Going the Distance in USPAP
- Hybrid Assignments, the Consequences - February 7, 2019
- Bankers Concerned About Appraisals - October 18, 2017
- Third Party Blues - July 19, 2017
Arbitrary distance limitations….
When I was in private practice, much of my litigation work took me to Somonauck, Sandwich and Plano, Illinois. That’s about 45 miles west of where I live. Still, I had so much work in those areas, you’d think I had an office there. However, if I were working for many AMCs, I’d have been considered too far out of my area for the assignment.
Some AMCs, under the guise of authenticating geo-competency, restrict assignments to Illinois certified appraisers based upon arbitrary distance limitations. Most typically seen are 15 miles for urban/suburban locations and 25 miles for rural. Then there are others who insist on 45 mile limits or 30 mile limits for any and everything.
What does USPAP say about geo- competency?
With regard to Competency in general:
The appraiser must determine, prior to accepting an assignment, that he or she can perform the assignment competently.
Comment: Competency may apply to factors such as, but not limited to, an appraiser’s familiarity with a specific type of property or asset, a market, a geographic area, an intended use, specific laws and regulations, or an analytical method. If such a factor is necessary for an appraiser to develop credible assignment results, the appraiser is responsible for having the competency to address that factor or for following the steps outlined below to satisfy this COMPETENCY RULE.
AMCs need to be reminded that under the Illinois AMC Administrative Rules: Section 1452.190 Unprofessional Conduct
“Dishonorable, unethical or unprofessional conduct” as used in Section 65(a)(9) of the Act includes but is not limited to: i) Deliberately interfering with a licensed Illinois appraiser’s ability to comply with USPAP;
Because USPAP states:
In an assignment where geographic competency is necessary, an appraiser who is not familiar with the relevant market characteristics must acquire an understanding necessary to produce credible assignment results for the specific property type and market involved.
AMCs that draw arbitrary circles around appraisers without knowing what the appraisers understand about a market area or segment are misleading their own clients on their vetting process. Aside from that, they run the risk of enforcement action in Illinois. AMCs need to qualify their panels appropriately and thoroughly.
If the distance between the appraiser and the subject is an issue, then perhaps the distance between an AMC and their appraiser should be called into question.
Let’s all use common sense.
By Brian Weaver, Coordinator Editor of IllinoisAppraiser, Appraisal Management Company Coordinator for the Illinois Department of Financial and Professional Regulation (IDFPR) – Illinois Appraiser Newsletters – Volume 8, Issue 2
You are absolutely correct that there is no arbitrary distance that can define or guarantee geographic competency.
Because the post emphasizes that USPAP allows (indeed requires) appraisers to acquire competency if they do not already have it when they accept an assignment, and because the post specifically discusses AMCs, the bulk of whose work is for lenders who mostly require their loans to be saleable to Fannie, it is worthwhile to remember that Fannie requires that the appraiser already have the competency BEFORE accepting the assignment.
Although USPAP allows an appraiser that does not have the appropriate knowledge and experience to accept an appraisal assignment by providing procedures with which the appraiser can complete the assignment, Fannie Mae does not allow the USPAP flexibility.
Great article. Geocompetency arguments really fall apart in distant settings, where even if there is an appraiser who lives there, they’re routinely booked out weeks if not months. An appraiser does not need to live there to be competent there. Should appraisers list all the places they’ve lived previously so they can be qualified under geocompetency? What about a total map list of all the places I have appraised in the past? Geesh. I think the solution to these issues rests in affirmation that the appraiser has the primary or the varied primary MLS subscriptions for the area. I’m constantly dealing with this issue because I’m up North, near the county line which separates North side MLS from mid Denver side MLS. Although I’m in proximity, I can’t take those orders because I don’t have the dual MLS.
Well said Mr. Weaver!