Appraisers Should Never Do Evaluations
…users of evaluations knew & accepted that if they obtained evaluations in lieu of real appraisals that they were getting meaningless value opinions by unqualified personnel…
TALCB will be considering the Board’s position regarding appraisers performing evaluations in compliance with USPAP at the next Board meeting on August 23, 2019
Dear Texas Appraisers Licensing & Certification Board Members:
The short and sweet version is that appraisers should never, repeat never do ‘evaluations’.
The term itself should never be uttered as if it refers to any legitimate appraisal product that meets the USPAP requirements of a real estate appraisal.
When FIRREA 1989 was first written, The United States Congress recognized that there may be rare instances in rural or under served areas in which a lesser product that does not meet all (or even any) of the requirements of USPAP may be required for a variety of exceptional reasons.
They called these poorly defined “less than appraisal” products, evaluations. They never intended that they should become the preferred lowest cost / fastest turn time ‘valuation product’ available.
As originally written, evaluations were specifically prohibited from being referred to as appraisals, or allowed to ever be called appraisals.
If USPAP and FIRREA 1989 are to have any remaining credibility across the nation, then evaluations should be kept separate from the uses which require appraisals, and the professionals that perform those appraisals.
Bifurcated Hybrid products have already attempted to blur the distinction between the two; repeatedly using both terms in the same reports as if they are interchangeable.
The Uniform Standards of Professional Appraisal Practice already permit service limitations by direct statements in the scope of work, while still allowing the flexibility associated with limited scope restricted appraisal reports. Frankly even that was an error. The (repealed) Departure Provision enabled deviations, while preserving the rest of USPAP applicability.
If a change is required, then let it start with The Appraisal Foundation (TAF). Let THEM revise the wording that limits restricted use reports so that they may function like ‘evaluations’ without negating the rest of USPAP requirements. Otherwise, there will never be uniformity, and cross over erosion of real appraisal standards will inevitably follow.
Evaluations were never in the province of appraisals. Nor were the requirements for who could do them ever indicative of special skill or experience. Frankly, users of evaluations knew and accepted up front that if they obtained evaluations in lieu of real appraisals that they were getting meaningless value opinions by unqualified personnel.
That low level quality of work should never be allowed to cross over and be treated as if it was ‘almost as good’ as a real appraisal. Allowing appraisers to complete them legitimizes them in the public eyes.
Allowing evaluations to be produced by appraisers will only further muddy the quagmire that USPAP compliance monitoring has become for regulators nationally. Many states already act as if SR3 and SR4 obligations don’t apply to them, based on bad advice from AARO and TAF.
That means we already have 50 states and 5 to 7 more territorial interpretations of what USPAP compliance is. What will happen when they allow a product which by its very definition is and never was intended to be USPAP compliant?
Will the same state regulators (not Texas) have 50 separate interpretations of the horribly ambiguous IAE Guidelines to reinterpret? Will TAF and AARO simply urge regulators to follow more compliances matrices without the ‘investigators’ necessarily understanding what it is they are investigating?
Texas is fortunate to already have a two step process of legal review and screening as well as USPAP compliant real estate appraisal review as part of the process of assuring USPAP compliance. Will current appraisal professionals at TALCB also be required to ‘review’ these products which really have no defined standards of performance?
Or, will Texas be forced to hire failed loan officers, bank managers and banking parking lot attendants to screen evaluation reviews for quality control, since they don’t have anyone with standards that low? I mean, those are the people that can perform them now.
Currently 70% of all complaints received by TALCB are dismissed as having no merit. Those are based on real appraisals. Imagine the inundation when (if) evaluations prepared by appraisers result! Are consumers really going to understand that sometimes the appraiser performs to specific minimal federal standards, and other times they simply don’t? What about the appraisers themselves?
There is never a shortage of loan officers or lenders; or AMC companies willing to urge appraiser to ‘cross the line’. A standard joke in the professionis “Why you are the only appraiser that has ever told us that can’t be done. All our other appraisers do that.” Whatever the ‘that’ happens to be.
The American Guild of Appraisers membership all strive to provide the highest quality appraisals that they are capable of. We have not had a great hue and cry to lower the standards so that they too can routinely produce sub standard valuation analyses.
TALCB should consider who exactly is claiming appraisers need to be able to compete for sub par work.
Respectfully submitted, on behalf of the American Guild of Appraisers
Mike Ford, AGA, GAA, RAA, CGREA, Realtor®
California General Certified R.E. Appraiser
Chairman National Appraiser Peer Review Committee
V.P. Special Projects
American Guild of Appraisers, #44, OPEIU, AFL-CIO
(714) 366 9404
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Troll Alert: This comment/commenter was flagged as suspicious!
