Copyright of Appraisal Reports – Again

Michael Ford

Michael Ford

General Certified Real Estate Appraiser at Michael F. Ford Appraisal
Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory
Michael Ford

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Copyright of Appraisal Reports: Control Over Our Own Intellectual Property

Why do we need a copyright in the first place?

Before deciding whether you need to copyright, or whether it is too complex or not I urge all to read the information found in the following link.

When I started searching to see what the specific requirements were, I initially thought I’d have to pay a fee and submit each ‘work’ (appraisal report) to the United States Copyright Office. Clearly not a practical process for most of us, even if the fee weren’t so high (about $114.00).

I’m pleased to say if is not that complicated, or costly.

In fact, it is free according to the linked information above. It’s also as easy as simply putting “© 2017 Michael Ford” on each of your appraisal reports. (I’d probably recommend using your own names though, but if you insist you can use mine for the copyright only).

Okay, so why do we need a copyright in the first place?

Does anyone remember an article not too long ago in which CoreLogic offered certain market trends, opinions and conclusions that were purportedly arrived at after having “reviewed millions of appraisals?”

Our work product was used without compensation by an unintended user to develop and report claimed market actions based on the perceived or stolen ‘credibility’ inferred by having developed those conclusions as a result of ‘reviewing’ or studying our millions of appraisals.

Fannie Mae (FNMA) has also admittedly used our professional work product in a manner that was never intended nor authorized in order to create their so called (and patented) ‘Collateral Underwriter’ (CU) process. It’s interesting that FNMA thought they needed patent protection for a process that incorporated results taken from our stolen work product.

Freddy Mac also has a collateral scoring system, but they are much quieter about how it was developed or how it functions. Smart, huh?

How about Redstone and all the other commercial regression programs that are touted as being able to tell us how to make adjustments? Are these also using appraisal reports submitted through them or to them to cross check accuracy or performance based on real appraisals? (If they are developed purely on math based statistical & regression analysis of public records – no problem).

Each of us puts a Statement of Limiting Conditions on our appraisal reports so that they may not be used for unauthorized or even potentially misleading purposes. We don’t do it to try to ‘hustle more money’ out of already existing or compensated appraisals. We do it primarily to limit our own liability and to prevent uses that would be misleading or otherwise detrimental to the public.

Many of us think there is nothing we can do as far as limiting FNMA use goes, but that simply is not true. FNMA does not allow us to alter their limiting conditions page. FNMA has broadened its intended uses and users beyond anything any of us ever envisioned, but they have not yet included language in the limiting conditions that gives them intellectual property rights over our work or to use it for purposes beyond specific loan transactions.

Technically we don’t have to claim copyright to enjoy it’s protection but there is a defense called ‘innocent infringement’ if we don’t. I’m not willing to give the likes of CoreLogic, FNMA or anyone else that steals all or part of my professional work product that easy of a defensive out.

I also want to put an end to our professional work products being used against us in the development of processes that have proven detrimental to our profession (like CU).

As a start, I urge all appraisers to at least put ‘© 2017 YOUR NAME’ on TEMPLATE cover sheets or report cover pages if you use them. If not, then put it in the FIRREA and other disclosures pages. I’m going to also put it on addendum pages and in non FNMA transactions in the limiting conditions.

I don’t know how much actual protection this will give us, but at least it gives us a legal foundation for claiming protection and control over our own intellectual property. Some AppraisersBlogs readers may have other or additional suggestions. Let’s pay attention to them. It’s another small step toward taking back our profession.

Personally, I think it also reinforces the concept that appraisals are as much an art as a science and a subtle reminder they have value of their own.

Image credit flickr - Dennis Skley
Michael Ford

Michael Ford

Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory

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41 Responses

  1. EJ Brown says:

    Whats the key stroke for the “circle C” ?

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    • Koma says:

      EJ,
      Hold down the ALT key and type 0169 on the numeric keypad.

      To type it on a laptop you may need to Hold down ALT+Fn and type the number 0169 while holding down ALT.

