Knowledge is Everything
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Conversation with an AMC Reviewer
The following was sent to VaCAP from a member. We thought it was important to share as it demonstrates how important it is for each appraiser to be knowledgeable of the statutes and regulations we all must follow. It may help make your interactions go a little more smoothly.
“I completed an appraisal for a purchase transaction in a rural area and the opinion of value was below the contract price. The report included five comparable sales, three of which were within 2 miles and had equivalent gross living area. The other two sales were larger and bracketed other amenities. A list of sales the agent gave indicating how the list price was established was also included; none of which supported the list price or contract price. Each sale provided by the agent was addressed as to why they were not comparable. The report was completed and uploaded to the AMC.
Several hours later, a revision request was received asking to compare another sale to the subject. This sale sold $21,000 higher than the opinion of value. The request had the reviewer’s name and direct phone number should there be any questions.
Well I took this opportunity to call the reviewer. Here is how the conversation went:
Appraiser: I am calling about the revision request sent on file number 1234. I am inquiring about the source of the sale. Can you please advise where the sale came from?
Reviewer: One of many sources we use.
Appraiser: Can you tell me which one?
Reviewer: I don’t recall. We have several we use.
Appraiser: Was the sale viewed for comparability to the subject before asking for it to be addressed?
Reviewer: I am not knowledgeable in that market. I am licensed in XYZ state and only familiar with three counties. I look for additional sales in the general market area based on the parameters in the report and generally look at square feet, bed and bath counts.
Appraiser: Are you aware Fannie Mae guidelines specifically state Reviewers, Underwriters, and AMCs are not to ask the appraiser to address a sale unless the sale has been reviewed for appropriateness and the inclusion of the additional sale will make a material difference in the value opinion?
Reviewer: My employer requires me to look for additional sales when the opinion of value does not meet the contract price. The lender will also find this sale and ask you to address it.
Appraiser: Did you actually look at this property on whatever source you used? This is a ranch style home in a PUD with a monthly HOA fee and is connected to public water and sewer. The subject is a colonial style home in a rural area with well and septic systems. Not exactly apples and apples. Even being licensed in another state, you as an appraiser should know these properties are not comparable. In your opinion, is this sale better than the sales used in the report.
Reviewer: Your report is well written and your opinion of value is supported. I did not see any errors in your report. I am just following the instructions given to me by my employer.
Appraiser: Are you aware Virginia statute allows an AMC to perform a USPAP technical review only. If you are looking for additional sales, it sounds like you are performing a Standard 3 Review. Being license in XYZ state certainly makes you competent to perform a USPAP compliance review, but if you are not licensed in Virginia, how are doing anything more?
Reviewer: We have a list of states that can we use and Virginia is not on that list.
Appraiser: I understand. You do realize that it is your license and your liability on the line don’t you? Virginia and the state you are licensed in will come after you, not your employer in the event of a complaint filed for unlicensed activity.
Reviewer: crickets, crickets, and more crickets
Appraiser: Are you still there?
Reviewer: Can you please address the sale within your report so I can send it to the lender?
Appraiser: Are you sure you want me to address this sale within the report? This will provide a permanent record that Virginia Statute may have been violated and that appraisal services without proper licensure may have been done? Are you sure you want me to do that?
Reviewer: I am going to forward this to the lender as is.
Appraiser: Thank you.”
This AMC employee followed the instructions of her employer and may have violated:
54.1-2021.1 (B) (2) (i)
54.1-2022 (C) (8)
And Virginia AMC Regulations
18 VAC 130-30-160 (7)
18VAC 130-30-160 (10)
18 VAC 130-30-160 (13)
Then there is the issue of Appraisal Independence, which was never discussed with the Reviewer. The sale price of the sale being asked to address was significantly higher than the opinion of value.
We completely understand following your boss’s instructions to keep your job. We don’t even fault this Reviewer for working at an AMC. But how are you a licensed appraiser and not understand and follow USPAP? Are staff appraisers and reviewers working for AMC’s so desperate for a fair wage they are ignoring our basic covenants? What about that internal moral compass that tells us right from wrong?
Our continuing education requires us to take a USPAP update course every two years. Appraisers should know USPAP extremely well. Our licensing fees include a printed copy of USPAP and it is available on line as well. There is no excuse for any appraiser not understanding and following USPAP. It is readily available to each of us for reference.
Having a conversation with AMC staff and talking intelligently can only happen with knowledge. When was the last time you read the Statutes and Regulations that we all must follow? They were just updated 07/01/2017.
Did you know 54.1-2020 of Virginia Statutes states the following?
“Appraisal management company” means a person or entity that (i) administers a network of independent contract appraisers, receives requests for appraisals from clients, and receives a fee paid by the client for the appraisals and (ii) enters into an agreement with one or more independent appraisers in its network to perform the appraisals contained in the request.
At a recent meeting of the Virginia Housing Commission discussing SB 1575 one of the panel members of the work group pointed out the language in 54.1-2020 and it clearly states that the AMC is to be paid by the client. Have the AMC’s been in violation of Virginia law this entire time? Are consumers due a refund for the fee the AMC charged?
Read a little closer, “enters into an agreement with one or more independent appraisers.” It is clear as the sunshine outside; Appraisal Management Companies must use independent appraisers. Have many of the AMC’s been in violation of Virginia law this entire time?
See Virginia Statutes and Regulations for Appraisal Management Companies here.
See Virginia Statutes and Regulations for Appraisers here.
Knowledge is everything!