Appraisal Objective. You base your opinion on market data, therefore your opinion is well-formed. I had even appraised that particular home from interim up to closing for completion and now it was a resale, so I knew the Subject inside and out. Also, when I started doing reviews many years ago, I charged about the same fee that other appraisers in this area charge. Dear AMC employee, how do you “Try coming up the present” with that persistent legacy? That’s been going on for over 30 years. As such, you have formed an independent, impartial, objective, and credible opinion of the contributory value of that particular amenity. The competency rule requires the appraiser to assess his proficiency for performing an assignment. I have been doing reviews for a significant portion of my life. Sometimes at the cost of losing clients and AMCs. On one such visit, he taught me a great lesson about peer reviews. For instance, if you were to appraise a home with a small crack in the foundation, you may implement an extraordinary assumption that the home is structurally sound. Not only that, but those appraisers will be utilized for that client's assignment rotation so the "feet on the ground" in your CRA assessment area do not change. I will not bore you with the details, but the majority of his findings were unfounded at worse and a simple difference of opinion at best. FEMA Valuations The 50% FEMA Rule appraisal is a tool that is frequently used in coastal areas, but theses valua-tions also may be needed for properties located in flood zones and subject to floodplain manage-ment. I thought that was sage advice, and I have always tried to live by it. The knives in the back for AMC’s should stop. USPAP Standards Rule (SR) 2-1 provides three basic, foundational requirements for real property appraisal reporting: “Each written or oral real property appraisal report must: (a) clearly and accurately set forth the appraisal in a manner that will not be misleading; (b) contain sufficient information to enable the intended users of the appraisal to understand the report properly; and, (c) clearly and accurately disclose all assumptions, extraordinary assumptions, hypothetical conditions, and limiting conditions used in the assignment.”. You would be required to disclose the use of the extraordinary assumption and also state that its use might have affected the assignment results. Appraisers make adjustments for line items in their reports based on market reaction to specific amenities. Ground Leases – Rent Review Arbitrations • Courts in New York and California have adopted two very different approaches establishing the intention of parties where one is difficult to find • “California Rule”: “value” means fair market value in a standard appraisal at its highest and best use, not limited Whenever you appraise a home that is not yet built, for instance, you know with full certainty that the improvements simply do not exist as of the effective date of the appraisal, and yet the appraised value of the property reflects the completed improvements. Appraisers have no agenda but market value. They're easy to understand and concise. For example, you might state, “the appraised value is subject to completion of the improvements per plans and specifications, based upon the hypothetical condition that the improvements were complete as of the effective date.” You would also need to state that the use of the hypothetical condition may have affected the assignment results. “All appraisals are really worthless if the lender refuses to accept a “Range of Values.”. It is not necessary for the appraisal report to contain sufficient information so that anyone can understand it. I had appraised every home built in that subdivision from the day they broke ground up to that point 10 years later. Standards Rule 2-1 (b) SR 2-1 (b) states that you must provide your client and other intended users with enough information to understand the report. That requires you to communicate with clients “on their level,” and with consideration of the specific issues involved in the appraisal. A difference of comp choice is not always a sign of incompetency. It’s important to realize that forms are not reports. The following information was taken directly from Fannie Mae’s2019 Selling Guide. I feel like I'm leaving the course moving forward in my career. Do not make accusations if you cannot back them up yourself. You can avoid being misleading in your appraisal reports by making sure that you “clearly and accurately set forth the appraisal.” As the saying goes, you must tell the truth, the whole truth, and nothing but the truth. Let me give you a perfect example of what I mean from my own files. Remember, you did not inspect the property and you did not sit in that appraiser’s shoes. I was taught as a young boy that whenever a person is given a little bit of authority, it is usually in their nature to take that authority to the extreme. 2. Tags:Appraisal peer reviews, Appraisal Reviews, review appraisers, reviewing appraisals, reviews of appraisals, reviews of appraisers. I believe his methodology of review was to put an “X” in the “NO” box and then to think up a reason to justify the mark. I agree with you that appraisers should “Try coming up to the present”. An in-ground pool is considered part of the real estate and is given consideration in the appraisers final opinion of value. 12.6.4 The Capitalizati on of Ground Rent Method 12.6.5 The Land Residual Technique 12.7 Special Considerations in Land Valuation 12.7.1 Legal Changes to Land 12.7.2 Physical Changes to Land 13.0 THE COST LESS DEPRECIATION APPROACH 13.1 Description of the Approach 13.2 The Importance of Stratification 13.3 Units of Cost Or, so you’d think. USPAP defines hypothetical condition as: “a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis.”