T.J. McCarthy, of T.J. McCarthy & Associates, Tinley Park, IL has the following assessment of the AMC and Lender practice of making post-closing calls to appraisers to question how some of the adjustments were made and get appraisers to second-guess their original appraisal process. The following is being reprinted from an Illinois Coalition of Appraisal Professionals (ICAP) alert.
Good afternoon Appraisers,
I am writing to our residential members regarding a growing problem that ICAP is concerned with regarding lenders and AMC’s filing complaints against appraisers.
THE SETUP: You receive a call from a lender or an AMC who wants to talk to you about an appraisal assignment you recently completed for them. The call usually comes from the QC Department at the post closing stage of the loan. They start questioning you on your line item adjustments. All the comparables are on smaller lots then the subject property and they feel your adjustment for lot sizes seems a bit high. You want to be a good little appraiser and not upset your client so you agree that pe rhaps they could have been a little lower. While they have you on the phone, they also ask you if you think your time adjustments were a little aggressive. Again, not wanted to upset a good client, you tell them that maybe you were a little aggressive (even though you really don’t think you were…you’re just trying to appease them), and you state that you will try to find another public data source in the future that is more conservative. Your client thanks you and even tells you to have a nice day. You hang up the phone thinking you handled that rather well. (The following is simply a hypothetical situation used to get a point across)
FAST FORWARD: A month later you receive a letter from the Department of Professional Regulation – Appraisal Division. Your great client filed a complaint against you stating that you openly admitted to them in a phone conversation that you falsely inflated the value of your appraisal by using inappropriate site adjustments. You also stated that you often use non-traditional data sources to intentionally report market trends that are lower than normal to arrive at higher value conclusions. YIKES!!
THE REALITY OF THE SITUATION: This is really happening to appraisers and since the Dodd-Frank Act more and more lenders and AMC’s are sending in complaints on appraisers.
MORAL OF THE STORY: There is no question that the appraiser is getting slammed here for trying to be a “stand up” guy, attempting to clear up gray areas in their report. They’re engaging in what they perceive to be an honest dialogue with the QC department (long after the loan has been funded). Unfortunately, at the post-closing stage, the lender isn’t looking for you to have a change of heart on your final opinion of value. There are no changes that should be made, but now you have given the QC department ammo for a state complaint.
Also, you should never change parts of your appraisal because you think it will make your client happy. They don’t drive the process. Perhaps you don’t even realize that you are giving someone a reason to file a complaint against you when you agree to the slightest alteration or allow someone elses opinion to dictate how you will complete your assignment. In the meantime they are on the other end of the phone writing down everything you are saying as they prepare to turn you and your report into the state.
DISCLAIMER: I certainly am not telling you to ignore errors and omissions on your reports when a client discovers them and asks for corrections. Nor am I telling you to be unethical. But, by trying to be accommodating, you could be creating a problem for yourself where one never existed.
I can assure you that the State of IL is receiving these types of complaints. I can’t tell you [which] lenders or AMC’s are filing these complaints. Also, I am not saying that all lenders and AMC’s support this type of practice.
It’s getting pretty scary out their folks. We don’t have to make it harder on ourselves by reverting to a submissive position every time an angry client calls. We are appraisers not pacifiers!
TJ McCARTHY AND ASSOCIATES, LTD.
Real Estate Appraisers and Consultants
7903 West 159th Street, Suite B
Tinley Park, Illinois 60477
Phone: (708) 614.7200
Fax: (708) 614.7228