We Must Start Policing Our Own!

[George Hatch]

The "I-don't-get-paid-enough-to-do-this" argument is really pretty thin. Due diligence and the amount of the fee are supposed to be unrelated. How much diligence do we normally follow when we do a review for one of our paying clients? If, in the course of that review, we come across clear and unequivocal misconduct, do we not normally spend a little extra time on our review to make sure that everything lines up? If so, we have already performed a review that is sufficient to accompany a complaint. So how much extra "unpaid" work are we talking about here?

I can see two different philosophies at work here, both based on whether the reviewer is actually doing what they're supposed to be doing. One the one hand, if our work product as reviewers is truly commensurate with an appropriate scope of work then there should be no problem with a state board looking at it and using elements from it as part of their investigation. On the other hand, if our normal review work product is insufficient to withstand scrutiny by a state board then it is definitely insufficient for our clients to use. No reference to anyone on this forum, but I believe that at least some of the opposition to reviewers sending the worst of the worst is based at least in part on some insecurity on the reviewers' part as to whether their work product is truly sufficient in general. The only suggestion I can make is that if a reviewer is at all insecure about their work, they should remedy it by working on their competency and ensuring that their work is compliant with USPAP as well as their state's regulations. Poor review work is just as much an anathema to our profession as poor appraisal work.

There are many sides to this puzzle and not all of them will necessarily come together at the same time. We may find ourselves providing information that either gets misused or is ignored. That possibility isn't an excuse for burying our heads in the sand. Unfortunately, there are some states where the enforcement practices are uneven and/or unfair. If an individual state board has a pattern of inappropriate enforcement practices, that is a factor that will be beyond the control of an individual appraiser or reviewer. However, the fact that a state board is or is not enforcing their laws fairly should not be interpreted as a license by appraisers or reviewers to commit malpractice or malfeasance.

There are those who interpret their ethics based solely on what they think they can get away with and what other people are getting away with. I believe this line of thinking is currently under attack in our society (witness the accountants and the corporations), and in my personal opinion, rightfully so. Let us not follow in their footsteps. Let's have the intelligence to learn from the mistakes and misdeads of others.


George Hatch

 

[Dale Smalley]

So where do you stop.
Fraudlent Appraisals
Bad Appraisers
A bad appraisal
The illegal addition
Pencil searches
The teenagers in the back room smoking pot.
Are we going to join GWs TIPs patroll?

Of course if you get rid bad appraisals I will have no review work and everything will be perfect. :lol:

 

[Wally Jones]

Dale,

Please re-read Bob's post from 10:52.

We don't get paid to turn in fraudulent appraisals and bad appraisers, but the COST of not doing so is too high for me to accept.

Illegal additions - do you not bring them to anyone's attention?

Pencil searches - are they acceptable to you?

Smoking pot - now we're crossing into different waters, however, will we choose to navigate using a different moral compass?

I know you're trying to make a point by saying we could easily carry this "turn 'em all in" philosophy too far, and you're right.

The answer to your question, "So where do you stop", is that it's ultimately up to your conscience and personal belief system. This forum probably won't change your mind but hopefully we're all getting a chance to consider other perspectives on a tough issue.

 

[Austin]

Along these lines, I am working on an interesting appraisal with interesting implications. Tuesday I did an appraisal of a doublewide home with an added enclosed conventionally constructed breezeway and two-car garage. I used not only the best, but also the only sale data available in this county. There are approximately 12 on average re-sales of manufactured homes in this county annually. I don’t remember ever seeing one over $100,000 unless it had big acres. A few years ago I read a report that 350 new manufactured homes were sold annually in this county, but few re-sales. Lots of repo off site sales though. I appraised one recently, two years old, had $55,000 owed to the lender, was in a mh park and sold for $15,000.
I get a call Wednesday from the irate owner who is a car dealer no less. Seems he purchased the home in 2,000 from his brother who was the former sales manager of the home dealership. He installed it on his site on a brick foundation, installed well and septic all for a cost of $93,000. The lot cost him $15,000. The home is manufactured built to HUD code. Then he hires a builder to build an attached-enclosed-good-quality 12 x 15-foot breezeway and 24 x 24 foot two car garage for $35,000. Then he installs $6,000 in chain link fencing and plants $8,000 in exotic trees for a total package cost of $157,000. If he doesn’t get an appraisal of $140,000, something is really wrong he says. Apparently he is refinancing.
The dealership from which he purchased the home is about two miles from my home, so I paid them a visit. The sales manager gave me a tour and was very helpful except he was kind of vague when I ask if the home was manufactured or modular built to HUD or BOAC or equivalent code. He hesitantly said HUD code. The client had already called him axing the same question.
I had a copy in my hand of Jo Ann Meyer Stratton’s article on Modular and Manufactured homes (I gave him a copy of it) and explained that I was trying to appraise this unusual concoction but that I could no do so without comparable re-sale data of which there was none above $100,000. He agreed.
So, I axed him: “With no re-sales of the type homes he was showing me and selling in this market, how does he get appraisals done?” He said it was no problem at all. They used a company from a town just north of here. He said the previous manager brought two appraisers with him when he took the job. The previous manager was the client’s brother. The plot thickens! He also informs me that the brother of the client when he was manager gave the client a discount on the home on the order of $10,000 to $15,000.
Does anything sound out of kilter here? Somebody is doing a hell of a lot of appraisals on manufactured homes with no comparable sale data. Am I missing something here? I can see a dilemma here for these manufactured home sales people. They are in a Catch-22 situation. They have a new market product to sell but under existing appraisal regulations, they can’t get appraisals until the product is resold. How do they survive until the pump is primed? The obvious answer is: “Fudge appraisals by using package sales which is illegal?”
Is not allowing package sales as comps a good or bad rule under these circumstances? In my report or response to this client I included two recent sales of two cape COD dwellings almost identical in appearance except one is conventional and one is modular. The modular contains 2,290 square feet, has full basement, breezeway, three-car garage with storage attic on 5 acres in a subdivision of modular and manufactures homes. Sold for $127,000. (It is modular but MLS says manufactured). The conventional home is a cape containing 1,950 square feet on .9 acres in a conventional subdivision with two garage doors in the basement and small patio. It sold for $147,500. That is a $20,000 difference without counting the 3-car garage, size difference, breezeway and extra acres. If I showed you the picture of these two houses, you couldn’t tell which was which. Must be something to the rule. Just for the record; If it is manufactured/modular and over $100,000, don’t call me. There are apparently plenty of appraisers you can call though.

