Hybrid Reports ASB Q&A
What the cohorts promoting hybrid reports are overlooking is APPRAISAL PRACTICE…
Appraisers,
On Tuesday, Jan. 23, 2018, the Appraisal Standards Board released their latest Q&A document (see embedded PDF below).
This document appears to justify reasons why appraisers can complete the new ‘hybrid’, ‘bifurcated’, ‘desktop’ and ‘alternative’ appraisal reports (regardless of what they are named), although the Q&A document is written ‘generically’ and does not specifically mention those categorical names.
I have two issues with this Q&A document:
- it does not discuss the appraiser’s true responsibility when completing certain kinds of these reports; for more on that see the additional info below; and
- in an abrogation of the appraiser’s responsibility to preserve “Public Trust” – the cornerstone of USPAP – it says a third party “field inspector” who provides information used in these new hybrid reports does not necessarily have to be named in the report, when in fact, their provided data is stated to be accurate and acceptable within the body of the report. But then the document backtracks and says if the appraiser relies on the opinions and conclusions of the inspector regarding quality, condition and/or functional utility, this is ‘professional assistance’ and the inspector’s name (and description of assistance) must be disclosed – but according to the Q&A, the name/description disclosure only applies to an appraiser who is acting as the ‘field inspector’
Is there anyone besides me who questions this absurdity? That’s the basic problem with USPAP – it only applies to appraisers. If someone unlicensed as an appraiser ACTS and PERFORMS Appraisal Practice (as a ‘field inspector’ does) and contributes to the report preparation, that individual does not have to be disclosed.
Over the past year or so, as these new types of reports have been designed and promoted, I have written extensively about them. I have personally reviewed at least five different versions of them from different providers. Most of these new ‘forms‘ are being promoted as being “USPAP compliant”, which is a misrepresentation of grand proportions and a stretch of the truth.
To understand my perspective about what is missing in this document, and in virtually all other discussions I’ve seen about these reports, read my essay below. And below that is another perspective by a highly qualified USPAP instructor from a non-disclosure state who also has serious concerns about these new ‘alternative’ reports an appraiser can complete while in PJ’s (or bathrobe) and bunny slippers.
The Q&A contention is the gigantic EA (the size of Antarctica) contained in these hybrid reports absolves the appraiser of really knowing the qualifications and background of the “field inspector” who does the subject inspection, what that person’s instructions or biases were, or that the data they provide is not tainted in some way. The EA’s all say that subject data is ‘accurate’ and the signing appraiser agrees with it.
But what Mr. Brenan and the cohorts promoting hybrid reports are overlooking is APPRAISAL PRACTICE. Absolutely no mention is made of that, in this Q&A or elsewhere, because no one so far has bothered to look at that definition, and the definition of APPRAISAL.
APPRAISAL PRACTICE involves ‘who’ fills in the report form the appraiser signs. If the hybrid report provider sends an appraiser a ‘subject pre-filled report’ to finish with additional comps, then the appraiser is not in compliance with Appraisal Practice because they are allowing an unlicensed and unsupervised person to complete part of the report – i.e., acting as an appraiser. If the signing appraiser accepts that type of report, and signs it, the appraiser is in violation of the Ethics Rule, Conduct section – which is backed up by AO-21. Appraisers really need to read USPAP 2018-19 Definitions on page 3.
However, if the appraiser merely ‘relies on’ data collected by a “field inspector” whose data is on/in a separate document, then the appraiser can fill in the hybrid report subject section using this data. This would be considered similar to using MLS data for comparables in reports, or Assessor records for the subject. The Antarctica sized EA applies.
The multiple hybrid report samples I have seen say that if the appraiser has concerns about the “field inspector’s” data, then the appraiser can decline to do the hybrid report.
Once the ‘writing of the report’ is fully understood, then the appraiser has to determine if the offered fee is reasonable for their own business. In some cases it might be, in others not. Some clients will negotiate hybrid report fees, others may balk.
