USPAP Standard Rule 2-1

[ucbruin]

False accuracy is a big problem in this industry as most appraisers fail to accurately determine the actual "accuracy" that they are capable of. Few of us are "that good"...

"Few of us are "that good""

I agree....
But still don't see why "0" or "5" couldn't also be considered false accuracy.
"0" and "5" are exact numbers....
Yes????

 

[Terrel L. Shields]

"0" and "5" are exact numbers....
Yes????

They imply a "rounding" for most of us. Most of my assignments are rarely less than $500 precision, more often to the $1000, or even $10,000 (did a $5million ranch recently...whatzapoint?)

 

[ucbruin]

They imply a "rounding" for most of us. Most of my assignments are rarely less than $500 precision, more often to the $1000, or even $10,000 (did a $5million ranch recently...whatzapoint?)

Sorry, I didn't mean a single dollar...
I was referring to the example in the thread of $121,000...

 

[Eli]

Correct. So strictly speaking about 2-1, what is "misleading" about weighted averages? Short answer nothing. Does it comply with Fannie Mae? Hint. Fannie Mae isn't USPAP. So you are not bound by Fannie rules by USPAP directly. That is, proximate, recent and similar are a fannie thing, not a USPAP thing. 2-2(a) - (viii) would be more relevant to your complaint. But again, no where in USPAP does such a method get banned.

In much of the property types I do there is no "good" way to do it. You have a wide range of values and other than proximity and recentness, the "similarity" of one mineral interest over another is often, at best, only broadly discernible. I can't see underground. That's why I tend to look at 30 or more sales when they are available. And I may simply take the mean as a metric as close as any other.

The differences between an 80 acre farm with a 40 year old house and barn is vast between one of 120 acres and a 10 year old home, but may be the "best" sale. Or is it the 60 acre farm with the 30 year old house? Or, perhaps the cost approach is the best way to value the subject? It is a judgment. And often when faced by these differences, it's not possible to single "one" sale out as the "most similar". You might determine the most proximate...but is that a meaningful metric really? or the most recent, again, in flat market conditions, that might be perfectly meaningless. It's a choice. And USPAP itself is ambivalent about some choices as it notes, as it says the "amount of detail required will vary with the significance of the information to the appraisal."
False accuracy is a big problem in this industry as most appraisers fail to accurately determine the actual "accuracy" that they are capable of. Few of us are "that good"...

We are that good. It takes a ton of time though. "Fastest and cheapest". ???

The more time I spend using recognized techniques and methodology, the better I get!!!!

 

[Mike Kennedy]

violation of USPAP standard rule 2-1 b

So I'm working on a report, in front of me. SCA has indications of $275, $328, $365, and $292.

I've given Sale No. 1 the most weight, along with Sale No. 4. Can you guess the value? I would think USPAP could give you the number.

280

 

[App601]

280

Why not $275? would $5,000 make a difference between closing a sale or a refi?
If the sales price is $275 or less I would use $275 If it is $280 and comp 4 is second most similar I would use the weighted average between 1 and 4 which yields $283,500

Lets not forget that appraising is not an exact science or "art" I would say

 

[ucbruin]

Elliott did give us a hint/clue....

"$275, $328, $365, and $292"
"I've given Sale No. 1 the most weight"

 

[Deleted member 130081]

Not to start but aren't Fannies "rules" "guidelines" actually assignment conditions?

Only if they are cited as such in the engagement. What way too many players, lenders and appraisers alike, do not understand, is that the guidelines set forth by FNMA speak to the underwriter/originating lender, not the appraiser. They may say things like "the appraiser must do this or must do that", but the reality is, the appraiser "must" not do any more than what we sign our name to or have agreed to do per engagement. The appraisal guidelines are written to underwriters as a tool to determine if the appraisal qualifies as an adequate valuation for the asset. If the appraiser has or has not done something, it affects the eligibility of the loan to be sold to FNMA, but again, an appraiser is not required to do it just because it may or may not render the loan eligible. Appraisers have zero relationship with FNMA, which is why exactly zero of them were sued by FNMA during the buybacks, no matter how bad the appraisal may have been.

Further, the practice of underwriters/lenders imposing the FNMA guidelines on appraisers is an assault on our independence. FNMA did not intend for appraisers to write reports to the guidelines, rather intended the guidelines to be used as a tool to test the appraisal. Requiring appraisers adhere to the guidelines is counter-productive in terms of independence and is not unlike the fox guarding the henhouse or asking the appraiser to simply say what FNMA wants to hear at the request of the originating lender. FNMA ought to ban the practice.

 

[djd09]

I don't know. Fannie forms, fannie uad, fannie ratings, fannie CU. Better have a very good reason to vary.

 

[George Hatch]

It's the appraiser's responsibility to use some due diligence in identifying the relevant assignment conditions. We're obviously not expected to be mind readers but that doesn't justify making blind assumptions about what issues are or are not relevant to a user.

We *often* see with appraisers getting stipped after the fact for not addressing assignment conditions that were knowable had they simply made the effort to find out. If you're working with a regular client and you already know what they normally want then in lieu of info to the contrary it's usually going to work out to do what you normally do for them. But if it's a new client or a new appraisal situation that calls for a little more diligence on the issue.

Even if a client has no policy of their own, just knowing that enables you to understand how much discretion you have with these issues, and goes a long ways toward helping you avoid the moving goalpost scenarios.

I have client relationships that go back almost 25 years at this point, and I will STILL pick up the phone to discuss a new-to-me situation with a chief appraiser just to make sure we're on the same page as to how I'm handling it. I consider my willingness to exercise some diligence on identifying assignment elements to be a key to my success with my clients.