Mr. Ford: Enjoy your time in irrelevance. Like it or not, the banking world is going the way of evaluations. Evaluations are already legitimized and have been since the 1990’s. I’d rather be doing evals. than flipping burgers. I know of colleagues that make a killing doing commercial evals. Aren’t you more qualified to do an eval. than some nincompoop off the street? The financial system needs appraisers doing evals. rather than butcher, the baker and the bartender. It’s better for the public trust. Do you really want A.O.C. doing evals.?
LOL! So proud you’re hiding behind a fake name. Thanks for the laugh
Dustin, is that you?
Seek the truth.
Mr. Apa, interesting (& appropriate) perspective comparing burger flippers with “evaluators”. I suspect the burger flippers have higher mandatory standards since they have to comply with meaningful health and safety codes. While unlicensed ‘appraisers’ have none, and interagency ‘guidelines’ are set up to assure plausible deniability rather than enforceable standards.
“Legitimized;” by whom and in what way? Like a BPO?
As for being better to have an appraiser doing evals; in California, they are no longer ‘evals’ if an appraiser does them. They are appraisals. They’d have to conform to USPAP.
Under FIRREA evals may NOT be called an appraisal. It’s a Catch 22. If they are appraisals, then they are no longer evals.
I don’t doubt there are a lot of lost their license former appraisers doing them in mandatory USPAP states; which contrary to logic-allow unregulated unlicensed ‘appraisers’ to operate (again-California as an example). “The financial system” doesn’t need appraisers doing evals. It WANTS appraisers doing them. If only to lend a sense of credibility to what is otherwise a pure garbage product.
When banks got evals written into FIRREA I’m sure they told Congress they were only done by informed branch managers or local brokers. Yet they insisted on final language that allowed the parking lot attendant at the bank, a secretary, clerk, butcher, baker and any other nincompoop willing to work for chump change to do them.
Mike you are right on ! The Lending industry wants (needs) the appraisers signature and E & O insurance on a document that shows some kind dollar amount. If they call it an appraisal there are lots of requirements on the appraiser and the completion of the report. If they call it an “evaluation” there is no definition, requirements or regulations that need to be followed. To my knowledge “evaluation” has not been defined for the use in the appraisal industry.
Good article Mike Ford
Thank you Mr. Ford.
Your efforts are greatly appreciated.
As far as State Boards, especially those loaded with AMC employees.
So much for “public trust” when there aren’t any written Uniformed Standards for evaluations.
Is it an appraisal appraisal or an evaluation appraisal? Does it have to meet the selling guide requirements? Or can the public just assume the data is good, because it was uploaded to the CU lickity split?
When are state boards going to start “supervising” AMCs, which is part of their minimum requirement for taking registration fees.
Evaluations really only pertain to commercial in house loans for renewal and portfolio monitoring for the most part. It makes sense to have a qualified commercial appraiser on staff with the lender to perform these. Job opportunity maybe?
The Job opportunity already exist for Licensed Appraisers. USPAP AO-13 is very clear and explains the responsibility of a Licensed Appraiser when it comes to evaluations in the context of inter-agency guidelines. This is all about shifting Blame for the Next Bail-Out! Just My ever so humble opinion.
The ASB issues guidance in the form of Advisory Opinions, USPAP Frequently Asked Questions (FAQ) and periodic questions and responses “USPAP Q&A.” These communications do not establish new Standards or interpret existing Standards and are not part of USPAP. They illustrate the applicability of Standards in specific situations and offer advice from the ASB for the resolution of specific appraisal issues and problems. Please note that the “See also FAQs” references shown in the margins of the Standards are in addition to already footnoted Advisory Opinions (AOs); the location of these references do not place greater importance of USPAP FAQs over AOs, they are simply another reference tool for the users of USPAP.
AOs are not enforceable, nor are they USPAP, per USPAP PAGE I.
True. Now what ASB does NOT do is include any requirement that MY state regulators (Sr. Real Property Appraiser/Investigators) follow USPAP SR3 & SR4 in their analysis of an appraisers ‘factual’ compliance with USPAP, state law and federal regulations.
TAF wanted to straddle the fence and they have done so admirably.
I want to do bpo’s all day long instead… How the arguments shifted when the amc industry found out it could exploit the appraisal industry even further.
Lack of individual persons having licensing means it’s simply both time and cost prohibitive to regulate an amc. Because the amc is a corporation, not an individual.
I think the industry missed the mark on effective regulation by defining type rather than action. This industry should have regulated all aspects of ‘managing and engaging’ appraisers, rather than defining a specific business model type. Because they’re not licensed, mortgage persons can use them to levy tremendous pressure on licensed appraisers, effectively firewalling themselves behind non licensed individuals. With evals coming into the picture, expect more of the same.
I’m quite sure this industry has lost around 80% to 90% of the available full fee direct assignment order streams we enjoyed a brief 10 years ago.
Any Appraisers that are willing to do any type of “hybrid” or “desktop” deals, will be the demise of our industry.