Category: Lending

Can I solicit a listing during my appraisal?

I was recently part of a discussion where an appraiser asked the group:

I am an appraiser as well as a real estate sales agent. After I complete inspecting a property for an appraisal assignment and before leaving the property, can I then solicit the owner about the prospect of being his listing agent or buying agent if he needs one in the future? I have no current interest in the house being appraised. Would this action violate USPAP?

 

Remember that determining compliance or non-compliance with USPAP would ultimately be determined by your state regulator. Certain states may have position statements, guidelines, or specific instructions on how to handle yourself in these types of dual-license situations. That being said, let me discuss with you several important passages from USPAP which relate to an appraiser soliciting his or her sales services to a homeowner during the appraisal visit.

To start, the Conduct section of the Ethics Rule states that an appraiser “must not misrepresent his or her role when providing valuation services that are outside of appraisal practice”. Part of understanding whether we are “misrepresenting” our role is to consider our interactions from the point of view of the parties involved, in this case the homeowner. In your case, you are clearly performing services as an appraiser, since the homeowner was told an appraiser would visit the property, an appraiser’s office called to set the appointment for the appraisal visit, an appraiser arrived to measure and photograph the house as an appraiser, and so on. If, while you are perceived to be an appraiser, you solicit business related to sales services and later list the house for sale, might the homeowner think you are listing her house as an appraiser? After all, you solicited the homeowner when acting as an appraiser and the homeowner knows you by your appraisal work.

Soliciting for a listing while performing the appraisal as an appraiser can mislead a homeowner in terms of his or her understanding of what service you are providing now and what service you might provide in the future. The Management section of the Ethics Rule states “An appraiser must not advertise for or solicit assignments in a manner that is false, misleading, or exaggerated.”

Keep in mind, too, that the Conduct section of the Ethics Rule states “an appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests.” Offering sales services as you described may cast doubt on whether you are truly acting impartially and without accommodating your personal interests.

Further, and perhaps most to the point, your act of soliciting or promoting your services as a listing or sales agent creates a prospective interest in the property or parties. To illustrate, ask yourself: Why are you advertising your sales services to her? Invariably, your intent is to obtain the listing and/or sell a house to her in the future – a prospective interest.

If you have an interest, USPAP then requires two disclosures for appraisal and appraisal review assignments. The Conduct section of the Ethics Rule requires: “If known prior to accepting an assignment, and/or if discovered at any time during the assignment, an appraiser must disclose to the client, and in each subsequent report certification: any current or prospective interest in the subject property or parties involved”. The initial disclosure to your client might take the form of a phone call or email, and the disclosure in the report certification should follow the example of Standards Rule 2-3. (Note that if you are performing appraisal practice that does not result in an appraisal report or appraisal review report, the initial disclosure to your client is still required.)

But disclosure aside, while USPAP allows the appraiser to have an interest in the property and parties, many intended uses prohibit the appraiser from performing the assignment if he or she has any interest. For example, the I.R.S., the GSEs, and federal financial institution regulators have regulations speaking to the appraiser’s interest related to the property or parties. So, while USPAP allows it, you would likely need to decline or withdraw from the assignment if you have a current or prospective interest.

In the scenario in question: by soliciting sales services, you are creating a prospective interest which must be disclosed and likely precludes you from performing the assignment.

To restate the oft-cited “hat” metaphor: bring only and wear only your “appraiser hat” for your appraisal assignments.


Joshua Walitt, SRA, AI-RRS, MNAA, CDEI is a certified residential real estate appraiser, reviewer, and educator. As the Compliance Manager for Property Interlink, he oversees procedures, training, licensing, audit, operations, and review functions. His ongoing goal is to increase accuracy and efficiency through sound reasoning and communication skills, appropriate methodology and technology, and proper oversight.

He writes for industry publications, speaks at national industry events and client conferences, and designs and presents education courses. Prior to joining Property Interlink, he provided fee appraisal and consultation services. He has also been recognized as an expert witness in local and federal court.

