The interagency appraisal and evaluation guidelines are very clear, (when) “communicating the noted deficiencies to and requesting correction of such deficiencies by the appraiser or person who prepared the evaluation, an institution should implement adequate internal controls to ensure that such communications do not result in any coercion or undue influence on the appraiser or person who performed the evaluation” That sounds simple enough, right? So why is it that so many appraisers are talking about appraiser independence related to appraisal revision requests?
Appraiser independence issues were once relegated to the type of strong-arming appraisers received when submitting a “low value” but now it seems there is a new form of appraiser independence emerging, from the ranks of the appraisers (and non-appraisers) reviewing the appraiser’s reports.
Appraisers have indicated that these requests for revisions and comments based on automated review systems are not in compliance with appraisal independence requirements because of how the requests are being communicated. They state that the reviewers are suggesting that if the revisions are not made they will take them off the list of approved appraisers or lower their “score” so they do not receive future assignments.
But what if there are material deficiencies in the appraisal report, shouldn’t the appraisers be fixing them or more appropriately, should there be deficiencies at all in a report prepared by a professional appraiser if they were adequately performing their job?
There has been so much discussion over the years among appraisers, appraisal reviewers and underwriters about what the “guidelines” are and are not, that it has become difficult to determine a well done, quality appraisal report. The Fannie Mae and Freddie Mac guidelines have been interpreted by some as “law” rather than suggestions or guidelines and underwriters and reviewers have forced appraisers to use comparables and make comments that “fit into the box” rather than what they believe to be the best, most comparable sales or the most appropriate commentary.
Now introduce “client specific instructions” and the determination of a quality appraisal just got exponentially more difficult. Non-appraisers in the spirit of improving appraisal quality have added erroneous requirements such as pictures of running water, the “photo-shopping” out family portraits from interior pictures or pictures of the address of the house. Is this really leading to a higher quality appraisal? Are these really significant deficiencies in appraisals? Do these items really contribute to a quality appraisal and are they worthy of the tension created between appraisers and the reviewers?
The Interagency Appraisal and Evaluation Guidelines state “an institution should not directly or indirectly coerce, influence, or otherwise encourage an appraiser or a person who performs an evaluation to misstate or misrepresent the value of the property. Consistent with its policies and procedures, an institution also may request the appraiser or person who performs an evaluation to, consider additional information about the subject property or about comparable properties, provide additional supporting information about the basis for a valuation and correct factual errors in an appraisal.”
If reviewers are applying data or erroneous standards to the report like throwing mud against a wall hoping something will stick, or demanding appraisers change immaterial items on the appraisal or face consequences, then it is pressure and inappropriate.
If the reviewer of the report can identify relevant and material deficiencies, such as more recent, similar and proximate sales not considered, then the appraiser missed something and they should promptly correct the deficiency.
Appraisers have to stand up and take professional responsibility for developing a credible, USPAP compliant appraisal report. They must take the time to explain why they do things so the intended user understands how they came to their conclusions. If someone reading the report doesn't understand, then it is not pressure, it is required under Standard Rule 2-2bviii and the appraiser hasn’t done their job.
It’s time for underwriters and reviewers to focus on what matters in an appraisal, compliance with USPAP, and not an altered version of the agency guidelines or a check list of arbitrary and meaningless specific requirements. It is also time for all appraisers to become the professionals that the industry is demanding and submit credible, USPAP compliant appraisal reports. When this happens, the discussion of appraisal independence will shift to appraisal quality, right where it should be.
Have any comments or would you like to submit content of your own? Email Jim@appraisalbuzz.com