Appraisal Reviews and the Golden Rule
I believe in the Golden Rule when it comes to field and desk reviews.
As I have mentioned before, when I was going through my Trainee years, my Supervisor was actually located in another state. It was a different world back then. Though my Trainer was geographically competent in the area I worked, he was not physically ‘there’ most of the time. Fortunately, I was able to find a local—and seasoned—appraiser who lived 20 minutes from my office. Though he was technically my ‘competition,’ this grandfatherly man was always happy to sit down for a soda and a visit whenever I stopped in. His help in finding comparables and navigating the treacherous waters of appraisal was invaluable.
On one such visit, he taught me a great lesson about peer reviews. “As you become more seasoned,” he began in his baritone drawl, “you will be called upon to perform reviews of your colleague’s work. Don’t do what so many appraisers do in those situations and get a big head. Be careful what you criticize. You are not Mr. Perfect, either.” He continued, “If you don’t understand why an appraiser did something, don’t just assume it is wrong. I believe in the Golden Rule when it comes to field reviews and desk reviews. Remember, you did not inspect the property and you did not sit in that appraiser’s shoes. So, tread lightly.”
I thought that was sage advice, and I have always tried to live by it. Just because we are tasked with reviewing work from our competition does not mean we need to destroy them at all costs. Sometimes it is not a matter of right vs. wrong as much as it is a matter of my opinion vs. yours. Now, do not misunderstand; my wise mentor did not say to ignore all mistakes and pass the Original Appraiser (AO) at all costs. If mistakes are made, point them out. If reports are incompetently done, make the needed corrections. For heaven sakes, if there is fraud, do your duty!
So, what was Mr. Tutor trying to teach an aspiring, young appraiser? I think the lesson was simply to avoid pride when it comes to the role of a review appraiser. I was taught as a young boy that whenever a person is given a little bit of authority, it is usually in their nature to take that authority to the extreme. Give a man a badge and a gun, and suddenly he is Mao Tse-tung.
Let me give you a perfect example of what I mean from my own files. I recently had one of my appraisals reviewed by a local peer. I was given the chance to respond to the failing grade he gave my report, so I had the chance to review his review. It was a good thing I was in a light mood that day because what I read might have made a lesser man a bit angry. I believe his methodology of review was to put an “X” in the “NO” box and then to think up a reason to justify the mark. I will not bore you with the details, but the majority of his findings were unfounded at worse and a simple difference of opinion at best. In fact, a difference of opinion was the sum-total of about 90% of his findings. What’s more, rather than state this, his modus-operandi was to point out the difference and then in capital and bold letters exclaim, “THIS IS AN UNACCEPTABLE APPRAISAL PRACTICE!” Really? Using the comps I chose which had no basement (like the subject) but were slightly older than 6 months (in a proven stable market) was UNACCEPTABLE as compared with using his comps which were within 3 months, but had basements? A difference of comp choice is not always a sign of incompetency. To his credit, 10% of his criticism was well-founded (though minor in nature). After nearly 20 years in this industry, I have yet to turn in a perfect appraisal report. As a side-note, he agreed with my value, just not the methodology of deriving it. In the end, there was no fraud committed, no incompetency displayed, no blatant mistakes. Just a reviewer with a proverbial gun, badge, and a big head.
Here are some rules to live by if you are going to accept assignments to review your peers:
- Give the OA the benefit of the doubt when you can (remember, they walked through the property and drove the comps on the effective date of the appraisal, and… well, you didn’t).
- It is not your job to criticize every aspect of the report.
- It IS your job to look for real incompetency, deception, or fraud.
- Do not make accusations if you cannot back them up yourself.
- Do not resort to judgments or name-calling (yes, it does happen).
- Live the Golden Rule (do unto others as you would have them do unto you).
If something is amiss, make a comment. If the OA did something wrong, demonstrate how it should have been done better. If they did what they should have, be willing to point that out as well. In the end, remember that just because something is different than what you would have done, does not make it wrong. Above all, quit stabbing your peers in the back just because you have been given a little authority to review their work.
Another great article here. Reviewing is more complicated than origination. It’s very important to understand your function as a reviewer for your client, because there is potential for more variance there, than with origination appraisal sometimes. For most funding based review, it’s best to focus on proper methodology review, correct mistakes if necessary, and pass the review if the final value opinion is acceptable. The lender wants to know the appraisal and review creates a package which points to credible valuation opinion, primarily, for the use of creating a loan. With a variety of development methodologies available to appraisers, reviewers should not be surprised if their approach is different from the original appraiser, or if some additional support is helpful, even without criticizing the original appraisal. And like the article author points to; if the market value opinions are acceptably similar, pass it and don’t be too critical. / I think one overlooked solution to a variety of industry woes is to hire more appraisers for supportive positions. The appraiser should be a first choice candidate for many lending positions from panel management, order placement duties, and phone work, etc.