Walitt holds the SRA & AI-RRS designations with the Appraisal Institute, is a Board Member of the National Association of Appraisers (MNAA), holds a Certified Distance Education Instructor (CDEI) certificate, is an AQB Certified USPAP Instructor, and currently serves on the Colorado Board of Real Estate Appraisers.

TRID v Customary and Reasonable Fees

This past week, I had the opportunity to discuss TRID with appraisers, lenders, and AMCs when I attended and spoke at the Appraisal Summit and Expo (http://www.appraisalsummit.net). Clearly, there are misunderstandings of this lender disclosure rule.

A few basics about the TRID rule (TILA RESPA Integrated Disclosure):

  • The lender must disclose the appraisal fee to the borrower, and cannot collect more than the disclosed amount from the borrower at closing. This is a “Zero Tolerance” disclosure item.
  • After the amount is quoted to the borrower, if the lender learns of a previously-unknown complexity related to the appraisal, that event may qualify as a “Changed Circumstance”, which may give the lender the option to re-disclose the higher fee amount to the borrower.
  • If the lender already knew of the complexity (or reasonably should have known), then the lender cannot re-disclose (nor collect) a higher fee to the borrower. (Additionally, the lender always has the option to simply not re-disclose the higher fee to the borrower, but then cannot collect the higher fee at closing.)

Did you notice…? None of the above actions involve the appraiser!

TRID is a rule that governs activity and disclosure between the lender and the borrower – not the appraiser. In contrast, Customary and Reasonable Compensation (C & R) rules govern activity and payment between the lender and the appraiser.

The lender cannot pick and choose: it must comply with both sets of rules – TRID with the borrower, and C & R with the appraiser. Let’s look at an example…

The lender takes in an application for a single-family property with no known complexities. The lender engages an appraiser who agrees to perform the specific assignment for $X, and the lender discloses that fee to the borrower.

After the inspection, though, the appraiser notifies the lender that, since the property actually has an accessory unit, he/she will require a fee of $Y (higher) due to that complexity. What are the lender’s options in handling this situation?

The lender may agree to pay the higher $Y fee to the appraiser, so that the fee reflects the complexity in compliance with C & R. In terms of complying with TRID, the lender has a few options, depending on the specific situation and the lender’s interpretation of “changed circumstance”:

  • the lender may choose to re-disclose the higher $Y fee to the borrower so that it can collect that fee from the borrower at closing, if the lender believes the scenario meets the definition of “changed circumstance”; or,
  • the lender may choose to not re-disclose the higher fee to the borrower, and simply absorb the difference itself when it pays the appraiser.

Regardless of the lender’s handling of “changed circumstance” or TRID disclosures, the lender is still subject to the C & R appraisal fee rules.

Appraisers are reporting that some lenders have stated the following in newsletters, blast emails, or other announcements:

  • The lender will not ever increase the appraiser’s fee even upon discovering complexities; and or
  • The lender will pay only a set fee to an appraiser (such as based on county or state) regardless of the complexity of the property or assignment.

The above-two lender policies are just that:  lender decisions. Nowhere does TRID suggest that lenders should ignore complexities in an appraisal assignment when determining a C & R fee to pay an appraiser. In fact, the above policies may prove to be problematic for lenders, due to AIR violations (appraiser independence rules) resulting from non-compliance with C & R rules.

After all, how could a lender produce a believable argument that the C & R appraisal fee for a property – now known to be complex – would be the same amount as when the property was originally believed to be non-complex?

Here are a few tips for appraisers:

  • Conduct basic research about a subject property and quote the appropriate fee.
  • When requesting fee increases, always cite the reasoning.
  • “TRID” is not a compliant excuse for paying a non-C & R fee to an appraiser. TRID regulates disclosure between the lender and the borrower, and does not release the lender from its regulatory responsibility to pay C & R fees, including when a property is complex.

As with most government rules, lenders may end up having procedures that look slightly different from one lender to another. However, TRID-related lender policies should never distract from, be confused with, or “trump” compliance with the payment of customary and reasonable fees to appraisers when faced with complex properties or assignments. Complying with one rule at the expense of another, is never an acceptable approach to compliance.

