What the Flip is ‘Geographic Competency?’

Dustin Harris

Dustin Harris

Certified Real Estate Appraiser at The Appraiser Coach
A multi-business owner and residential real estate appraiser. He has been appraising for nearly two decades. He is the owner and President of Appraisal Precision and Consulting Group, Inc. He owns and operates The Appraiser Coach where he personally advises and mentors other appraisers. His principles and methodologies are also taught in an online, Mastermind group. He and his wife reside in Idaho with their four children. Dustin Harris on e-AppraisersDirectory.com
Dustin Harris

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Geographical Competency...What the Flip is it? - AppraisersBlogsI want to talk today about one of my biggest pet peeves in the whole real estate appraisal industry: geographical competency. We belong to an industry in which large numbers of people are failing to make a living, and being forced to leave. It’s sad, but it can be reversed. One of the major changes that is needed regards geographical competency.

We throw this phrase ‘geographical competency’ around a lot, and pretend that it means something. Does it really? Well, if you go and take a look in USPAP, I don’t think you’ll find it there. You’ll find the competency rule, sure, and you’ll find the subset which says we need to be competent in our geography; i.e. we need to understand the market we’re working in. But you won’t find any ‘Geographical Competency Rule’. Geographical competency is just the result of the two rules that are present being conflated into something that’s ill-advised and ill-implemented.

Dodd-Frank has also been misinterpreted. It doesn’t say anything about real estate appraisers only being able to work within 50 miles of their offices. There’s no legislative basis for this rule. It’s simply the result of misinterpretation and conflation.

We’ve somehow ended up at the point where clients can enforce arbitrary radiuses around our offices, outside of which we’re no longer supposed to carry out inspections. We no longer have the ability to decide for ourselves which areas we’re competent in; that autonomy has been taken out of our hands by clients.

Real estate appraisers in more highly-populated, urban areas might wonder what the problem is with only working within a 30 or 60 mile area. Well, for appraisers like myself who work in more rural areas, mileage takes on a different perspective.

If I only worked within the immediate Idaho Falls area, I wouldn’t be able to continue as a real estate appraiser. I have to travel very long distances in order to get enough volume to make a living. In terms of total population, my 200 mile area probably covers as many people as an appraiser who works in a 10 mile area in Salt Lake City.

The notion that mileage equals competency, and you can only be knowledgeable about a place if it’s near your office, is nonsensical. There’s an area of Wyoming that I’ve been visiting for 20 years now. It’s a 3 hour drive each way, and I charge very high fees to work out there, but I keep getting called back every single week. Why? Because I know the area. In fact, I’d argue that by this point I know it better than the real estate appraisers whose offices are much closer than mine.

Are there precedents for people abusing the system? Of course there are. I’ve seen them myself, but I’ve met a lot of real estate appraisers, both through my work as an appraiser and as a coach, and I firmly believe that the vast majority of them are fine people. They’re good guys and gals, just trying to make an honest living, and they’re not going to stick their neck out somewhere that they know it shouldn’t be.

Of course I understand the underlying reasons why the 50 mile rule was implemented in the first place, but it went way too far. If we’re going to get out profession back to its former heights then the 50-mile rule needs to go, and it needs to go right now.

For more information on this subject, please listen to The Appraiser Coach Podcast Episode 043 below.

Dustin Harris

Dustin Harris

A multi-business owner and residential real estate appraiser. He has been appraising for nearly two decades. He is the owner and President of Appraisal Precision and Consulting Group, Inc. He owns and operates The Appraiser Coach where he personally advises and mentors other appraisers. His principles and methodologies are also taught in an online, Mastermind group. He and his wife reside in Idaho with their four children. Dustin Harris on e-AppraisersDirectory.com

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14 Responses

  1. Xpert says:

    Often complaints of geographic non-competence are red herrings. A lot of the geographic competence complaints are attempts to discredit appraisals that may not support the sales price/estimated value. Geographic competence is a legitimate issue, but many of the claims about it are not so legitimate.