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  2. Koma says:

    Mike, Thanks for the info and work you do towards our profession. When I have some free time I’ll read over the link you have provided. If our reports don’t have to be noted as copyrighted, but automatically are can we appraisers get the ball rolling on a class action lawsuit for the pass 5 +/- years of CU? If we stick together then they can’t push us around.

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    • DW says:

      And what would be the basis for such a class action?

      As noted in the article, copyright protection is automatic for an original work (such as an appraisal report). However, that copyright does NOT prohibit extraction of data from within the report.

      As others have noted, this was a VERY hot topic +/- 10 years ago. There were a couple of prominent entities that used this topic to whip up fear and sell seminars and software. Their credibility took a hit when the copyright office itself assisted in the extraction of data from reports with registered copyrights.

      Yes, one appraiser did get a settlement based on a copyright violation, but in that case the work was literally copied. It was not a case of data extraction.

      It is a topic that plays on appraisers’ emotions – especually if they are not well versed in copyright law.  I strongly suggest that anyone with interest read the info at copyright.gov – especually the FAQ

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      • Koma says:

        DW, Just wish full thinking I guess. But on the other hand you can look at the talcum powder settlements and think maybe someday. Just want to state I’m in no way comparing the two, cancer to the treatment of us appraisers.

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      • MIchael says:

        DW, pretty bold statements concerning ignorance on copyright law when you seem to have some yourself. You use general terms like “data” – but what is that exactly?

        If an opinion as to the condition of a comparable sale a “fact” or an original opinion? What about for your subject? What about a decision on whether the enclosed porch is a sunroom (part of the GLA) or a porch based on the quality of finish? Is the GLA number a “fact” or an “opinion”?  Simply because lenders with agendas and deep pockets have tried to repeat over and over that our reports are simply a conglomeration of “factual data” does not make it true. That aspect hasn’t been fully tested in any legal setting. A “fact” would be that the subject’s siding is wood lap. An OPINION would be what condition is that siding in based on visual observation? Opinions are copyrightable. So sure, read the copyright office website. Or, speak, live and in person, with someone from the particular branch of the US Copyright office that deals with these issues (I have) and learn a little more.

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        • DW says:

          Perhaps someone has said it, but I have never heard anyone claim that appraisal reports are simply a conglomeration of factual data. IMO, it would be silly to make such a claim. An appraisal is an opinion, and appraisal reports contain opinions. The copyright of the report protects the whole report – including the facts presented and the “original opinions.” However, copyright protection does not mean what many seem to think it means. In the past, there have been folks who took advantage of that misunderstanding (by appraisers) to line their pockets selling seminars and software.

          My point was that copyright protection does not prevent one from extracting information from a report, regardless of whether the information extracted represents facts or opinions. This was demonstrated years ago when a group of appraisers, tired of the rhetoric and false claims on this issue, physically went to the copyright office and, with the assistance of employees there, extracted all sorts of information from reports that had registered copyrights. That information included condition ratings, HBU conclusions, etc. Some of that information was then posted on a public forum, to demonstrate that copyright does no prevent data extraction from reports. Would actually meeting with copyright folks and having them assist one in extracting data meet your test to deal with someone directly? 🙂

          Copyright protection fundamentally prevents duplication of work. In the famous settlement in an appraiser-related copyright issue, the appraiser won not because data was extracted, but because someone literally copied passages from his report. Copying passages and extracting data are two very different things.

          The great irony to me is that some appraisers get so worked up over this issue when extracting data from other reports and re-using that data to create something else is fundamentally how appraisal reports themselves are created. Appraisers routinely take data from copyrighted sources and then use that data in their own reports, yet some get real fired up when the same is done with their work.

