Hybrid Reports ASB Q&A
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What the cohorts promoting hybrid reports are overlooking is APPRAISAL PRACTICE…
On Tuesday, Jan. 23, 2018, the Appraisal Standards Board released their latest Q&A document (see embedded PDF below).
This document appears to justify reasons why appraisers can complete the new ‘hybrid’, ‘bifurcated’, ‘desktop’ and ‘alternative’ appraisal reports (regardless of what they are named), although the Q&A document is written ‘generically’ and does not specifically mention those categorical names.
I have two issues with this Q&A document:
- it does not discuss the appraiser’s true responsibility when completing certain kinds of these reports; for more on that see the additional info below; and
- in an abrogation of the appraiser’s responsibility to preserve “Public Trust” – the cornerstone of USPAP – it says a third party “field inspector” who provides information used in these new hybrid reports have to be named in the report, when in fact, their provided data is stated to be accurate and acceptable within the body of the report. But if the appraiser relies on name (and description of assistance) name/description disclosure only applies to an appraiser who is acting as the ‘field inspector’
Is there anyone besides me who questions this absurdity? That’s the basic problem with. If someone unlicensed as an appraiser ACTS and PERFORMS Appraisal Practice (as a ‘field inspector’ does) and contributes to the report preparation, that individual does not have to be disclosed.
Over the past year or so, as these new types of reports have been designed and promoted, I have written extensively about them. I have personally reviewed at least five different versions of them from different providers. Most of these new ‘‘ are being promoted as being “USPAP compliant”, which is a misrepresentation of grand proportions and a stretch of the truth.
To understand my perspective about what is missing in this document, and in virtually all other discussions I’ve seen about these reports, read my essay below. And below that is another perspective by a highly qualified USPAP instructor from a non-disclosure state who also has serious concerns about these new ‘alternative’ reports an appraiser can complete while in PJ’s (or bathrobe) and bunny slippers.
The Q&A contention is the gigantic EA (the size of Antarctica) contained in these hybrid reports absolves the appraiser of really knowing the qualifications and background of the “field inspector” who does the subject inspection, what that person’s instructions or biases were, or that the data they provide is not tainted in some way. The EA’s all say that subject data is ‘accurate’ and the signing appraiser agrees with it.
But what Mr. Brenan and the cohorts promoting hybrid reports are overlooking is APPRAISAL PRACTICE. Absolutely no mention is made of that, in this Q&A or elsewhere, because no one so far has bothered to look at that definition, and the definition of APPRAISAL.
APPRAISAL PRACTICE involves ‘who’ fills in the report form the appraiser signs. If the hybrid report provider sends an appraiser a ‘subject pre-filled report’ to finish with additional comps, then the appraiser is not in compliance with Appraisal Practice because they are allowing an unlicensed and unsupervised person to complete part of the report – i.e., acting as an appraiser. If the signing appraiser accepts that type of report, and signs it, the appraiser is in violation of the Ethics Rule, Conduct section – which is backed up by AO-21. Appraisers really need to read USPAP 2018-19 Definitions on page 3.
However, if the appraiser merely ‘relies on’ data collected by a “field inspector” whose data is on/in a separate document, then the appraiser can fill in the hybrid report subject section using this data. This would be considered similar to using MLS data for comparables in reports, or Assessor records for the subject. The Antarctica sized EA applies.
The multiple hybrid report samples I have seen say that if the appraiser has concerns about the “field inspector’s” data, then the appraiser can decline to do the hybrid report.
Once the ‘writing of the report’ is fully understood, then the appraiser has to determine if the offered fee is reasonable for their own business. In some cases it might be, in others not. Some clients will negotiate hybrid report fees, others may balk.
Hybrid reports work well in major homogeneous urban areas with lots of property transactions. In suburban and rural areas, hybrid reports are questionable due to the scarcity of comparable and subject verification data and competitive properties that can be found in a reasonable amount of time to make the fee payment profitable to the appraiser.
The USPAP instructor’s perspective:
The difference between the EA relying on MLS data for comparable properties and the EA necessary for producing credible results using the same source for subject data is, in my opinion, simply too large. Every appraiser knows that many MLS participants don’t even own a tape measure, much less possess the necessary understanding of what the appraiser actually does. To include an EA that states the appraiser is relying on a real estate agent’s site visit data renders the end results meaningless – the appraiser would be better served by simply disclosing that the data was obtained from the gentle extraction method. Agents have zero requirements, at least where I teach. I would be able to tear up any appraisal report, desktop or “conventional”, that utilized such an EA. This issue goes well beyond typical “peer appraiser” actions (is it Q4 or Q5?), even with the understanding that most “peer appraisers” have little idea of USPAP. I’m extremely unhappy with the ASB for what they did with this Q&A – no response would have been better than “yes…but”. That they also neatly sidestepped appraisal practice just adds insult to the injury.
As I wrote in my last essay about these “new normal” low-cost alternative reports,. Don’t just take a promoter’s assurance that you don’t need to worry about that based on their claim that the ‘form’ complies with USPAP. That’s a load (dump truck size) of bovine substance.