As someone that does a lot of reviews, I see some interesting appraisals come across my desk. Some give me pause to wonder. And some just give me pause.
One issue that has come up more and more of late, is appraisers not being licensed to appraise the property in question. Specifically, I’m speaking to the license limitations of a “Licensed” or “Residential” appraiser.
Here in California, we have 4 licensing levels. Other states have similar licensing, however, the designations may differ.
AT-Trainee Appraiser - Can appraise any property the supervising appraiser is licensed to appraise.- AL-Residential Appraiser - Can appraise any “NON-COMPLEX” 1-4 family property with a transaction value up to $1,000,000
- AR-Certified Residential - Can appraise any 1-4 family property without regard to transaction value
- AG-Certified General - Can appraise all real estate without regard to transaction value or complexity.
The sticking point that I see is the “NON-COMPLEX” issue. Many AL or Residential Appraisers here in CA appraise complex properties as a part of their regular business. I talked to a few about this issue and the consensus is that they feel they are capable of appraising “complex” properties with a transaction value under $1,000,000 and that the definition of “complex” is so vague, that they feel they can justifiably do it. They may be right. Federal Reserve Regulations, from which USPAP was born and which state define a “Complex” appraisal as “…one in which the property to be appraised, the form of ownership, or market conditions are atypical.”
Can you say “Vague”? I called my state office of real estate appraisers and spoke to an investigator about this issue. While I didn’t ask them to go on record or put it in writing, I was told the CA OREA considers examples of “complex” to be anything that has
- Functional Obsolescence
- External Obsolescence
- Acreage
- Views
That takes a whole lot of properties out of the pool of homes a residential appraiser, or AL level appraiser, here in CA, can appraise.
I recently did a field review of an appraisal on a home that was a lakefront property, on a few acres of steeply sloping property, in an area where there are very few similar sales and the few that there are, were up to 26 miles away, by road.
OK, now that is definitely complex by anyone’s standard. Even the appraiser admitted it was very complex when I called her. The problem I had with the appraisal is that she is an AL or residential appraisal, as is her supervisor, that signed on the URAR.
When I asked her why she completed an admittedly complex appraisal that is outside the scope of her license, she had a few reasons.
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- She has appraised these types of properties in the past
- She thought she was competent to do the appraisal
- She didn’t realize it was so complex until she inspected the property
- She didn’t know the definition of complex
- No one ever said anything to her before about doing homes like this.
These are all well and good, but unfortunately, none flies with USPAP.
Unfortunately, it seems that the CA OREA doesn’t prosecute this offense, specifically, because, as the investigator told me, the definition of complex is too vague and in an investigation, there are usually many other issues.
The policy does have a negative impact on the Certified Residential appraisers who all worked so hard for their AR licenses, because they lose business when an AL does a complex appraisal. It should be noted that other states may prosecute this offense.
When an AL level appraiser, or residential appraiser completes a complex appraisal, even if the value is fine and there are no issues in the appraisal itself, it damages the professionalism of our appraisal industry in a time when we need a greater level of same. Residential appraisers are not likely to turn away work in this market just because a home has a view or a pool causing functional obsolescence.
It is incumbent on us, as appraisers, to police ourselves and follow state and federal law. It’s always a good idea to revisit state law, no matter what the state you are in, and USPAP, to keep yourself familiar with what you can and can’t do. And no matter what your licensing level is, or the state you are licensed in, it’s always a good idea to stay in touch with your own state’s Office of Real Estate Appraisers. Every time you call them and ask a question, you will likely learn something new and helpful to you.
If you are a residential appraiser, and not licensed to appraise a complex property, consider:
- Increasing your license level
- Having a supervisor with the appropriate license level supervise you and review and sign the report.
- Turning down complex work and referring it to a colleague that is licensed at the appropriate level.
It hurts, I know, doing any of the above, but professionalism, following and knowing the law and ethics begin with ourselves. Lenders, investors, brokers, loan officers and Realtors, and all the other users of appraisal services are generally ignorant to our licensing laws, just as we are to theirs. So many times, we wait for someone to decipher USPAP and our laws and guidelines and then give us a condition on a report to change something.
If it doesn’t happen that way, we, as a profession, think we are doing things right. For us to control our destiny as a profession, we must have the courage and capacity to dig deep and understand USPAP and our other rules, regs and laws. No one else is going to do it for us.
AUTHOR: Anthony Blackburn is a Certified Residential Appraiser in Martinez, CA and one of the co-owners of Apple Appraisal, Inc. - 811A Ferry Street, Martinez, CA 94553 - Appraisals and Reviews Throughout California
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