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          • Baggins Baggins says:

            That’s not great irony.  We use data in ‘fair use’, for confidential clients.  Quite different from casting a blanket over all data, capturing it, structuring it, and making additional stand alone products from it.  That certainly is not ‘fair use’. Appraisal data is not funded by government, but the government treats it like assessors data as if it should be public and they have fair use rights to it. FNMA is a private company who’s claiming fair use rights on all private data. Private property rules should be the guide. We’re all ‘publishing’ every single report we create. The nightmare scenario for a journalist, forced to publish every single piece of work, forced to commit to publishing before the final product is confirmed. Not allowed to publish to the free market, can only publish to one single private company who claims a virtual monopoly via integration into government. If it’s o.k. to use this data this way, how can I monetize my own reports legally and sell the data myself? You know, cut the middle man out of it? Rule of thumb, if it’s legal for one person, it’s legal for all people or it should not be legal.

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  3. DW says:

    here we go again. :). A copyright on a report does nothing to prevent use of data within that report. Check out copyright.gov for authoritative information about copyright.

    From copyright.gov – “Copyright does not protect facts, ideas, systems, or methods of operation, although it may protect the way these things are expressed.”

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    • Baggins Baggins says:

      Awesome. Now reconcile that with standard disclosure language in the 1004 form and GLB.

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    • MIchael says:

      But what is a “fact”? Is an opinion as to the condition of the subject a “fact” or an opinion? What about an opinion as to whether an enclosed sunroom is a porch or a part of the GLA? Lenders like to call a lot of things in reports “factual data” – but quite a bit of it is “opinion” if you sit down and think through the process of how it was (or is supposed to be) put on the report. If you’re just reciting “facts” on your sales comparison grid then you might have a problem in terms of verification and analysis.

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    • DW its not the end all solution but it MAY provide some degree of protection. If nothing else it sends a message that we do in fact consider the entire report to be our professional work product. It may lead to having standing vs not having legal standing in some down the road dispute.

      Protection of the method and specific manner ‘facts’ are expressed IS enough protection as far as I’m concerned. Example: Rate two properties C3; Are they the same? fact? OR are they C3 only due to UAD artificial definitions that no market recognizes? The data miner may take the “C3” rating as a literal ranking (as FNMA does) based on the UAD definitions while the “fact” may well be that the market perceives a $10,000; $20,000 or greater difference between the two properties.

      I explain it in my report. The data miner doesn’t steal that portion of my work…only the gridded portion. Now a misleading “opinion” (my perception of condition) is at risk of being communicated as “fact”.

      As for digital signatures, what’s the point? xml and env formats can glean only what they wish. The fact of a digital signature does little in practical terms for preventing misuse. If a case can be made for using them, I’m fine with that. I used to use one when I worked at IRS. They are simple enough to get.

      IF we have no intellectual property right investment in an appraisal; why is it that every single questionable alternative automated valuation system makes so much effort to pretend the data and ‘analysis’ is “as reliable as an appraisal?”

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  4. Chris says:

    Ya, something that might work !!! Great job !!!

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  5. Baggins Baggins says:

    One hand seems to not know what the other hand is doing at fnma sometimes. State based area managers for fnma are reportedly going to revamp the 1004 form sometime in 2018, so we can all look forward to the forms eventually including such disclosures. Alamode still has some password or protection option for pdf printing, which came before the big sell out to xml for complete data scrape capability. It’s the open source vs closed source argument. We’re not philanthropists just giving away our intellectual property, well, we did not intend to be anyways. Further evidence we’re not participating in a free market. Support for winding down the gse’s? Also forcing XML took control away from appraisers, since we lost all ability to lock files and protect consumer data when submitting gse reports. Stories have came forth of companies taking out pages from reports, and who knows what else. An important reason appraisers at large can not be given access to CU systems data?  XML changed the game for data retention, we all need to keep pdf final copies forever, because XML is a completely insecure form of transmission. All these tech advancements with encryption and data security in the world today, and the GSE’s choose open source, go figure. All the data for the vast majority of loans and real property in the USA, held in one central repository. What could go wrong? I hear a lot about rights, but what’s up with tech security? FOIA requesting information on CU attempted data breaches? Could one compromised point of transmission location allow total systems access similar to well known credit card breaches? What exactly is CU holding for data, the complete loan packages & all consumers approval based data, or just core approval and loan terms information? Thank you Alex, I’ll take “Brain Drain” for 2,000.