. The new rule, which took effect May 1, forbids brokers from hiring their own appraisers and requires intermediaries — called appraisal management companies — to choose them instead. Though my Trainer was geographically competent in the area I worked, he was not physically ‘there’ most of the time. Let’s look at Fannie Mae’s definition for GLA. As per Standards Rule 2-1 (c), even ordinary assumptions need to be disclosed. What’s more, rather than state this, his modus-operandi was to point out the difference and then in capital and bold letters exclaim, “THIS IS AN UNACCEPTABLE APPRAISAL PRACTICE!”  Really? The one rule to keep in mind is that agents can't offer this information in a way that attempts to influence the valuation professional's opinion of value, but as factual insights. It also establishes requirements for performing appraisal assignments and reporting results. Appraisers are required to take the USPAP course every two years to remain current on the changes. It was by a “Licensed” newbie (not Certified and less than 2 years in real estate, let alone appraising) and supposedly reviewed by an MAI. I’d rather respond directly to the client and help educate them and better handle borrowers’ issues, when necessary. The ethics rule addresses conduct and prohibits specific activities including certain undertakings to procure assignments. Arkansas Code § 17-14-308, as amended by Act 413 (2009 - HB 1500) CALIFORNIA 1090.5. I have incorporated several techniques and comments that I have discovered on reviews into my own work. He owns and operates The Appraiser Coach where he personally advises and mentors other appraisers helping them to also run successful appraisal companies and increase their net worth. “As you become more seasoned,” he began in his baritone drawl, “you will be called upon to perform reviews of your colleague’s work. And even then the bid we offer is usually not very competitive. Here are some rules to live by if you are going to accept assignments to review your peers: If something is amiss, make a comment. “Gene” wrote: Well stated Dustin. The content of the appraisal report—not its form or format—determines its compliance. I was given the chance to respond to the failing grade he gave my report, so I had the chance to review his review. Fortunately, I was able to find a local—and seasoned—appraiser who lived 20 minutes from my office. A good example of utilizing a hypothetical condition in the appraisal process is the appraisal of a property with proposed improvements as of a current effective date. ... RVO Estate Managers & Appraisers Foundation. In my opinion, the AMC advocates for the client whereas the appraiser is not an advocate for anyone. He has been appraising for nearly two decades. For units in condo or co-op projects, the appraiser should use interior perimeter unit dimensions to calculate the gross living area. As a real property appraiser, you rely on appraisal reports to communicate your opinion of value. Try coming up to the present. Clients and intended users will require more or less information depending on many factors, including but not limited to: Just as the scope of work varies from assignment to assignment, the level of report detail also varies for different assignments. Strive for excellence because perfection will not be achieved. Simplify the appraisal process. (iii) A violation of this subdivision (a)(2)(B) is a ground for discipline against a person holding a license, certificate, or registration under this chapter; or (C) Violates any other provision of this chapter. If mistakes are made, point them out. • The SCOPE OF WORK RULE states in part, Appraisers have broad flexibility and significant responsibility in . Approved lenders must select qualified and competent appraisers that are properly licensed or certified, as appropriate, in the State in which the property is located. No report is perfect and I agree that we should always review with the golden rule in mind. He should have said: “Nearly all men can stand adversity, but if you want to test a man’s character, give him power.”~ Abraham Lincoln Don’t do what so many appraisers do in those situations and get a big head. SR 2-1 (a) builds on the ETHICS RULE requirement that your reports must not be misleading. So, what was Mr. Tutor trying to teach an aspiring, young appraiser? Appraisers must demonstrate competency in properly calculating GLA by knowing when to separate above and below grade finish. It means less money for us, but more peace of mind. If you are reviewing and mark anything as unacceptable you should give the exact USPAP or lending regulation that was violated. A simple phone call to me would have prevented them from losing their credibility. He and his wife reside in Idaho with their four children. Their level of sophistication or experience with appraisals and appraisal reports, The intended use of the appraisal and report. It’s your opinion that the swimming pool at the subject contributed $10,000 to overall value. Most lenders have guidelines wanting appraisers to stay within a one-mile radius, but there is actually no official “one-mile rule” from Fannie Mae. I agree…the golden rule applies, at all times, and all places as we review our own lives. Within a short period of time it became apparent that doing a review involves more work than doing an appraisal. However, when I receive a notice of an omission and I point out what page of the appraisal the information is on, and receive instructions to repeat it again in an email anyway- something is amiss? The Appraisal Foundation has learned to