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What exactly is appraisal independence?
Dodd Frank requires appraisal independence and associates it with pressure against the value of the property. But what about other areas of the appraisal process in which appraisers receive pressure?
Let’s take turn times for example. Normal turn times in a steady market average 5-7 business days in most markets. Market activity, location, complexity, etc. will require longer turn times. First let’s define a business day. This is Monday through Friday and excludes Federal Holidays. A business day is not Saturday or Sunday and it should NEVER be counted towards turn times. Some AMCs include them, but I will get to that in a minute.
AMCs want to automate every process. Perhaps that is the case because they do not understand the appraisal process, nor do they trust their employees to utilize intellectual thinking on their own.
“It must fit the box no matter what”
In this automation, amcs track turn times and the appraiser is scored against their peers. Here is a snap shot of an appraiser score card.
The peer top performer is 5.9 days, but the amc only allows 4 days. The AMC is expecting some sort of “magical miracle” here. Is that not pressure? Does not allowing adequate time to complete an assignment go against appraisal independence?
Here is another example.
The peer top performer is 7.0 days and the appraiser is right there with him or her at 7.2 days. Yet the amc still only allows 4.0 days. Does this make sense to anyone?
What happens if the borrower holds up the appraisal due to their work schedule? What about the agent who states we need to resolve the home inspection issues before an appraisal can be done. Some amcs hold the appraiser responsible for delays that are simply out of their control. Again more pressure.
What about the absurdity a report must be completed in 48 hours after inspection? What if the appraiser inspects on Friday afternoon? How is the appraiser to verify the data? No courthouse I am aware of is open on non- business days of Saturday or Sunday. No attorney is in their office either. Good luck getting the information you need from an agent who is out showing houses on Saturdays and Sundays. Is this not undue pressure?
Now take bifurcated appraisals. An unlicensed individual performs the inspection, provides some factual data, but also gives an opinion on the condition, quality or utility. The conduct section of the Ethics rule of USPAP states an appraiser:
must not accept an assignment that includes the reporting of predetermined opinions and conclusions ( line 193)
I can only assume, when this was written the authors were thinking about values. But does it state values, NO, it states opinions and conclusions. No one could have foreseen that bifurcation would be even an option in the appraisal profession today. Isn’t that exactly one of the reasons FIRREA was passed? Is appraisal independence an issue here?
What if the appraiser does not agree with the opinions of the inspector? Can you imagine how this will play out? More pressure anyone?
Now for some reality.
…appraisers could care less about an amc score card…Appraisers are licensed professionals. They have years of training and experience prior to becoming licensed. Most appraisers could care less about an amc score card. Why would they? AMCs, although required to be licensed in most states are not well educated, nor are they experienced in the appraisal profession. Sadly, they have no clue about anything related to real estate, the mortgage market or the appraisal profession. They are nothing more than puppets on a string. Professionals don’t treat other professionals like they are in grade school. They simply do not! Despite what the amcs claim, appraisers and amcs are not partners!
Who is to blame?
REVAA, the AMC advocacy group is too busy playing Tiddley Winks to care about anything but collecting outrageous dues for whatever benefit they think they provide. You see, REVAA could have been educating their members on good ethical business practices and why it was important for the AMCs to build strong mutually beneficial relationships with appraisers, but they chose to help destroy the profession with no foresight to understand they were destroying the AMCs and themselves in the process. Of course if you have ever listened to anyone associated with REVAA speak before a Legislative hearing, you would understand their ignorance.
REVAA missed another opportunity to educate the AMCs. They could have educated them on the difference between an independent contractor and an employee. You see when an amc counts Saturday and Sunday in turn times, they have just crossed the line with classifying an appraiser from an independent contractor to employee. Federal and state employment laws mandate how many hours employees work. If the amc requires Saturday and Sunday work hours, most appraisers would be entitled to overtime pay for exceeding 40 hours. There have been several court cases against amcs already over this, none in which the amc prevailed. Has REVAA advised or educated any amc?
Now for the Bifurcation garbage that is being promoted, AMCs and REVAA are once again short sighted. You see Appraisal Management Companies are just that, Appraisal Managers. When someone other than an appraiser is placed into the mix, the amc, in most states is prohibited from contracting with anyone other than licensed appraisers. Has REVAA or any amc stepped up and advocated for maintaining the appraiser in the field? I don’t think so. Instead, REVAA representatives have been promoting bifurcation, completely clueless they are cutting their members and other amcs off at the knees. You could translate this another way as well
No AMC = No REVAA
By the way, enough of these bifurcated appraisals are coming into the hands of licensing boards now. Trust me when I say they will be scrutinized to the nth degree. It will not be pretty for anyone involved.
A Final thought:
Thank you REVAA helping eliminate amcs! Continue on with your Tiddley Winks games. Licensed Appraiser Professionals will be here to clean up the damage you and your AMCs are creating.
By Advocate, Certified Real Estate Appraiser – author requested to remain anonymous