The author is the owner of Acorn Appraisal Associates, a 21 year old firm offering a wide range of quality appraisal services to the Financial and Business Communities in the greater Houston SMSA
I was on an appraiser forum this morning and a frustrated appraiser posted the following....
"Thanks, got the usual call .......Comp check and if value is there they would send the request. Has anyone ever told the LOs and Realtors that this is against the law???? and when you tell them it is, they don't believe us."
This is a pet peeve of mine. Comp checks are NOT against the law. They are NOT even against USPAP.
USPAP is quoted below.
The foregoing illustrations all include an appraisal assignment. In some situations, a client will request a service that is not an appraisal, appraisal review or appraisal consulting assignment as defined in USPAP. The service to be performed by the appraiser in the following illustration is:
* not an appraisal assignment (the appraiser does not develop a value opinion);
* not a real property appraisal consulting assignment (a value opinion is not a component of the analysis); and
* not a real property appraisal review (there is no appraisal to review).
The caller in this illustration is usually in the process of making a business decision and needs impartial and objective information but has not yet decided whether to pursue the matter at hand. The caller knows there is the potential for needing an appraisal, depending, in part, on what the sales data shows. The caller also believes that, if the data indicates that an appraisal is worthwhile, having that work completed by the appraiser in that subsequent assignment will lessen the time required to perform an appraisal. The prospective client may ask:
"We want you to check your data resources to see if there are sales within the past six months that are within one mile of [address]. If you find some, we may order an appraisal from you."
One possible response would be:
"If what you want is only the sales of properties shown in the databases available to me with the criteria you specified, I can do that research and send you the result. Then you can decide what you think your client’s property is worth. If I do only that, it is just research and is not an appraisal.
However, you need to recognize that there are risks if you decide to have the research done that way. If you decide to limit my work to just gathering the sales data using the research criteria you set, you are taking the risk that those criteria are both adequate and appropriate to find all of the market data relevant to your client’s property. You also take the risk that any appraiser’s analysis of that data would result in a value conclusion within the price range suggested by the sales data assembled using your criteria. There is no assurance that such would be the case."
It is perfectly understandable for a lender or a broker to pre screen a prospective borrower to make sure that the proposed deal is potentially workable before the lender or broker invests their time and the borrower's money. Wouldn't you expect that of your lending officer if you wanted a loan?
Click below to continue reading . . .
The fact that many brokers abuse that pre-screen, by attempting to transfer that responsibility to the appraiser, doesn't lessen the correctness of the pre screen activity.
I as an appraiser would not have an enjoyable business if my clients didn't look out for their customers in that way. You wouldn't either. Too many dashed hopes, too many busted deals with all the ensuing irate phone calls would result. That's not profitable.
The lender is coming from a very reasonable and prudent and ethical position....doing the right thing for their business and for their customer.
The fact that some lender/brokers abuse that function by mass emailing looking for an appraiser who will "hit the value" doesn't negate the practice of those who are attempting to do the right thing for their business and their customer.
We do a disservice to the lending industry and to the appraisal profession when we declare rudely to the client that comp checks are illegal. That's simply wrong, and the client knows in his heart that's wrong. If delivered with a rude and accusatory stance, the appraiser comes off as a jerk, and one who is also ignorant. And the Appraisal Profession has one more incident to recover from....if I'm the next appraiser that lender talks to, I've got to spend time taking the chip off the lender's shoulder.
But we have businesses to run just as the client does. A better approach is to respond just as suggested in the USPAP Example. Heck, copy that example and convert to a PDF, save it and offer to email it to those who need further explanation. If the response from the caller is to move on...fine; you've minimized the time you have to spend on a non productive call. On the other hand, if the caller is just attempting to conduct their business by looking out for their customer, you may have obtained a new client.
Don Clark a AQB Certified USPAP Instructor, responded:
"Ken, That's all well and good. But, when you narrow the search to a property type, style(ranch, 2 story) or a value range it suddenly becomes an appraisal. Most callers want a number, not just sales."
Yet another appraiser chimed in:
"And therein lies the rub - by not narrowing the criteria. If unfiltered sales are provided with the statement that these sales may or may not be comparable to the subject, and appraisal has not been completed and USPAP not violated."