tap into government’s coercive powers – that is, appraisers must continually buy its copyrighted code, learn from the teachers it sanctions using copyrighted teaching material, and interact with its proprietary products in many ways in order to obey the law and work in their chosen profession. Appraisers are required to take the USPAP course every two years to remain current on the changes. In fact, a difference of opinion was the sum-total of about 90% of his findings. Want to contribute to our blog? For heaven sakes, if there is fraud, do your duty! ... Sector – III, Ground Floor Salt Lake City Kolkata – 700 106 Phone Numbers. Additional language is required to clearly disclose the hypothetical condition. •ANDARD 1, in developing a real property appraisal, an appraiser must Under ST. … Great article I hope other appraisers read this and take heed of it. She instead cited comps shown on the builder’s website. Be careful what you criticize. I’ve made life long friends with some of the best appraisers in the country by helping them from a position of humility and a quest for the common goal of a professional; reliable opinion of value that is defendable no matter where, or who, ends up with a copy of that document. An institution should ensure that the scope of work is appropriate for the assignment. Lenders may verify that an appraiser is licensed or certified Basically we look for whatever is in the Intended User’s scope and we follow Fannie Mae and USPAP guidelines. Emails full of tips, news, resources and advice will be sent your way soon. Residential Report Writing: More than Forms, 7 Ways for Appraisers to Spend Less Time on Email, 2020 Housing Market Recap, 2021 Housing Predictions, and More Appraisal News. I doubt there exists a buyer in the entire world of real estate who hasn’t asked, at one time or another, what is the square footage of a particular property. The appraiser must comply with the current edition of the Uniform Standards of Professional Appraisal Practice (USPAP). Is the Luxury Real Estate Market Slowing? Using the comps I chose which had no basement (like the subject) but were slightly older than 6 months (in a proven stable market) was UNACCEPTABLE as compared with using his comps which were within 3 months, but had basements? As a consequence, we don’t offer a bid to do a review until business is REALLY slow. I have had both the opportunity to learn and teach with the reviews I have done over the years. I do Appraisal Reviews for an AMC. The burden is on the appraiser to determine which of the two rules apply. Appraiser’s typically segment out the above grade living area from the total living area for many reasons. I believe in the Golden Rule when it comes to field and desk reviews. As provided by the USPAP Scope of Work Rule, appraisers are responsible for establishing the scope of work to be performed in rendering an opinion of the property's market value. The scope of work is determined by the appraiser. You took my opening line in calls with my peers I’ve reviewed..”the next perfect report I write will be my first”. The appraiser must provide a factual, objective and unbiased opinion of the home's favorable and unfavorable characteristics and provide specific data, photos and commentary to back his opinions. I don’t do a lot of review work mainly because I feel everybody has their own opinion and most of the time it’s not looked upon objectively by our peers as well as others in our industry (ie clients, AMC reviewers, homeowners ect). He is the owner and President of Appraisal Precision and Consulting Group, Inc., and is a popular author, speaker and consultant. So why should the fee for a review be less than a fee for an appraisal? Filling out the form properly and completely does not always mean your report will be compliant with USPAP. In this post, we break down the basic reporting requirements set forth in USPAP Standards Rule 2-1. No offense, but that statement is ridiculous and laughable because in 30 years I have heard of EXACTLY zero lenders accepting a “range of values” for any residential property. I wrote a 4 page rebuttal to the Lender with a suggestion they get their money back from that reviewer and never use them again for as they obviously had a lack of quality assurance. Individual store contacts (to schedule inspections) 3. I have actually learned a ton from reviews. I love McKissock courses because I can learn at my own pace. Just a reviewer with a proverbial gun, badge, and a big head. I assume property’s title is good and marketable, and will render no opinions about the quality of the title. On the other hand, he is quite correct with is advise on reviewing a peers work. If you were to later discover that the extraordinary assumption is actually not true, then your value opinion could be impacted or changed as a result. As a former trooper, I fully agree with the comment from Mr. Charles Cross. If the OA did something wrong, demonstrate how it should have been done better. Required fields are marked *. It is not your job to criticize every aspect of the report. Give a man a badge and a gun, and suddenly he is Mao Tse-tung. Above-ground pools are considered to be personal property because they can be moved from the property, therefore they cannot be included in an appraisal. Apply here to reach thousands of readers on a weekly basis and establish yourself as thought leader in appraisal. There used to be a USPAP definition for assumption, but it was deleted in 2018, as the Appraisal Standards Board decided its use is not intended to differ from the general English meaning of the word. Things are pretty wild here at Appraisal Camp-Sedona. 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