Outside the Boxes: Part 14 - 12 Tips To Increase Your "ODDS" ... Observe, Disclose, Disclaim & Specify

AUTHOR:  Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. He can be reached at lvreqa@cox.net 

As licensed professionals, appraisers are required to "promote and protect the public trust" in our profession. Clients and the public have a right to expect ethics, competency and consistency from all appraisers, even when many of those same clients contribute to problems in the market.  We are expected to provide a "credible appraisal", one that is "worthy of belief".

Over the next several years, "odds are the profession will change", perhaps dramatically. During this time appraisers will become the "odd man (or woman) out" as some of the blame for market conditions will be laid at our doorstep and rightfully so as many in our profession were willing participants of "housing gone wild".

The initiatives and actions we take from this point forth will determine the trust placed in the appraisal profession by clients and the public. The real estate industry that we are part of has lost credibility and to restore the confidence, we need to be pro-active and using the "ODDS Rule" will help. 

• Observe the property and the market.
• Disclose to the client what you did and did not do.
• Disclaim that to which you are not qualified to evaluate.
• Specify your reasons and logic.

Often, clients, underwriters, loan officers, buyers and sellers have questions. Some are reasonable and some are absurd, however all are important. We can't become a "culture of no". We must take the steps necessary to respond appropriately since our responses reflect on our profession as well as ourselves. 

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12 Tips to "Increase Your ODDS"

1. Have an engagement letter and or e-mail (or fax) an "assignment acceptance" letter outlining your standard scope of work, etc.  Download Sample_Letter_of_Engagement.pdf
2. Include a transmittal letter with each report and use it to alert the client to any issues encountered in the assignment.
3. Identify issues and problems in multiple areas of the appraisal report. make an effort to reference issues (and the addenda you included to cover those issues) in the comments section on page 3 of the URAR. This way, even if the addenda or transmittal is missing, a permanent reference remains in the body of the URAR.
4. Do not clone previous reports. While you may view clones as "time-savers", reviewers and readers often find errors that originated from the cloned report of a previous assignment.
5. In you include the cost approach, make sure you advise the client of its limitations and that it should not be used to establish "insurable value".
6. Photograph all rooms, improvements, issues, problems, etc. Photos take little room in the work file and vastly exceed the ability to describe a problem, feature or issue.
7. Include a "Scope of Work Clarification Addendum". This will specify what you did and did not do with respect to the scope of work included in the URAR. A similar addendum can be included with your assignment acceptance letter.   
8. Disclose to the client, any documents that you did not receive a copy of or documents that were incomplete.
9. Most readers will not be familiar with technical terminology. Limit its use or define unique terms.
10. Do not speculate or draw conclusions for conditions, trends, etc. that you do not have support for or expert knowledge of.
11. Disclaim problems or issues that you are not qualified to evaluate. This does not mean you do not have to report issues or problems that are apparent. You do not have to be an expert to report the obvious.
12. Take the time necessary to be thorough and complete. Some assignments will take more time than others. Making the extra effort will increase the odds (of not making a costly error) in your favor.

Good reports are easy to follow and logical, providing exhibits and addendum that assist the reader in understanding the property, its attributes and issues. Avoid data and exhibits that are marginal, duplicate other material or do little to contribute to the reader's insight of your methods, opinions and conclusions. 

Credible = Worthy of Belief - Black's Law Dictionary

We apply the "principles of value" in our assignments. Likewise, every day we are measured by "the value of our principles". One is inseparable from the other. Appraising is the "act or process of estimating value" while the URAR "reports our findings and conclusions". They represent two distinct functions. We must recognize our obligations with respect to both appraisal functions and adjust our methods to produce "a credible opinion of value".

Developing and communicating the appraisal will at times cost you more than perhaps the assignment earned in terms of time and effort vs. fee and service to a client. Your choices are simply that ... your choices, business decisions that you must live with, each representing a risk that you consider acceptable. During the course of your career, you will be tested and measured many times.

"You are only as good as you last appraisal report. It will be the review of your work by a client, peer or commission that will determine, to a great extent, your reputation and standing in the profession, regardless of the experience and ability that you exhibit prior to or after that assignment".

Patrick Egger

This concludes the series from my class "Outside the Boxes: Developing and Communicating the URAR". Thanks to all that posted comments or e-mailed me regarding the articles. I appreciate your observations and feedback. I plan to continue writing on topics of interest under the "Outside the Boxes" heading.

Please take the time to let Brian Davis and the other authors know what a valuable resource The Appraisal Scoop is. They take a lot of time and effort to keep us informed as we all work to improve the profession ... "one appraiser at a time".

AUTHOR:  Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. He can be reached at lvreqa@cox.net  Look for the new Outside The Boxes category for a collection of Patrick's articles on Appraisal Scoop!