully become the standard of the day. We could all end up chasing the states' definition of appraisal ethics rather than our own. Think about that.

The ASB responds to input from various sources. There is no reason they wouldn't respond to the states if the states were unified in this one aspect the way the appraisal organizations unified for USPAP. The states' legitimate concerns deserve their fair share of consideration, no more or less than the needs of the Feds or the appraisers. But in the end, the greater good must be accomodated.


In my view, most of the problems the state boards face are problems of their own making and problems they could successfully address if they would just band together and try to work smarter within the existing system. Just as appraisers have little power with clients when they are acting reactively rather than proactively (within the system), the states will not have their fair share of power while they are in hunker-down/defense mode. They should work within the system and use it to their advantage rather than wait for the next requirement to come down the pike.


George Hatch

 

[Fred]

Tom,

First, my point in linking you to those posts was not to open a new front in the discussion with the JE as the topic.

The specific point I was supporting with the posts was-
"no reasonable adjudication would find the ASB to be a automatically credible source of standards or standards theory"

What I am suggesting is that in the Exposure Draft, the ASB apparently-
-Thinks USPAP requires specific exposure time, which it is does not.
-Cannot distinguish market value from use value by applying a market value specific requirement to a use value problem
What’s more, is that they did the same thing that one of the posters did in this thread by applying the standard "consider" to a problem, forgetting that in the flood of changes in the last five years that "consider" has been removed from the Uspsp – which goes right back to my earlier point about how we all are reflexively fall back on perfectly good standards that no longer exist. While it is excusable for an appraiser to have overlooked that the ASB yanked "consider" from the USPAP, how can the ASB be unaware of the own exposed and enacted changes?

The theme of these points is not the JE, but with all due apologies, that they call into question the technical credibility and competence of the ASB that produced the Draft – and by extension makes questionable the entire wholesale set of changes that began in 1999’ the changes that appraisers have been questioning en masse in the chat rooms and complaint letters.

Tying this back to the original theme that somehow USPAP might promote some uniformity, otherwise appraisals in GA and FL might be done different. How can there be interstate uniformity when there is not intra-ASB uniformity on "consider" or the ASB is erroneously publishing that USPAP requires "specific" exposure time and confusing use value with market value?

You can say all this is just my opinion, but I do not see how one can un-ring the bell. It would be much better to have ten pages of error free standards and a board that is above ethical reproach as some starting point to promote uniformtity or anything else. Repeating my opening point, I do not see how USPAP can withstand the onslaught to which it is now vulnerable in any reasonable adjudication setting, for anyone in possession of all the key data. I have run a little one-minute time-line summary past a couple of professional mediators who all seen to develop the same incredulous facial expression.

---------------
On the issue of the JE and cost new as the value sought, I would just suggest that it is reasonable and ethical for appraisals to consider all or any part of the bundle of rights and to use any definition of value to appraise those rights; virtually without limitation, so long as there is no misleading, especially of third parties. The real test is whether some intended user is going to mistake Replacement Value for Exchange Value and be misled. If parties wish to transact or tax at replacement cost new, that is there prerogative and an appraiser engages in no ethical conflict or USPAP compromise by finding the market data necessary to fit the given value definition and by completing the estimate. One of the issues I mention specifically in the linked post (that you are skirting past) is whether the value in question is measured by how it is defined or by what it is called. In the Virginia Tax Code case, the ASB is looking past the name to the definition, which is what I would do. Just because the client calls it market value, does not mean that it is what I would call market value. Be able to make that distinction and communicate it in a non-misleading manner is exactly what a ethical, professional appraiser is supposed to be able to do.

This linked article is long and complicated, but it addresses some of theses issues and others you raise. It was written and published before the current Exposure Draft.
http://www.naifa.com/gram/2002jan/santora-jan02.html


Steven Santora

 

[Tom Hildebrandt]

Steven

Sorry to have missed the point.

As to whether a jurisdiction would find USPAP to be credible source, I say the issue is mute if that is what the law requires. In the State of North Carolina, our board has adopted USPAP as the standard for all real property appraisal work, regardless of ehether it is FRT or not. Ergo, it is the standard. The law is the law. It may be right, it may be wrong, but it is what it is. Maybe in other states it is not so, but I do know that most federal juridictions have adopted USPAP.