I absolutely agree with both points. When you take the path described by the USPAP Instructor it becomes an appraisal. Anyone who takes that path without knowing the outcome is as guilty of abuse as the caller. That's exactly what AO-19 is meant to explain.
But how freaking often does it occur when that's what the caller wants....10%, 50%, 90% of the time?
- If it occurs 90% of the time I get a call, then I might be justified in responding tersely.
- If it occurs 90% of the time I'd be well advised to change my client base and/or the business practices that resulted in me cultivating that client base.
- If most callers want that number as is suggested, then you should change your business.
On the other hand if it occurs only 10% of the time (less in our business) it would be folly to respond that way. We maximize our efficiency and our profit in our businesses by cultivating good clients that share our values. We should always be seeking new clients who match our values.
If nine out of ten of the calls for "comp checks" are well intentioned, I'd be doing a disservice to my business and my profession by assuming otherwise.
The peeve I have is that a select few consider ALL comp check requests to be illegal, and immediately label the caller a crook.
Really! A crook. That is a baseless position and a disservice to the profession.
I'm sure the AQB Certified USPAP Instructor would agree that USPAP has evolved through the years attempting to educate the appraiser that there are few black and white situations. It's mostly shades of gray; gray not being a tainted inference, but in the sense of communicating complexity.
The Scope of Work Rule, which I consider to be the present pinnacle of that education effort gives appraisers the authority and the responsibility to not make snap judgments, but instead to act as a professional and conduct themselves in a manner that reflects well on themselves and the profession.
Too many (if it's just one...it's still too many) appraisers take the easy way out and revert to black and white.
Don Clark replied:
You and I are in agreement Ken. There are many legitimate things an appraiser can do that is not verboten. My main concern is that folks on this forum, and all appraisers everywhere should at least read USPAP when a new edition comes out. It is clear from some responses that some are not yet aware of the July 1, 2006 changes to USPAP that will be effective until 2008. BTW, there are going to be some BIG changes in 2008. Look for supplemental standards to be abolished in favor of SOW.
Michael D. Pragit of Suburban Value Residential Appraisals in Northeast IL chimed in with...
"Why not just sell them an oral report for $50-75 with a more exact number or range of value? Make sure they understand the limited scope of work, keep your records and follow USPAP and state law. At my office we call them VOV's "Verbal Opinion of Value". Making it a two step process takes the pressure off the appraiser to hit a certain number in order to get the assignment. The fee should more than cover the value of your time and helps them with prospecting (a valuable service). Sometimes the borrower really has no clue what their home is worth or it doesn't sound right to the LO or whatever. If they order an expanded scope of work assignment later -- great! If not so what? You've been paid and done an honest job.""You have control of the scope of work too. If you think you need to expand it beyond a desktop search tell them you need the see the interior of the home or that you want to visit the county offices, drive comps or whatever. Adjust your fee accordingly. If it is cheaper than a full appraisal they may go still for it."
"I was just thanked the other day for offering to see a unique home prior to a verbal opinion. There are many honest LO's and processors out there that don't know what they need. Or they do what their boss told them or what they've done all along assuming that it must be correct since that's what they've always done (appraisers do this with things too)."
"No one wants to spend hundreds unnecessarily, but they don't know how to go about it any other way unless you offer them a better way. If they seem like open and honest folk don't let this money slip through your fingers and don't miss the opportunity to teach them a way to get an estimate without pressuring appraisers into unacceptable assignments. This is a real opportunity to bring about a change in the industry and get rid some freebies and pressure one LO or processor at time."
Couldn't have said it better myself Mike. Well done!
Related Appraisal Scoop Stories:
- Fishing For Appraisers - The Comp Check "Bait & Switch" Technique
- Comp Checks - Value Opinions Put Appraisers "On The Hook"
- Value Checks, Comp Checks, Compouts: An Understandable Desire, But a Bad Idea
- "Can you check comps for me? I want to know if I should order an appraisal"
The author is the owner of Acorn Appraisal Associates, a 21 year old firm offering a wide range of quality appraisal services to the Financial and Business Communities in the greater Houston SMSA
Recent Comments