Hybrid reports work well in major homogeneous urban areas with lots of property transactions. In suburban and rural areas, hybrid reports are questionable due to the scarcity of comparable and subject verification data and competitive properties that can be found in a reasonable amount of time to make the fee payment profitable to the appraiser.
The USPAP instructor’s perspective:
The difference between the EA relying on MLS data for comparable properties and the EA necessary for producing credible results using the same source for subject data is, in my opinion, simply too large. Every appraiser knows that many MLS participants don’t even own a tape measure, much less possess the necessary understanding of what the appraiser actually does. To include an EA that states the appraiser is relying on a real estate agent’s site visit data renders the end results meaningless – the appraiser would be better served by simply disclosing that the data was obtained from the gentle extraction method. Agents have zero requirements, at least where I teach. I would be able to tear up any appraisal report, desktop or “conventional”, that utilized such an EA. This issue goes well beyond typical “peer appraiser” actions (is it Q4 or Q5?), even with the understanding that most “peer appraisers” have little idea of USPAP. I’m extremely unhappy with the ASB for what they did with this Q&A – no response would have been better than “yes…but”. That they also neatly sidestepped appraisal practice just adds insult to the injury.
As I wrote in my last essay about these “new normal” low-cost alternative reports, you need to be double-darn-sure about ‘who does what‘ in every section of the report. Don’t just take a promoter’s assurance that you don’t need to worry about that based on their claim that the ‘form’ complies with USPAP. That’s a load (dump truck size) of bovine substance.
Dave Towne on e-AppraisersDirectory.com
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Great article Dave!
I’m reminded of the proverbial three monkeys; Hear no evil, see no evil and speak no evil.
They have finally crossed over the line and essentially neutered all of USPAP. From now on compliance is not measured by what the actions of ones peers would be, but rather on how well someone can boilerplate and argument asking what the meaning of ‘is’ is.
Sophistry over substance. Well done TAF!
Thanks Dave.
I would also add that per USPAP:
“When a signing appraiser(s) has relied on work done by appraisers and others who do not sign the certification, the signing appraiser is responsible for the decision to rely on their work. The signing appraiser(s) is required to have a reasonable basis for believing that those individuals performing the work are competent. The signing appraiser(s) also must have no reason to doubt that the work of those individuals is credible.”
“have a reasonable basis for believing that those individuals performing the work are competent”
I’m pretty sure appraisers are not vetting these 3rd party inspectors and just relying on amcs for selecting the fastest and cheapest so-called “inspectors”. I can’t wait to see these appraisers hang out to dry by their boards & E&O, and drowning in lawsuits!
I have been told by a couple of reputable people in our appraisal world that the ASB has ‘pulled’ this latest Q&A off their web site. From what I’ve been told, the ASB has received a high amount of “blow back” messages about this topic. The question now becomes whether or not the originally issued responses to the Q&A would still be considered valid? Or since it was ‘pulled’, is it like it never existed in the first place?
Appraisers: You need to decide if you are going to be an appraiser or part of an assembly line. Back in the 1980s a firm named Arthur Anderson (accountants) did appraisals by committee; they got around a conference table with some senior appraisers (designated) and some junior trainees and split the work up. This did not turn out well for them; their reputation was trash and even those who were designated were shunned by their peers. We need to decide if you want to be a whore for the banks and amcs or you want to uphold the standards and ethics we must adhere to when we are licensed. I will never get so hungry for work that I will do any hybrid work because it is my opinion which depends on me following the standards and ethics set forth in USPAP. If I were to see a hybrid appraisal performed by an appraiser who used an unknown inspector to do their work I would turn it into the state. I expect there will be a feeding frenzy by lawyers on work licensed appraisers do and finally, maybe some licenses will be lost due to lack of standards and ethics. Seriously, if someone told you to jump off a cliff for a fee, you’d deserve to be out of the gene pool, so go right ahead and listen to those politicians who think they are the experts on degrading the appraisal process all in the name of the banks being able to control the appraisal results, then ask for a bailout, because this is all being done to get us desperate because we need money. You won’t get one dime after you have lost your license, so get ready to greet people at Walmart, or compete with high school kids making burgers. If you think your peers won’t turn you in, check again.
