A Foreign Landscape to Suburban Appraisers
After writing an article about the HVCC program and how it is affecting the home buying process I received an e-mail from an appraiser from California. She asked me to get the word out about the Uniform Standards of Professional Appraisal Practice (USPAP). There are certain guidelines an appraiser must follow while completing an appraisal report. The scope of work depends on the client and the clients needs.
The main concern with HVCC is that appraisal management companies (AMC) are now set in place to order appraisals. Mortgage brokers are no longer allowed contact with the appraiser. The AMCs have raised the prices of the appraisals, but the appraiser makes less on every appraisal. Management companies also do not know the specific areas that the appraiser works in and knows well. An appraiser that lives and works in the suburbs should not be appraising property in the city?it’s nearly impossible for them to understand and know the market well enough to do a solid appraisal. The differences between an urban market and a suburban market are enormous. For example, suburbs do not often have high rises nor do they have building organizations like c0-op. And, needless to say, every neighborhood has its different nuances and boundaries.
Many Non-Local Appraisers Are Not Disclosing
Below is the letter from Barb Torres, reprinted with her permission. Barb is an Accredited Senior Appraiser, a member of the American Society of Appraisers and a California Certified General Real Estate Appraiser:
Per the Competency Rule of the USPAP, an out-of-area appraiser is required to disclose in the report their lack of geographic competency and what steps they took to familiarize themselves with the “nuances” of the local market. (such as working with a local appraiser, local agents, local MLS, etc.)
Out-of-area appraisers are NOT doing this. If they came from far away and it is not disclosed in the report, they are violating USPAP – and therefore violating the HVCC. The lender ends up with a non-complying appraisal, doesn’t know it, and they also violate HVCC.
The solution: As soon as an out-of-area appraiser shows up to do the inspection, the buyer, the seller, the listing agent, the selling agent, the loan broker – everyone! – should contact the lender immediately. Preferably in writing as well as via phone. They have a right (and perhaps an ethical obligation?) to DEMAND that a local appraiser be used – or else the appraisal violates the HVCC! Lenders need to be informed of this, and the parties to the transaction have a right to protect themselves.”
It’s Up To You To Vet the Appraiser
So, if you are a buyer, a seller, a real estate agent, or a mortgage broker, make sure you stand up for your rights on this issue. Make sure the appraiser is qualified to be doing the appraisal. Ask them where they usually work. Ask them about their knowledge of the local market. Ask them where their last ten appraisals were. If you don’t like the answers, just as Barb suggests above, contact the lender immediately in both writing and by phone and get a new appraiser.
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July 17, 2009 at 9:01 pm
Appraisers Must Be Local or Disclose According to USPAP
No they don’t.
USPAP states this:
“In an assignment where geographic competency is necessary, an appraiser preparing an appraisal in an unfamiliar location must spend sufficient time to understand the nuances of the local market and the supply and demand factors relating to the specific property type and the location involved. Such understanding will not be imparted solely from a consideration of specific data such as demographics, costs, sales, and rentals. The necessary understanding of local market conditions provides the bridge between a sale and a comparable sale or a rental and a comparable rental. If an appraiser is not in a position to spend the necessary amount of time in a market area to obtain this understanding, affiliation with a qualified local appraiser may be the appropriate response to ensure development of credible assignment results.”
Read the COMPETENCY RULE.
July 17, 2009 at 9:26 pm
There is more to be done and before the report is even written. The appraiser must, under the Competency Rule, disclose this lack of geographical familiarity (in this case) to the client BEFORE accepting the assignment.Then after the appraisal is developed, the appraiser must report the steps taken to become proficient. Here’s the current rule:
USPAP 2008?2009
COMPETENCY RULE
Prior to accepting an assignment or entering into an agreement to perform any assignment, an appraiser must properly identify the problem to be addressed and have the knowledge and experience to complete the assignment competently; or alternatively, must:
disclose the lack of knowledge and/or experience to the client before accepting the assignment;
take all steps necessary or appropriate to complete the assignment competently; and
describe the lack of knowledge and/or experience and the steps taken to complete the assignment competently in the report.
Renee