Appraisal Issues: Handling Unacceptable Instructions from Your Client

This article was originally printed in the April 2014 edition of Appraisal Today, “Handling “instructions” to not make time (market conditions) adjustments without losing your client”

 

by Joshua Walitt

 

 

A few months ago, I posted to my blog several sample “instructions” I received from lenders, one of them telling me to remove a time adjustment I had applied to a comp that had sold 6 or 7 months prior to the effective date. (The other sales comps I used had all sold in the prior one or two months and I made no adjustments based on the market studies.)

My blog emphasized remaining professional, polite, and courteous in handling any appraisal issues with clients, as well as solidly knowing the rules, with the goal to save any business relationships worth saving.

 

Some could argue that a client that “instructs” an appraiser isn’t worth keeping, and I’d tend to agree. But when the client has a long-term and good track record, the fact that one problematic episode arises isn’t, in my opinion, reason to throw the baby out with the bath water and fire the client. As it worked out, I was able to communicate effectively with my client and save the relationship (I’ve received more assignments since the episode). A few appraisers questioned how I could possibly remain strong in insisting that my time/date adjustment (aka, market adjustment) remain in the report, yet still retain the business relationship. (Oh, and I like to think I educated the client at the same time!) This is one type of example I will be using in June when I speak at the Valuation Expo in Las Vegas. My talk will cover compliance-related issues and practical applications to our day-to-day appraisal businesses.

Residential Appraisal

With only minor editing, I’ve included the email exchanges below. While there are many issues related to the discussion, some of the major items I noticed throughout the conversation are included below.

 

Can a no-time-adjustment policy be an acceptable assignment condition?
No. Adjusting for market conditions is a necessary (and fundamental) part of analyzing sales, in order to bring sales “current” to the effective date. An assignment condition that bars an appraiser from properly applying such adjustments would be unacceptable, and raises USPAP and Appraiser Independence issues for the appraiser and client.

 

Is it a problem that this assignment condition was added after the assignment engagement (in fact, after
delivery)?
Whether it was presented as part of the original engagement or as an additional condition after acceptance or delivery makes little difference.
At engagement, such a condition would have to be considered an unacceptable assignment condition. In the latter scenario, after engagement or delivery, this type of “instructing” the appraiser in the development or reporting of the appraisal would not be in line with Appraiser Independence regulations.

 

Does the client evaluate the market, in order to determine when a time adjustment is warranted; or, does
the appraiser do that?
Obviously, it must be the appraiser – the market analyst expert – who evaluates the market. Regulations require that the lender engage a state-certified or state-licensed appraiser to develop and report the appraisal. They need to leave the appraising up to the appraiser.

 

Is forecasting important when deciding whether to apply time adjustments?
Forecasting may come up in some assignments, but in market value assignments for lenders, typically adjustments to comparable sales are not related to forecasting into the future (beyond the effective date), but to bringing the sales “current”. If a client is concerned that the increase or decrease in a market may not continue into the future, that concern is not directly related to the market adjustments made to the sales.
[Editor’s note: sometimes a “quick sale” value is requested on REO appraisals, such as a 90 day sale when the typical exposure time is much larger. This is, or is very similar to, future value.]

How much market study summary (such as graphs, charts, narrative) is necessary to support a
time adjustment?
In my experience, the necessary amount of summary analysis supporting market adjustments may vary, based on the market, the specific data, the variables studied, the availability of specific data, and even the client (the client can compliantly ask for further clarification). Most frequently, the Neighborhood section of standard appraisal forms (even supplemented with the 1004MC form for lending appraisals) does not offer enough space or request enough data for an adequate summary.

For example, simply reviewing the change in median sales prices over 3 periods of time, such as on the 1004MC form, may not provide enough data to determine whether values have increased or decreased, or how much they have changed. There is not enough information provided to a lender to understand how market adjustments were arrived at.