 

[Bob Ipock]

Wally,

Where do you stop, is not that hard to figure out for me. The guideline I use is right out of USPAP........misleading and fraudulent. If I belive that a report is misleading or frudulent, I am going to file a complaint and sign my name to it. Having done that, it is out of my hands. It is then up to the state appraisal board to dismiss, investigate or prosecute as they see fit.

No where in USPAP does it say or imply that complaints should be filed for minor offenses, errors, spite, to get even, to get rid of competion or anything else. It clearly says "misleading or fraudulent".

Folks can either adhere to this or not, it is a personal choice. I expect to soon see some situations where appraiser will WISH they had filed complaints rather than ignored misleading and fraudulent reports done by others that are now causing THEM some problems.

If in an appraisers opinion, a report IS NOT misleading and/or fraudulent...then there is no need to worry about it.

 

[Wally Jones]

Bob,

I'm in total agreement with you. That was sorta my point to Dale. Since, as you point out, our duty is clearly spelled out in USPAP (whoa! did I just use clearly and USPAP in the same sentence?? 8O ), it seems pretty simple to figure out what we should do. If walks like a fraudulent duck, etc., etc.

 

[Bob Ipock]

Someone posted that they were not sure that USPAP allows an apprsier to file a complaint with ouut a lenders permission. This is a MYTH!
Please, don't take my word for it, read USPAP. Page 8, USPAP 2002, line 305....... CONFIDENTIALITY.

If you are still unsure, contact YOUR state appraisal board. There is no such thing as USPAP enforcement, no national or federal USPAP police and THE APPRAISAL FOUNDATION has no enforcemnt authority at all.

Only your state appraisal board can answer this question in your state.
The North Carolina Appraisal Board DOES NOT consider a complaint filed by an appraise to be violation of the CONFIDENTIALITY RULE.

I would be surprised if ANY state be any different.

I am a Certified USPAP Instructor and have discussed this issue with the folks that know. THIS IS A MYTH. The Appraisal Foundationa and USPAP DO NOT consider filing a complaint to violate the Confindentiality Rule. Period.

If you don't know!!!!!!!!!!! Call your State Board and get an answer!

 

[Dale Smalley]

Ok
Lets go with just fraudlent and misleading appraisals because you can find USPAP errors in most reports.

On review you do your job and notify your client. It is their appraisal not yours. You can suggest they turn it in. Are you going to go behind your clients back and make decisions for them. I value my relationship with my client to make sure they know exactly what is going on and they expect me not to hide anything. I am working for them not the LO, not you and not the government.

I cant believe this attitude that some of you are better than other appraisers. These are the smart appraisers that know how beat the system. Just because it is a good report doesnt mean it is not BS. and you know what I mean.

 

[Bob Ipock]

You are working for the lender. No argument here.

They ask you to do unethical things, are you still just working for them? They ask you to JACK UP a number and you do, but hey, you are working for them! They are the BOSS! I can guarantee this defense will not get you far in front of your state appraisal board.

Regardless of WHO you are working for, you have agreed to follow USPAP and your state board rules. You signed an application which said you knew what the rules were.

Dale, you may never file a complaint and that is up to you, but the logic that you can only do what your lender says is simply poor logic. Doing what the lender wants is what has gotten us to the point we are now......an appraisal system that is broken, fraudulent and corrupt.

 

[George Hatch]

Dave,

I have no problem holding myself, you, Bob and every other concientious appraiser as being better than a crooked appraiser. Regardless of whether there is a professional designation involved, how many years experience, how large the shop, or how pretty the report looks. If an appraisal is clearly misleading and fraudulent, there is nothing even the most guru appraiser out there can do to disguise it. This is why we don't advocate going after errors (really, differences) of opinion, but rather after errors in fact. You do not have to be the world's greatest appraiser to spot a crooked appraisal.

As far as a client objecting to a reviewer sending in the worst of the worst, I don't quite follow the reasoning. Did these bad appraisals not incur extra costs in the way of review and reappraisals, or lost processing and underwriting time, or even undersecured mortgages and increases risks of default? The only reason I can think of that a client would not want to send in a bad appraisal is because that client wants bad appraisals. I dunno about you, but I don't want to do business with that kind of client, because if they're willing to do funky things with appraisals they'll do funky things with credit reports, income estimates and every other facet of the loan. They eventually will get caught and everyone associated with them will be categorized as being as crooked as they are. That includes a reviewer whose work might otherwise have been good on a technical basis, but was not backed up by their recommendations.

Besides, I still maintain the best way to make a complaint is to have the client send in the original report and the review. That way, whichever of the two parties is incorrect, the state board has both sides of the story. This forces reviewers to take their job more seriously, too. If I have a real problem with an appraisal, that's what I usually do.


George Hatch