There was a recent study completed that proved, beyond a doubt, what I have essentially suspected for years. The topic was what causes criminals to do what they do. After much study and consternation, it was discovered that all criminals, regardless of the crime and in 100% of the cases, have one thing in common. They all had a mother.
There is an old debate trick called “Hasty Generalization.” Basically, it means taking something that may be true in some cases and applying it to all cases. “The Hansen family home schools their children, and their kids are pretty weird. Therefore, all home schooled kids are socially backward.” It is unfair, but it happens all of the time.
The same thing is happening today regarding Geographical Competency of appraisers. The “Competency Rule” in USPAP requires that an appraiser have the background, experience, and expertise to complete a particular assignment (or gain that competency by taking the necessary steps). Geographical Competency speaks directly to the area that the appraiser may be working in.
Obviously, any sane professional can see the wisdom in requiring that appraisers understand and have proper ability in their particular coverage area. That is a no-brainer. Hasty generalization, however, is equating distance to the subject with appraiser competency. They may relate, but they do not equate. Yet, it is becoming a standard in our industry (among AMCs, Lenders, regulatory boards, reviewers, and even appraisers themselves) to blindly connect the two.
Many engagement letters are coming over with an interesting (and relatively new) instruction:
“If your home or office is located more than 30 miles from the subject property, please contact our office before proceeding with this assignment.”
What is the purpose of this statement? Geographical Competency. It is my argument, however, that distance may have little if anything to do with competency. Allow me to give a few examples.
I know a man who currently lives in New York state. He moved there 3.5 years ago from Florida. He still has a vacation home in Florida. For 4 months each year (you can guess which months), he lives in Florida. He is a certified appraiser in both New York and Florida. He knows the Florida real estate market very well (he lived there longer than he has lived in New York). However, he has a very difficult time convincing his clients that he is competent in an area that is over 1,000 miles from his home and office.
In Idaho (my home base), it is almost essential to a viable business to cover a large geographical area. I personally cover 12 counties (including 2 counties in another state). It is not unusual for me to travel an hour and a half to my subject. These are very rural areas. One of my counties has a population of less than 1,000 people. When I say there are more sheep than people in that area, it is not an exaggeration. There is not one active appraiser among the 982 people who live in that county. I travel 80 miles (one way) to get to that area. Much of my coverage area is similar. However, I have been covering these areas for over 15 years. I understand the market as well (I would say better) than any of my peers.
When my office calls to set up an appointment with a borrower in Wyoming, they will often get the question, “Why are they sending an appraiser from Idaho to appraise my property in Wyoming?” Fair question, but when they learn that I have been licensed in Wyoming for 18 years and travel to their area once or twice a week, well…
I was recently sitting in an appraiser conference and the speaker said, “We are seeing appraisers sometimes travel two to three counties away from their office to appraise homes. There is no way an appraiser can be and stay competent doing that kind of thing.” Well, I would respectfully disagree. Can we stop equating distance with geographical competency? They are not the same. And while we are at it, can we stop equating all home schoolers as strange?