 

Does it really matter if the appraiser simply takes away the market adjustments?
If the appraiser believed, from market data, that a market condition adjustment was warranted, then removing it because a client instructs him to do so is a problem. And it’s not just a problem for the appraiser, in terms of USPAP and state enforcement.

The lender is required to obtain a USPAP-compliant report and the entire process must meet Appraiser Independence requirements; “instructing” an appraiser and utilizing a non-compliant appraisal does not place the lender in a good position.

————————————–
The email conversation, between the underwriter and myself, follows:

Request from Underwriter
Hello Josh,

Due to feedback from investors we cannot accept positive time adjustments on any comps, so please remove the time adjustment on comp 3. In the past we could accept positive time adjustments, but our investors feel differently now. So going forward please do not use positive time adjustments. This will be reassessed as we go along and the market continues to show an increase in values.

Thank you for your help

Underwriter

———————————-
Reply from Josh
Underwriter,

For me to ignore all of the studies and data that I’ve summarized in the report and not reflect the change in the market for this older transaction would not be consistent with USPAP or sound valuation practice. I can honestly say your organization is the only client, lender, or AMC that has ever instructed me to remove an adjustment. FNMA, VA, FHA, etc. all expect market analysis, and FNMA Selling Guide specifically notes time adjustments can be positive or negative. This was conventional – what set of industry guidelines is this file subject to?

Your hard and fast rule could be called an unacceptable assignment condition because it does not allow the appraiser to follow USPAP. Lack of time adjustments is one example of the problems that led to appraisers being blacklisted and losing State licenses after the bubble a few years ago.

Please hear my comments as they are intended, which is a non-confrontational discussion in order to figure out how we can work through this. I hope these comments do not jeopardize our business with one another.

Best regards,

Joshua Walitt
——————————————
Reply from Underwriter

Josh,

I understand your concerns and what you have to understand is that we have to satisfy our investors and you are the only appraiser that I have seen at this time use positive time adjustments. [Editor’s comment: How many times have you heard this? Am I the only one who does what should be done in an appraisal? I doubt it.]

I have had conversations with the investors and yes you are right there are times when it would be appropriate to use time adjustments but because of the short amount of time that we have seen an upward trend, we want to be very cautious because we don’t want to be the only ones out there doing this. We received a lot of flack from the investor on the last appraisal that we sent in that had positive time adjustments and ended up having to have a second appraisal done to support the value and that appraiser did not use time adjustments and was able to come up with a similar value. So for right now until we see more of this happening industry wide and being accepted, then we would like to avoid them if possible. I do not want to ask you to do anything that would be against USPAP but as I said I have not received any other appraisals that have used positive time adjustments so it is hard for me to make a judgment on whether you are right or wrong.

I have had conversations with a couple of other appraisers and investors about positive time adjustments and they felt that there had not been a long enough period of upward growth to determine if positive time adjustments are appropriate. Also for comps less than 6 months old I do not feel there is enough data to support the use of positive time adjustments. On older comps positive time adjustments might be appropriate, but again there has not been enough time to determine if the upward growth will continue or turn around and head back down.

You do good work and I trust your judgment and because you want to discuss something would not jeopardize your standing with us. But in this instance I don’t feel that a time adjustment is warranted and in the future you would be asked to remove positive time adjustments for comps less than 6 months old.

This is not a hard and fast rule but a judgment call by our company for this period of time, and as we know things change and I could be asking you in the future why you did not use a positive time adjustment on an older comp. I appreciate your comments and I am always willing to discuss any issues.

Underwriter
————————
Reply from Josh

Underwriter,

Thanks for the response.

The Division of Real Estate has said that if a market has increased (assuming that the summary of those market analyses is in the report and the analyses make sense), then they will expect to see time adjustments. A lender policy is not an acceptable reason for an appraiser leaving off a time adjustment, and the Division considers this type of situation a misleading report, which in the appraisal and compliance world, is a huge deal in terms of violations of USPAP. The Division is the entity that enforces USPAP and issues our licenses. They will “fail” a report that ignores the time adjustment when the market has increased or decreased leading up to the effective date. As they see it, it is black and white.