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    • I wonder where the FTC is regarding the requirement by the loan purchasing monopoly for most mortgages when they REQUIRED appraisal reports be provided in a format originally intended by appraisers?

      There is still no legitimate appraisal reason for requiring an appraiser’s report be provided or delivered in any format other than PDF , via email or secure email.

      Does requiring xml result in a more secure report, or less secure?
      Does requiring env result in a more secure report, or less secure?
      Appraisers intend the ENTIRE report be read in order to be meaningful. Does any format other than PDF encourage this?
      USPAP includes a requirement that appraisers take reasonable steps to assure there reports are not used in a manner that is misleading. Isn’t an abbreviated summary of limited data provided to investors a misleading report?
      Would statement(s) that “This appraisal is intended to be considered and reviewed in it’s entirety. It is null and void if it is decompiled. ALL users agree and concur by use of this appraisal for any purpose that the appraiser may not be held liable by any party for any purpose where decisions were based on extracted summaries rather than the entire report;” be “violations” of FNMA policy?.

      Doesn’t the FTC recognize as a restraint against trade, conditions where the vendor is required as a condition of being allowed to work that they must subordinate their own professional sound appraisal practices and principles to those of the only effective ‘game in town’?

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      • Baggins Baggins says:

        Great insights. The most obvious and immediate effect of CU review systems was the way underwriters and various reviewers handled reports. At first I resisted the sudden standing of underwriters that something needed corrected every single time. Then I learned many of them jumped from 8 something or more, to 40 something a day standard. Also opening up the door for a wide range of non qualified people to suddenly provide an ‘administrative review’. Not sure about the accuracy of those figures but it’s my understanding the productivity of underwriting jumped dramatically with CU. My tag line for that was; Good for the underwriters for finding a way to save so much time. Unfortunately much of the time saved was merely dumped back in the appraisers lap, now being requested to perform redundant and rather meaningless reporting and revision. The ‘stip of the week’ as they say. Of course this only accentuated the system of backwards rewards because now the see addenda totally automated appraisers were even more helpful towards productivity, and the gap between true detailed appraisal turn times and automated appraisal turn times grew even further apart. As usual, cost savings were not returned to consumers.

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  6. DW says:

    Absent a true digital signature (which very few appraisers use – most use a simple electronic signature) neither PDF nor XML is a very secure format. The good news is that it is relatively easy to apply true digital signatures to both formats, making them very secure. The ENV format is created with a true digital signature. MISMO XML is not, but one can be applied.

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  7. appraiserbjc says:

    It is simpler than copyright as it is our full rights to the report as the owner of the report at all times.

    Our License grants an appraiser the right to do appraise that without such license would be unlawful to do.

    When we are engaged to perform an appraisal and ultimately the appraisal report we own that report by law under the statutory provisions granted by licensure. We then designate and intended user or in other words a provisional temporary user to a specified intended use with our property which is the report.

    In my 20+ years of appraising only very few appraisers have ever focused on the trespass and nuisance laws that most states have and can be used in tort law against perpetrators or in other words unintended users “Defendants” when they trespass onto our reports which is our property and also create a nuisance by doing so.

    Forget copyright laws and start threatening unintended users of our reports with trespass and nuisance lawsuits it’s a whole different legal playing field.

    Lastly the Fannie Mae selling guide is a Private for Profit Contract between the Lender and Fannie Mae and i have done considerable extensive research and can not find any where in any state that a corporations for profit contract has ever been cited as law or rule. Appraisers stand up for other Appraisers and most of all know your state and federal laws that pertain to you. I urge every appraiser to read a master services seller contract as well as the whole Fannie Mae selling guide which makes up the full Lender Contract not an appraiser contract. Remember that all secondary market mortgage participants have selling guides and these are not law just like Fannie Mae’s is not law, these selling guides have to be made public for Fair Housing, SEC Compliance, etc., and are not for appraisers actually Fannie Mae’s selling guide is clear that no one gains any benefits from the selling guide other than the approved Lender which has to follow the contract and guide.