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  2. Bill Johnson says:

    As it relates to “Real estate appraisers in more highly-populated, urban areas might wonder what the problem is with only working within a 30 or 60 mile area”, is to not fully understand the games being played by the power brokers in these major population areas. In working the 3rd most populated county in the entire county, the 1,000 licensed appraisers within 30 miles of me can and often loose out on assignments not based on competency, but because there might be 50 appraisers within 3 miles while you are 3.1 miles away. Often times, people who commute to an office (5, 10, 15 miles away), which will be used as the starting point of ones competency (per the client/AMC), WILL NOT be eligible for work in their own neighborhoods based on some distance matrix that has no bearing on ones true knowledge. The fight for appraiser independence should start with the professional setting their qualification boundaries, not the client or their hired puppet AMC operating a super computer (hello Watson). Long gone are the days where my primary market area could be 150 miles from my office (Palm Springs, 2 trips a week), as with regional appraisal license numbers, the computer will recognize 4,000 to 5,000 closer appraisers for the job. Dustin, while some of your clients might challenge your competency on properties 3 hours away, many of us get challenged based on a few blocks, or a few miles if we are lucky.

    Seek the truth.

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  3. Carl says:

    Too bad real estate isn’t about location, location, location!

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  4. J. West says:

    It’s not the client’s responsibility to determine competence. However, if that’s what they’re selling to “their client” then that’s their problem.

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  5. Jeanie says:

    If the appraisal is credible then the appraiser is competent. We should be judged by our work product, not by our location.

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  6. Jeff says:

    When an issue of competency arises USPAP seems to be very clear to me. Or if you are unsure then the process is to become competent and state in your report the steps you took in an unfamiliar market as to how you researched to become competent.

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  7. Baggins Baggins says:

    The industry at large promoted ready substitutability but now the consequences present.  Appraisers who undercut the competition is what drove proximity concerns in the first place. If the fee was direct consumer to appraiser, there would be far less appraisers driving such great distances to undercut the work away from others.  Appraisers with unique specialty would not be questioned about rising to the challenge of servicing under served areas.  If the goal is volume it seems rather illogical to maintain a working location in a sparsely populated area.

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  8. My license (certification) is valid for the entire state of California. Subject to compliance with reciprocal license laws it is valid anywhere in the USA and territories.

    While very rare, I have performed appraisals of property in New York, Florida, and Pennsylvania. I helped develop a system for appraisals in Delhi India. I bid on jobs in Mexico and the Caribbean. Every one of these assignments included added time to familiarize myself with my subject markets.

    In the case of the India assignment it meant learning fundamental differences in simple (Vedic based) counting, and translating that to western numeric concepts. It also meant understanding government imposed (presumed) values or ‘circle rates’; and the grey market sales that predominate.

    Before becoming an appraiser, the worst value mistake I ever made was in the area I grew up in, about 1/2 block from my high school. It was also my real estate sales ‘farm’ area. I knew it like the back of my hand.

    However, the market didn’t limit itself to the physical boundaries I knew about since I was a child. The competitive market had already expanded the area I knew so well. That mistake prompted me to become an appraiser.

    Geographic Competency (GC) is one of those buzz phrases people like to throw around without having to learn what it means. By itself it means nothing.

    A good appraiser performing to accepted practices and principles can appraise anywhere in the United States competently…as long as they take the time and exert the effort to do so. That costs extra.

    So, my take on GC when used by a lender is “We are too cheap and unrealistic in our turn around times to pay for a competent professional, or to allow them enough time to do the job properly. Therefore we will settle for ‘next best’.” Perhaps someone that knows the area like the back of their hand and that wont have to bother with all those pesky appraisal standards.

    Y’all know them. They already know that the adjustment for GLA is $25  sf (maybe even $40 or $50 in high cost areas) just like it was in 1986; and that bedrooms are $10,000; common rooms and full baths are $5,000 and half baths are $2,500 and that no line adjustment will ever exceed 10%. The ones that learned rote adjustment from the Property Science Mill…or FNMA.

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  9. Jack Of All Trades says:

    There are plenty more reasons why appraisers are leaving this profession, geographic competency is one of them , included are the dirt bag AMC’s , the ignorant Fannie Mae and Freddie Mac including the very ignorant FHA and so so much more. These entities have made a complete debacle of the industry and are playing for keeps, they will do whatever it takes to protect what they have and steal more money from appraisers with there AVM’s. The goose has been cooked for a long time guys and girls.

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  10. Baggins Baggins says:

    When cost savings are not returned to borrowing consumers, the appraisers discount becomes an enticement to select, otherwise known as a violation of the management rule and providing a thing of value. With no ethical managers in place with fee shopping companies, it’s not surprising the management rule is perhaps the most overlooked rule in appraisal ethics today. I like proximity rules, it keeps the discount 2 hour appraisal guys from south denver and fort collins out of my areas, when clearly I am available at C&R rates and provide a more detailed product. This is the city and the suburbs after all, not expansive semi rural and farm.

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What the Flip is ‘Geographic Competency?’

by Dustin Harris time to read: 2 min
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