Other appraisers, your investors, you, etc. acknowledge – according to your email – that the market has increased (at least for some time) leading up to the effective date in this particular assignment. (Of course, it varies by assignment, due to market area, what particular segment,  type of property.) You note you don’t want to be the “only ones out there” having time adjustments appear in your files’ reports. I work for a variety of lenders, and looking back through my reports, I see other reports in which I used time adjustments and summarized my research and conclusions (with attachments and narrative) just as I have in several reports I’ve turned into your organization. I haven’t heard “boo” back from them (I rarely get revision requests anyway) and I’ve continued to get work from them which is one indicator to me that the quality (including time adjustments) in my reports is not an issue. Wanting to see “more of this happening industry wide and being accepted” you write below. As I noted above, it is being accepted by other clients, some small some national. However, looking to the larger industry doesn’t seem to be a reliable way to verify if adjustments are necessary or appropriate. I have absolutely no idea if time adjustments are appropriate for segments of the markets in Denver, Philadelphia, LA, or small towns in Florida. What we look at is our local market, and USPAP – according to the Division of Real Estate and reading USPAP – expects us to react certain ways in our reports if the market has changed since a comp sale’s transaction.

You note that you haven’t had any other appraiser use positive time adjustments. Talking with other appraisers, I know others are (and some are not) depending on the market and the specific segment, but obviously I haven’t looked at reports you specifically receive so can’t really comment on them. With this, I understand you are in a tough spot not knowing if I am “right or wrong”. But in light of your comments that clearly acknowledge the market in some cases (not every segment) has increased leading up to the current time, I am confidently telling you – in terms of compliance with USPAP and enforcement/ interpretation through the Division – that I am right. The bottom line is, if a market has increased, comps with older transactions must be adjusted, unless there is good reason not to. (Again, policy of a lender is not considered a valid reason.)

You mention in several places below in your email something to the affect that the increase hasn’t been going on “long enough”. Market studies and analyses in appraisals are not meant to indicate forecasting or predictions or anything like that (in general, for lending appraisals).
So, I do not understand the significance of the worry of whether “upward growth will continue or turn around and head back down” as you state. I am concerned with (as are HUD, VA, FNMA, Division, AF, AI, etc.) what has happened between the comp transaction and the effective date. While the “health” of a market can be a concern, a time adjustment is not in response to how long an increase has been occurring or if an increase will continue into the future. A time adjustment IS used to reflect the change in the market from the comp’s transaction to the effective date. For example, let’s say a comp sold 6 months ago with studies showing values increasing during that time (6 months ago up to the effective date); a positive time adjustment may be needed to reflect the upward movement of the market since that specific sale. Another example, I make a positive time adjustment following analysis and provide support in my report, and a month later the market tanks; there is nothing that makes the report invalid because any time adjustments used in the report were reflecting the change leading up to the effective date (to bring the comp “current” to the effective date). There is never a guarantee that a market will not “head back down”, and time adjustments made to comp sales have nothing to do with that. The Division does not allow appraisers to avoid time adjustments (or any adjustments for that matter) based on a lender policy/condition. If they see this type of omission, the appraiser will face a fine, required additional education, required review by another appraiser, or worse for a misleading report. As the Division sees it, there are sequences of adjustments that must be adhered to (which is basic appraising 101), one of them being market/time adjustments, so if it is left out, that is not good. One of the top “missing” adjustments found in reviews of reports leading up to the recent “bubble” were time adjustments and/or little-to-no actual market analysis. I need my license to work.

Knowingly meeting a lender’s condition that is against USPAP is risking my license and not smart. No other lender has asked me to remove adjustments, and no other lender has disallowed time adjustments. I want to find a way we can work through this, while still delivering a compliant report.

Is there a way that you/investors allow time adjustments to remain in a report, through additional pieces of data that I can supply to you?

