Second Appraisal Controversy
Latest posts by Michael Ford (see all)
- Baby or Bath Water? And Is it Time to Take Back USPAP? - February 24, 2017
- AI’s Effort to Eliminate the ASC! - February 22, 2017
- Congress, Please…No More Cash for FNMA Clunkers! - February 17, 2017
On reading a recent post about agents telling their clients to just order a second appraisal when the values came in ‘low’, I’m reminded of an old saying that both my parents used to frequently address toward me, “People who live in glass houses, shouldn’t be throwing stones.”
I had no idea what they were talking about since when growing up I’m CERTAIN that ALL of my criticisms were well founded and deserved by those they were directed to. Teachers, government officials, world politicians, teachers, general authority figures, friends, enemies, and did I mention teachers? Basically most of the entire world that failed to anticipate my needs or wants well in advance of my having to voice them.
Before condemning, lets look at the realities. IF FDIC is to be believed that more than 97% of the 1/4 million WAMU & Countrywide appraisals were non USPAP compliant, and that 90% were “egregiously deficient” (whatever that means separate from non USPAP compliant), then it is a fair assumption to admit the possibility that collectively we are not as error free as we like to claim. I mean, of COURSE YOU and I are, but those ‘other guys’? Probably not so much.
A good agent SHOULD be asking to see the appraisal! It’s called due diligence. IF there are significant deficiencies, then they SHOULD be ordering a second appraisal and that second appraisal IS permitted under current guidelines. Now the fine points, such as documenting the bad appraisal and following up on it are ignored by most lenders (except RELS). Now, we are victims to our own collective pigheadedness here. Rather than looking OBJECTIVELY at the agents reasons & evidence why they believe the value should be higher, far too many of ‘us’ have said “Upon review of the additional information it was determined that there was / is no significant impact on value therefore the appraised value remains the same…”. It’s even worse now that admitting to a POSSIBLE error is tantamount to saying we did not do our jobs as far as punitive minded state regulators are concerned, or that we produced a misleading report.
Friends, IF we collectively ever get to a point where we can reasonably claim 90% of all appraisals are good, then I would STILL have to consider that 10% chance I ‘missed’ something. BEFORE I climb up on top of my high horse I’ve found it’s a real good idea to make sure my work is MORE than 100% defensible. In these relatively rare cases I try to DISPROVE my own results and value. THEN I use the opportunity to make sure the report & WORK FILE will pass State Review muster, via whatever addendums are required. I AM allowed to make a mistake.
It is how I deal with human failings and limitations that determine USPAP and regulatory agency compliance. I ALSO am NOT going to change value opinions gratuitously since doing so can also cause State Regulatory Board problems. However a value dispute instantly raises the risk of a state complaint claim from negligible to probable (in my mind). IF I believe the added data DOES warrant a change (particularly a change under 5%) then there is a good chance I am going to make a change “Based upon a review of additional information not previously available to the appraiser in the normal course of business, I concur that the market value is “X” rather than “Y” as previously reported.” Or, I may state reconciliation toward the higher end of the range is warranted based on whatever new data dictates.
I noted above that RELS follows, or purports to follow procedure for second appraisal ordering. Based upon numerous complaints I’ve reviewed it appears that when an appraisal is alleged to be low and the appraiser declines to change his or her opinion, they then produce or order ‘some type of review’ that finds “numerous discrepancies.” They then order the new appraisal and once it comes in on value they now have TWO appraisers inferring the Original Appraiser (OA) was wrong. THEN they forward the second appraisal to their parent corporate appraisal review department (Wells Fargo in Phoenix, AZ) with the new (spurious) support so that formal complaints can be made against the OA in his or her home state. THEY ARE NOT DOING THIS FOR THE BENEFIT OF THE PROFESSION!!! They are doing it to document THEIR paper trail in support of having ordered that second appraisal!
Folks I know times are hard, but anyone that still does work for people like this are damn fools! It’s only a question of time before you get caught up in their grist mill. Are $180 fees worth it? $250? The ONLY way THEY will stop doing this is if WE stop doing work for their AMC! I’ve never found their fees or terms to be acceptable and based on complaints from appraisers made to the Guild, I never will work for them. The only question I have is why anyone else does?
When we get a request for reconsideration, lets treat it as being ‘probably right’ instead of automatically ‘wrong’ or unsupported. Try to PROVE ourselves wrong and only when we cannot do so, climb up on that high horse. Even then make the extra effort to carefully explain WHY the new data is no good and ANTICIPATE and head off the future complaint! IE: three potential higher ‘comps’ were excluded because they were all on the west side of the street with unobstructed ocean views that paired sales or regression shows sell for 1/4 million more than similar houses on the east side of the street….OR GRID them and make the 1/4 million adjustment!
Just saying “value remains unchanged” is an invitation to get a state complaint…even when you did nothing wrong!
Just my two cents. FYI nearly HALF the cases where I get involved on behalf of the Appraiser’s Guild trying to help appraisers defend themselves against state complaints, OR mitigate the damage arose out of cases very similar to what I have described above. It is often the UNRELATED sloppy report discrepancies that are getting appraisers burned. Start thinking defensively folks! State regulators across the country are looking to impose $5,000 fines rather than remedial corrective education courses. The “gotcha police” are focused on raising revenue – NOT maintaining appraisal integrity.