Now, is it possible that USPAP, taken out of context, can be presented to be conflicting and misleading? Sure, just as can any written document.
Part of the training of attorneys (and professional mediators) is to see both sides of an issue and argue their relative merits as an advocate for their clients. It does not surprise me that a group of legally trained professionals would be incredulous about the genesis of the USPAPand the changes it is undergoing. Heck, they do not understand that an individual appraiser working for a client is presummed to be free of bias, lawyers are trained advocates, the whole concept of being impartial is not applicable to them in a client relationship. (The only individuals in the legal profession who are considered to be impartial are judges, thank God they make no mistakes! Of course, judges think of themselves as God, but I digress)

Nevertheless, I am no inclined to jump from that to saying that the document won't stand up as relevant in an adjudicated settlement. The meaning of the erm arbitrary is reasonably well established by the judicial system, took awhile, but the courts have pretty much go that nailed down.

Can the ASB make mistakes, I reckon they can and have. That is why they put stuff out for exposure, to get feedback from those who read their words with a critical (some say jaundiced) eye. So I am not inclined to throw out the ASB as unethical for trying. What would be unethical of the ASB would be to promulgate changes without asking for input. So I guess I do not see the ethical or technical issues with the ASB that you would suggest are present.

Regarding the comments on JE; I have not yet taken the time to read your treatise on USPAP , Supplemental Standards and Eminent Domain Appraisals. From your comments in the post, I would opine we are of similar minds, but bear in mind, I have not yet done my homework!

Now, quit posting me so I can get some paying work done!

Regards

Tom Hildebrandt GAA

 

[Fred]

Tom,
Save time. Don't write long answers. (lol0

If it's OK for the ASB to make mistakes, then I suppose it's OK for the NCAB to follow suit.

Steve

 

[Tom Hildebrandt]

Steve

Yep, we share a common affliction, our answers are far too long. In that vien, the following respnse to the ASB/NCAB analogy.

It is one thing to make a mistake, have it pointed out to you, admit you screwed up, and then take diligent steps to fix the problem and attempt to prevent its recurrence.

The NCAB keeps making the same mistakes, but even after being told by a majority of practitioners that they are wrong, refusing to even consider that they are wrong and continuing to make the same mistake.

Best regards

Tom Hildebrandt GAA

 

[Fred]

Tom, you think this remark,
"making the same mistakes, but even after being told by a majority of practitioners that they are wrong, refusing to even consider that they are wrong and continuing to make the same mistake. "
does NOT apply to the ASB??

I would give you 50 facts to support that your statement applies to the ASB, but that's how you get a rep for being longwinded.

 

[Fred]

Here is an excerpt from a state board sanction. I would like to hear some coments on this.

Respondent violated the Uniform Standards of Professional Appraisal Practice (USPAP),
Standards Rule 1-1, by failing to be aware of, understand and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal for the property.
Specifically, Respondent prepared an appraisal in a careless and negligent manner (USPAP 1-1&copy by committing certain errors of omission (USPAP1-1(b))in that he failed to list the actual age of the subject, failed to state that the property was located in an Enterprise Zone, and failed to note the access and egress to the major highway that the property is located alongside the subject property. In addition, Respondent failed to invoke the USPAP Departure Rule. Although the subject property was referred to as a unique design with a limited use of improvements, there was not an inadequate discussion of how it was a unique design. Furthermore, there was no reference to indicate that the client was in agreement with the performance of a limited appraisal. Respondent also failed to properly use the Highest and Best Use analysis in that he merely gave the definition of Highest and Best Use without doing the necessary analysis in violation of USPAP 2-1(a). In addition, Respondent failed to analyze the sales history (USPAP 1-5, 2-2(b)(ix)) or to disclose the sales history (USPAP 1-5) which resulted in a misleading report (USPAP 2-1(a)).


I have several oberservations, here are just two:
1- The sanction is low, which means it is more likely to be paid and responsdent is not going to try to have a judge set this aside.
2. Under violations of SR 1 (development), the finding says the respondedn "failed to list...state...note," which sound like reporting failures.