Entities Behind Appraiser Disciplinary Complaints
Appraiser Disciplinary Complaints: Who is Filing Them? What for?
We were doing some research for a project and came up with some basic data that appraisers may find interesting about disciplinary complaints to state appraiser licensing agencies. Who files the complaints? What’s the basis? Well, here’s some data from claims reported to LIA Administrators & Insurance Services in the last three years:
Source of disciplinary complaints reported by LIA insured appraisers, April 2015 to April 2018:
61% Borrower or purchaser
16% Seller
8% AMC
6% Lender
5% Miscellaneous (litigation party, estate beneficiary, other appraiser, etc.)
3% Real estate agent
1% Government (HUD)
Alleged basis of complaints filed by borrowers/purchasers:
53% Appraiser undervalued property
24% Appraiser failed to discover problem with property
19% Appraiser overvalued property
4% Other problem (appraiser offended borrower, appraiser late, appraiser didn’t show up)
Alleged basis of complaints filed by sellers:
93% Appraiser undervalued property
7% Other problem (appraiser offended seller, didn’t take shoes off, used toilet and didn’t flush)
It’s important to emphasize that this data is from matters involving appraisers insured in our E&O program (about 15,000 appraisers in all, working in small firms to very large firms), rather than the full population of appraisers.
- LoanDepot Appraisal Discrimination Settlement - March 28, 2024
- Should Property Data Collectors Be Licensed? - February 29, 2024
- VA Appraisal Request Form at Heart of AIR Violation Class Action - May 23, 2023
That data is good to know. Who to watch out for. Value is always on top of the list. We gave up accepting Credit Card payments 7-10 years ago when the “Value was not as EXPECTED”. and the card company canceled our payment, unless there was a dispute. If you look at sites like Angie’s list and others somehow we are rated LOW based upon Value alone…..I’ll keep on writing reports, but unfortunately add at least 1 page of disclaimers and explanations that I should not have to.
Used toilet, Don’t Flush. The complainers run out of reasonable complaints. Then it turns into a pissing match or who said what….really sad. The lenders are really at fault, I’ve heard horror stories what an appraiser did, or did not do, and the delay etc. fed to borrowers from lenders. But ech, I’ll just each lunch.
While measuring a house for a loan I was followed by an ankle nipping weenie dog. Standing after finishing the measurements I popped the little cuff hanger in the snoot with my clipboard. looking up I saw the Buyer setting in his wheelchair watching.
He told me to leave, for which I promptly did without saying a word. On returning to the office I immediately informed MY Client of the incident and offered to forward my work and studies to another appraiser with NO charges.
You should always do the right thing regardless.
A colleague cited a situation when we had to look at the toilette seat lid for the year built. Fred said the owner was following him and stated “YOU COULD AT LEAST CLOSE THE DOOR BEFORE YOU DID THAT”.
Best article ever!!!
These statistics prove that broad revisions to state enforcement policies and practices are urgently required.
1. NO complaint should be allowed or accepted by state regulators from anyone other than identified clients and specifically identified intended users in conjunction with the stated purpose. We do not work for the ‘general public’ and they should not have a right to target us where no contract for services exists with them. FNMA already has a laundry list of unidentified other people they’ve given a right to sue us to.
Imagine; you go get a bad haircut and your neighbor is given standing to sue because it made you grumpy!
No different for any third party.
I appreciate that many states consumer laws consider the party that ultimately pays for a service to be a client; or at a minimum someone entitled to fiduciary responsibilities on the part of the appraiser. This runs directly contrary to USPAP as it is presently written. These parties (buyer. seller or agents) have ZERO RIGHT of reliance on the appraisal. ALL they have paid for is for us to provide a lender with an appraisal in accordance with that lenders specific requirements; FNMA (or others) and USPAP. It is up to the lender-client to determine if our work is suitable. The current system and direction of TAF to investigators they train is find technicalities; and no need to comply with USPAP in doing THEIR reviews!
The solution is simple to identify but much harder to implement. (A) Either specific identified third parties such as the paying-party become intended users with a right of reliance; OR states stop accepting complaints from people with no standing or right of reliance! USPAP should be aligned with other state contract laws.
Sellers should have no ability to sue or make state license complaints about us period. None. They can sell their property to whoever they want to that is willing to pay cash, They also are not our clients. Their interests often run contrary to the interests of our actual clients.
Because they over priced their property or have an inflated opinion as to its worth, WE get to be sued or have to defend against spurious complaint at great expense, with little to no recourse?
IF states are going to keep accepting such complaints, then they all need to pass legislation that allows the appraiser to be reimbursed fully for the cost of defending themselves if complainants lose.
2. Complaints should be limited to issues raised in the complaints; not find no basis for those issues but then hammer appraisers on some other technicality that DID NOT SUBSTANTIVELY impact the conclusion!
77% of all complaints are because appraiser allegedly undervalued property or didn’t know about a property condition. The latter is usually beyond our expertise and scope of work anyway! Odd, how CoreLogic and FHFA say 6.9% of all property is over valued in their working paper; state complaints allege 19% are. Are we to believe or accept that only 4% are accurate? That’s not credible.
