A New ‘Standard’ for ROV Requests
Appraisers, the latest ‘buzzword’ around appraising is Standard. We’ve got to have a Standard for measuring a subject dwelling, even though the comparable GLA reported figure may have been measured far differently from the new soon-to-be mandated Standard. Appraisers have no way of controlling the apples to oranges dissimilarities.
But I digress…
According to the Dodd-Frank law, and the HVCC before it, clients are allowed to challenge the appraiser’s value opinion by submitting what is termed in the law “appropriate” sales to be further reviewed, with the expectation that it or they are included in a revised report as comparables – if a value change is warranted. A sale is NOT a comparable until an appraiser decides it is, and includes it in a report.
But guess what? Just like there has been no national Standard for measuring mortgaged homes across the US (and won’t be until April 1st… no joke!), there has also been no Standard for what an ‘appropriate’ sale is. There is no definition of that term in the law, or elsewhere. It is left up to the client to determine what is submitted to the appraiser as a ROV request after the initial report submittal. And most clients don’t validate the appropriateness of any other property, which normally is supplied to them by someone else with a financial interest in the transaction.
I venture to say that most residential appraisers have been hit with this lopsided process more than once in their career. Most of these ROV properties are entirely bogus due to a multiplicity of inappropriate characteristics, including basing the ROV property entirely on its Sale Price. The general attitude is ‘who cares!’ Just “please, pretty please, raise your opinion of value anyway.”
Well, it’s time appraisers incorporate an easily understood Appraisers’ ROV Standard in their reports to either ward off or tighten ROV requests. This is especially important when 1) the contract price is excessive based on market evidence and your value opinion is lower; and 2) multiple people with differing viewpoints are involved with the property, such as with an estate or divorce. (If your Opinion of Market Value is at or above the Sale Price, you’re considered God’s answer to appraising and won’t be hassled, so you don’t need to include the Appraisers’ ROV Standard in that report. But use it for private assignments.)
Not long ago I got really irritated with this ROV process when a seller submitted to the client 10 properties for reconsideration, which were passed on to me. As you might imagine, none were truly comparable and I did not alter the report just because the seller wanted to get a higher price.
After wasting my time with all that junk, I wrote the following process the client must follow when the situation is as noted above in order for me to consider a ROV request. I, the appraiser, have set the Standard they must follow. But if you use it, YOU need to enforce it.
Since beginning using this Standard, I have had ZERO ROV requests.
I’m making this new Appraisers’ ROV Standard available to you, which you can use as written if you like, or modify it to your liking. No other similar ROV Standard exists, as far as I know.
By the way, the only way this will become effective across the appraising spectrum is if it is used! Do so!
VALUE DISPUTES / ROV REQUESTS:
If client (or anyone else with a financial interest in this property) disputes the Opinion of Market Value (OMV) as reported, the client may submit to the appraiser within 9 business days of report submission no more than three additional recent property sales with similar characteristics as the subject** for evaluation, along with a written explanation stating why these are better than the comparables included in the report. Additional sales must NOT be based only on ‘sale price.’ These must be within the same geographic neighborhood area or in reasonable proximity (x miles or less) to the subject’s location.
If additional sales are submitted to client by someone with a financial interest in the property, the client must FIRST evaluate those for appropriateness to this assignment, before sending to the appraiser for consideration.
If upon the appraiser’s analysis, any new submitted sales are deemed more appropriate than the original comparables in the report, the appraiser reserves the right to modify the report’s OMV and submit a revised report with a changed value. But there is no guarantee that any value change will be made.
**Similar characteristics: Design/Style, Gross Living Area (GLA), Age, Updates, Lot Size, Outbuildings, Location in area
In the statement above, you define the (x miles or less), based on the subject’s location and neighborhood within the region.