Josh

———————–
Reply from Underwriter

Josh,
I am willing to give this a try so we will call it good.

Underwriter.

—————————

Final comments

Appraisers have a responsibility to evaluate any requests from clients (lender or otherwise). Whether the issue relates to market (or any) adjustments, the condition of the property, locational influences, the final opinion of value, or a laundry list of other items, appraisers decide. In the end, the appraiser’s judgment and expertise must prevail, in providing the unbiased, credible, and reliable appraisal report he or she is required to deliver.

AMC Appraisal Fees and Disclosure- Joshua Walitt

The proposed AMC Rules from the Agencies are out in draft form.  Coalitions, industry organizations, and groups of appraisers are examining these and other Rules.  There is discussion amongst appraiser groups and other industry participants like never before.  It’s a great time to make your voice heard and to hear what others have to say!

 

AMC_ Appraisal Fees and Disclosure- Joshua Walitt

When I helped put together a petition to the CFPB a few weeks ago (related to correcting the Customary and Reasonable Fee Rules which allows circumventing the intent of Dodd-Frank), I never imagined the amount of responses I would receive. With so much change going on in the industry, I encourage every appraiser to be involved:

 

  • What is your Appraiser Coalition doing?

  • How can you be involved in the local chapters of AI and other appraisal organizations?

  • Have you read your State’s Appraiser and AMC rules?

  • Have you read the Appraiser Independence rules established by CFPB, HUD, the Agencies, and other entities?

  • Who do you contact if you have questions regarding State laws and rules?

  • Have you contacted the CFPB regarding enforcement of Appraiser Independence or Customary and Reasonable Fees?

  • Have you completed any and all available fee surveys related to establishing your area’s typical (aka Customary and Reasonable) fees?

  • When was the last time you met with other appraisers in your area?

  • Have you signed and shared the Petition to the CFPB?

  • Are you part of online discussion groups that are positive and share useful information?

Obviously, we all need time to do our work, but issues related to our independence and our fees are part of the foundation of that work itself, so we need to make time to be engaged in the industry discussion. My talk at Valuation Expo this June will touch on related fee issues, with the overall topic being compliance-related issues and their practical applications to our everyday work.

 

One argument against the Rule-based solution is the assumption that consumers, in the end, really don’t care how much an appraiser is paid. (So is this really a consumer issue? the argument goes.) While consumers may not care about an appraiser’s paycheck per se, let’s not fool ourselves: consumers do care 1) how much they are paying, and 2) what they are paying for. I would argue that consumers DO care how much the appraiser is receiving – since it may differ from what they are charged on the settlement sheet (which may reflect a higher fee than is necessary).

 

If a loan settlement document shows the consumer is being charged $600 for the Appraisal Fee, I think that consumer would find it surprising – and confusing – to learn the appraiser was actually paid $300 (this is an illustration). Even real estate agents and loan officers tell me they are confused over this issue: Why does the appraisal report say the fee is $300, but the borrower is being charged $600?

 

The CFPB allows lenders to separate the two fees on the settlement document. But in situations where the lender chooses to comingle the fees on the settlement document, the consumer may not realize they are being required to pay an AMC fee – which is an optional service.

 

To help alleviate this confusion, many states now require appraisers to post their fees in the reports. HUD also gives this authority to the appraiser for FHA appraisals. (Some AMCs expect the appraiser to post the breakdown of fees within the body of the report.) I have posted my fee in appraisal reports for years.

 

But be sure to include a disclosure explaining why the Appraisal Fee on settlement documents may differ from the fee you’ve typed in your report, so there is a clear explanation of any “additional” or “different” fees. Take a look at a sample here.

 

In the end, Appraiser Independence and Fee issues are complex and there is no easy one-route solution. We must proceed with caution.

 

My two points today:

  1. CFPB Rules related to C & R Fees do not allow for any real enforcement of Dodd-Frank, and need correction.

  2. Post the Appraiser Fee in the body of the appraisal report with a clear and understandable explanation to avoid consumers misundertanding settlement documents.