With state agencies across the board ‘going after’ appraisers without even doing USPAP complaint reviews themselves before offering outrageous opinions the appraisers are sitting ducks.
Either consent to wrong doing for a $1500 to $5,000 (maybe $10K) fine OR spend from $25,000 to $150,000 for non reimbursable legal defense fees.
My suggestion to all appraisers is to defend yourselves and cross complain. Without fail sue all non client third party complainants. Without exception if an agent or AMC files a complaint, then automatically cross file against their licenses with their state regulators. Start with their listings – those are rarely properly filled out. Every time a lender files a complaint, automatically file a cross complaint about attempted improper influence if they ever made even one email attempt for a value revision..
What’s good for the goose is good for the gander.
In many states no USPAP compliant review is performed. FIGHT these! On receipt of a complaint notice immediately look up the investigating appraisers license credentials along with those of their department heads. In my state the former Head or Chief of Enforcement – Elizabeth Seaters was grossly incompetent along with her Sr. Investigating appraiser John Schmidt. GROSSLY.
Find out if they are allowed to do outside appraisals in your state. Then ask how long they have worked there. In my state neither the investigator nor the head of enforcement had done an outside appraisal in over 18 years! Never did a UAD format; and hadn’t done FNMA or other GSE work in 18 years (if ever). They were not qualified to be any appraisers peer as required under USPAP. That’s not isolated to California.
Tx, Md, & Mn immediately come to mind. One as having spouted off shear stupidity such as “Adjustments are outside line item guidelines and net and gross percentage allowances.” On a prior occasion they argued that “everybody knows you adjust for that.” No support beyond that claim. Apparently they never got the FNMA memo. Like California they are also confused between FNMA guidelines and USPAP. Poor states like Oregon haven’t a clue about what day of the week it is from their track record.
IF regulators will not take steps to curb spurious complaints, then the only viable alternative is to bury them in similar complaints any licensee that complains about us; and civil cases against all non-licensees. Even if it is only small claims court.
FIGHT BACK!
The concept of ‘duty to borrowers’ seems to be hit and miss depending on your state.
The intended user of this appraisal report is the lender/client. The intended use is to evaluate the property that is the subject of this appraisal for a mortgage finance transaction, subject to the stated SOW, purpose of the appraisal, reporting requirements of this appraisal report form, & definition of MV. No additional intended users are identified by the appraiser.
FHA STATEMENT: Per pg 514 of HUD handbook; b. Intended Use and Intended Users of Appraisal: The intended use of the appraisal is solely to assist FHA in assessing the risk of the Property securing the FHA-insured Mortgage (24 CFR § 200.145(b)).
FHA and the Mortgagee are the intended users of the appraisal report. The FHA Appraiser does not guarantee that the Property is free from defects. The appraisal establishes the value of the Property for mortgage insurance purposes only.
Baggs. all true BUT which provides exactly ZERO protection to an appraiser in court (except California, now). Equally as bad, the mere fact of a legal complaint requires an appraiser spend up to $5,000 (typical ‘C&R’ legal fee retainer) just to ‘answer’ the complaint in an acceptable legally correct format. Fail to answer it, and you get a default judgement against yourself.
Of ALL the complaints I’ve reviewed only two rose to a level where any form of complaint could be legitimately supported. One was a guy that lost his license because he accepted over a dozen assignment fees and never did the work (we declined his membership) ; the other was a member ‘pushed’ by the AMC scope creep into (incorrectly) doing an sfr with ‘surprise’ extra 36 acres agriculture as an SFR for FNMA. Not one of assignments I’ve reviewed had substantive errors that resulted in a significant affect on the conclusions. (Which by the way is supposed to be the measure of whether actionable USPAP violations exist).
Most appraisers get the values right. Even those that have fundamental USPAP omissions.
BTW- how exactly is it ok for investigators to not follow USPAP and be ‘credible’ but if the appraiser makes ONE technical error his or her report is misleading and not credible?
It’s hypocrisy squared!
Those language points came from the online CE, and client requested via stips. I had taken, avoid a visit with the state board, intro to legal appraisal or something alternative related, appraisal penalty matrix focused content, and liability in appraising, something like that. Great classes, 10 years later, I actually learned something new. Now I live in fear of elevated appraisal matrix penalties. Geesh, can’t win, but I keep trying.
My most recent courses were eye opening as well. So many appraisers out there mistakenly believing that doing good work and being honest and diligent will protect them.
Now days, its more about CYA than doing it right…and they are NOT necessarily the same thing.
My landy eo just jumped to 740 base in Colorado. I’m paying for all of the other guys mistakes lately, and being held to their ‘performance standards’ as well. Try this one on: “No appraisal due date will be presented to an appraiser which is more than 3 days before the stated appraisal deadline dates in a sales contract.”
5 out of 10 buyers whom complain agree, they don’t care about value and just want that credit! 9 out of 10 sellers agree they should have been paid out by the lender and the borrowers should have had more credit availability. A consequence of reckless 98% ltv allowances and the consumer expectations that followed.
Mike Great comments.
If the appraiser is not found at fault during a complaint process with the state. Can he sue the seller which did not get his value. Violation of appraiser independence, loss of income, legal fees and pain and suffering? Better question can he or she win the case?