    In regards to CU I would like to add that I view CU as the most blatantly obvious unlawful discriminatory mortgage instrument in the industry today, the past, and the future. Understand the illegal mechanism of redlining and that is what CU does. Census Block Groups were not designed as parameters for boundaries for Fannie Mae’s CU , ask any realtor what would happen if they only showed clients homes within a certain designated area or group. Census Block Groups are groups of PERSONS, HOUSEHOLDS, RACES, SEXES, INCOMES!!!!!! Hello, Fair Housing Laws!!!!!!!
    It’s not just an Appraiser class action waiting to happen but an Appraisers, Realtors, and private citizens class action that is going to happen.

    Take our profession back once and for all.

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    • Outstanding!!!

      By the way, has anyone considered WHY we put census tract numbers in appraisals still? Ostensibly originally to enable the feds to track fair housing and anti discrimination, their continued use has the exact opposite effect.

      Not too long ago a broker told me a commercial appraisal he had ordered was cancelled because the bank branch manager had checked the census tract profile data and ‘decided Compton was a bad risk area.’

      Now anyone that knows Compton is aware that it is comprised primarily of African American residents -though increasingly Latino housing migration is pushing against that trend. Additionally, anyone that knows Compton is also aware that there are far more upstanding, hard working typical Americans than there are any that are not. (factors we are not permitted to consider as appraisers-whether buyers do or not)

      There are as many areas there that would otherwise have been described as “pride of ownership” neighborhoods before the powers that be decide that phrase was itself discriminatory rather than merely being descriptive, as in any other area.

      Compton has produced some of the most famous athletes and entertainers to be sure, but it has also produced teachers, lawyers, bankers, Realtors®, Police officers, government employees, etc..

      But despite this, a Los Angeles based banker redlined the area based on census tract data, NOT based on unavoidable local knowledge, but based on an internal formula that was (reportedly) census tract based whereby the RATIO of African American residency was used to make an adverse decision on a commercial loan for a local business operator.

      I have no idea whether the business owner was African American or not. I DO know that had I ever been able to pry the name of the bank out of the loan broker, they’d still be in litigation.

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    • Baggins Baggins says:

      Yes, outstanding!  What is redlining anyways?  A convenient way to exclude certain provable higher risk areas or persons from free market access to lending?  Cause and effect must have meaning, and market corrections be allowed to happen, before the argument can be made that people are being categorically excluded by race or color.   The popular argument against natural corrections is the already ran away inflationary points, supporting the need for continuation of federal systems to manage the problems they themselves created.  The problem is easy access to cheap money.  The solution is a sound money system to slow down the inflation.  Now, reconcile data and copyright infringement in a hypothetical scenario where the fed and gse’s were absent and not part of the equation.  I present to you;  Mythbusters, inflation nation.  Dare to dream.

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      • Baggs, no need to debate or discuss what the meaning of ‘is’ is. As used in my comment it means unlawfully excluding from service based solely on the neighborhood that a property is located in-usually tied to race; but which could also be tied to predominant cultures or religions. There is no sugar coating or justification for it. It is illegal.

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        • Baggins Baggins says:

          Surely yes, but I maintain the position there is a better way to approach these issues.  We can’t regulate natural human bias, but we could return to a wiser monetary system which would alleviate many of these concerns, letting the free market control access and risk pertaining to lending.  The video says it all, I’m just the messenger.  Hypothetically speaking of course, if people managed the larger issues first, these issues on the table would not even be noteworthy because the conflict would not exist.

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          • Baggins, I’m only a real estate appraiser. I used to be willing to tilt at any windmill that came along, but ever since my trusty steed went lame; Sancho changed his name to Gordo and got that gig with Flaca, and Dulcinea ran off with the used car salesman it just isn’t the same anymore. Good luck!

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Copyright of Appraisal Reports – Again

by Michael Ford time to read: 3 min
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