Seriously, hyperbole with no point in sight.
I won’t do them they can kiss ? my ass
I have never filed a complaint with the state appraisal board on a fellow appraiser. Times are changing and I feel that anytime any of us get our hands on one of these “Hybrid Reports” we should prepare a little review and file a complaint with our state appraisal board. Maybe if some appraisers begin to lose their license/certifications they will stop taking this type of crap. Along with their $50.00 that complaint will provide them with a little something extra!
Try not to do it as a ‘review’ – just ‘ask questions (if you can) instead of saying they did this or that wrong. – but definitely turn every single one in for even the tiniest mistake.(the mistakes wont be tiny).
These are putting appraisers out of work already. Even regular AMCs that dont handle these are seeing a volume drop (yeah, I know – we don’t care – except if they have no work, then ‘WE’ have no loan work either).
Tomorrows AB may have a sample of one posted in its entirety. All can see what we are talking about.
So you just admitted that you will be biased.
I remain mystified why the mortgage origination distributors are not routinely penalized for their obvious infractions. He did not state he would be biased, he stated he would be highly critical which is his normal approach anyways.
Well, I fail to see that “admission”, but if you are asking whether I will have a zero tolerance policy toward purported appraisal products that claim to be USPAP compliant (but aren’t); performed for fees that cannot reasonably account for more than a few minutes or a professional appraisers time, by local real estate agents as CMAs converted to market value opinions or estimates and which absolutely undermine the future survival of my profession, then I guess the answer to your question is an unashamedly “Yes.”
I will absolutely be biased and already AM biased against ALL bullshit dressed up and packaged or promoted to pretend it is an appraisal.
You see Dennis, there is no moral or ethical prohibition against my being biased against bad work. Hell there isn’t even a SR3 requirement for a lot of it.
http://appraisersblogs.com/clearval-value-hybrid-appraisal#comment
Wayne, Good post! I don’t know any other profession where one can’t choose their own clients. What happened to appraisers is just like the “little extra” movie you posted! It is theft that we have to work for a pimp (amc) and then they don’t tell us what they make off our license, experience, time, data costs, license costs, continuing education and errors and omissions insurance, forms, etc. We are a profit center for these non-appraisers who are just practicing highway robbery. Yet we still haven’t gotten together with a strong union; I haven’t joined this one because there are too many libertarians, and that is who the Koch brothers are who paid Paul Ryan $500 million just after the passage of the so-called tax reform act. Corrupt politicians have taken over our profession; you don’t see this happening to CPAs, and insurance companies got to stay in the “game” for health care because they were entrenched with donations to career politicians. Those are the people who don’t respect what we do, so I am glad I am able to still work, but pick who and when I want to work for. I haven’t ever turned anyone into the state, even though as a review appraiser I read a description of LA County that was word for word from one of my reports…. but if I ever see any licensed appraiser doing this hybrid stuff, I’ll be the first one to turn them in. You can bet they won’t be reviewed by licensed appraisers, just their non-appraiser clerks who get $10/hour to put them thru a machine…. AI doesn’t mean the Appraisal Institute any more, it means Artificial Intelligence, so let them go to zillow if they want a value not worth the paper (or pdf) is was produced on!
Oh god, save your political judgements. Weaponized media is real. Please site your informational source regarding the political leanings of the union members for the union you have not yet joined. Fail. Spin much?
The Q&A doesn’t justify anything. This situation has ALWAYS been permitted. All development and reporting standards still apply, along with the appropriate assumptions.
The real issue is not the ASB requirements, it’s that some appraisers won’t adhere to the standards (cut corners) in order to get work from certain clients.
David, true re some appraisers but I think it goes well beyond that. The looser the ASB standards appear to be, the more leeway AMCs and lenders take. The FACT is that in the past no one had a fully USPAP compliant method for developing $10 or $25 general use appraisals. They still don’t appear to have one. I keep asking for a sample of one, but so far haven’t seen anything that could be argued to be even remotely USPAP compliant, and accurate.
http://appraisersblogs.com/clearval-value-hybrid-appraisal