Take a look at the Petition, and please sign and share it. But don’t stop there: Know your industry, Get involved, Take action.

 

 

Josh Walitt

 

Originally published at appraisalbuzz.com .

 

How to create an Appraisal Report: Following Instructions

I normally get very few revision requests, and usually for minor items. I’m not saying this to pat myself on the back, but to explain how surprised I was a few weeks ago when I received two revision requests in the same week. And they weren’t just any type of revision request: they were the dreaded “instruction” from an underwriter.

 

“Appraiser to include a second sale whose unadjusted sale price supports the opinion of value, and resubmit report.”

 

“Appraiser to remove the time adjustment from comp #3, and resubmit report. Our investor does not allow time adjustments.”

 

A few months back, I got another memorable instruction: “Appraiser cannot include any comps that exceed per-line, net or gross adjustment percentages of 10%, 15%, 25%. Appraiser to include different sales that do not exceed these requirements.”

 

I won’t go into details related to these reports, because I want to focus instead on how we can respond to these types of instructions from lenders and AMCs. (And, no, I am not a regulatory expert. I recommend taking a class or webinar on appraisal-related regulations.)

 

The issue at hand is that TILA, many states’ AMC rules, HUD, Interagency Guidelines, and other entities restrict this type of instruction from lenders and their agents (AMCs) because such conditions may lead to reports that are not based on the appraiser’s independent judgement (or even sound valuation principles). For example, the first request above turns the appraisal process on its head. Normally, the appraiser chooses comps based on similarities to the subject, then develops an opinion of value. Instead, the appraiser is being instructed to develop an opinion of value, then choose comp/s based on that value opinion. In the second, the appraiser is being instructed to ignore or remove a necessary adjustment. Remember learning, in your first-ever appraisal class, that you must adjust for market conditions? (By the way, in this situation, the client agreed with my data and analysis – that the market had increased – but simply didn’t “allow” adjusting an older transaction.)

 

So, how can we handle these instructions?

 

First, be polite. Don’t make insulting, belittling or threatening remarks. Simply state facts: facts related to the subject property, the comps, the market, and acceptable appraisal methodology. Consider this an opportunity to teach; whether they learn or not is in their control. If you respond negatively, don’t expect a positive outcome. Show your willingness to work through the situation compliantly and professionally.

be polite

Put it in writing. Submit your information in writing (email, fax, online messaging system), and specifically request a response in kind. This way, you can fall back on exactly what was communicated. And be sure to ask yourself how your message would look if (hypothetically) published in the newspaper or read by a regulator, a colleague or your mother?

 

Ask for the individual’s name and title who is making the instruction. I’m not suggesting we burn bridges by making it personal. But if they believe they are right in instructing you, let them identify themselves and be accountable. “Please provide the name and title of the individual requesting this, so I have it for my workfile” is simple and to-the-point; in the same message, let them know what action you are taking in the meantime.

 

legal documents

Don’t be pig-headed. Are they asking you to fix a Mountain photo that you’ve labeled “Interior” instead of “View”? Is that worth arguing over? Be gracious and fix it. But on the other hand, if they are saying “Please change the label from ‘Barn’ to ‘Outbuilding’; we do not allow barns”, then that alteration could be misleading.

 

Keep your license. Ultimately no one other than you truly cares about your license. If a loan goes south in a few years and the a lender is examining the file, they won’t care who instructed you to do what – but they’ll surely see a misleading report, improper methodology, incorrect information, or other violations. And whose signature will be on that report?

Finally, be certain. Don’t make it up. If you’re not exactly sure of methodology, State interpretation, USPAP, TILA, etc. on a specific issue, then go to those sources before you start “quoting” incorrectly. Call your state’s division of real estate, re-read sections of USPAP, read through the applicable sections of TILA, even look at the FNMA Selling Guide. Don’t make it about how YOU appraise, make it about what is correct, reliable and credible for appraisal work.

Have you received any troublesome instructions from clients?

This article was first published in Appraisal Buzz – click here.