Have You Let the Camel’s Nose Under Your Tent? - AMC "Audit" of Office Files

A recent conversation, on the Inland California Appraiser's Forum, concerning an AMC's Engagement Contact provision to "Audit" the appraiser's files reminded me of the Camel's Nose story:

A Bedouin tied his camel outside his tent and retired for the night. It is unusually cold, so the camel sticks his nose under the tent and asks, “Master, may I keep my nose warm?” The master thinks, what’s the harm? “Sure. You may put your nose in my tent.”

A while later it became colder. The camel nudges his head under the tent, and says “Master, it is so cold out here. May I keep my head warm?” The kind master sees no problem and doesn’t want to deny his camel a little warmth. And besides, it may keep the Bedouin warmer as well. “Yes, you may.”

The night got colder and the camel’s front legs inched into the tent. The Bedouin was now sound asleep but was slightly awakened as the tent was small and now half the camel was inside. He scooted over to the edge of the tent but didn’t say anything.

In the morning the Bedouin awakens shivering. He was outside the tent as the camel had gradually pushed him out to make room for its whole body, which was resting warmly inside.

Has an AMC you’re working with stuck it's nose under YOUR tent? This usually starts with something somewhat innocuous.  They're a good customer, and pay close to Customary and Reasonable Fees, so you think, “What’s the big deal?”  And a little while later it escalates. Before you know it you are doing things you’re not ready for, but each has progressed a little at a time.  Call it "Scope of Work Creep" or WORSE!

The Inland CA Appraiser's Forum post conversation started out with a request by an appraiser for input on a particular AMC's reputation and business practices.  As the conversation progressed, it became focused on problems with the AMC's "Indemnification Clause" and the AMC's demand to Audit the Appraiser's office files. 

That's where John C. Carlson of Diamond Bar, CA jumped in with the following reply:

 Ask yourself this question – Why would they need to audit one of the appraisals that you submitted to them??? They ALREADY HAVE the appraisal.

Some other questions: 

1. Does your work file have ALL of the data you alleged to have used and relied upon? 
2. Example: You said that you use Marshall & Swift in your Cost Approach, does your work file have the M&S Data sheet?
3. You say you derive land value from abstraction – are your calculations in your work file?
4. You say you use paired sales to derive pool & other adjustments – are your calculations in your work file?
5. You say that the Subject is superior to Comps 1, 2 “X”. Do you have copies of all of the listings AND additional photos of the Comps to back this up?
6. You say you use market derived adjustments for condition, appeal, etc., does your work file contain your calculations & the data from which you derived these adjustments?
7. You used $X for bedroom, bath & SFR size differences. Does your work file contain ALL of the data/calculations from which this was derived?
8. Your 1004MC contains all of the neighborhood data. Can you recreate the 1004MC? Have you saved the *txt file, the *csv file, the DataMaster file from which you created the 1004MC?
9. Do you, as George Dell teaches, have an “auditable trail” for all of the adjustments/conclusions, etc., that you allege in your report, contained in your work file?

If you don’t have ALL of the above, you are guilty of “puffery”.  Claiming that you use these techniques & methodologies and not having the data in your work file to back them up. Barry Alperin & I just put on an Appraisal Institute Dinner Meeting on August 2 where we presented details about 4 appraisers who were called as percipient witnesses into a litigation and grilled for 8 hours each by several attorneys about their reports – perhaps you saw the postings I made advertising this Dinner Meeting.

All of these appraisers were guilty of “puffery”, alleging that they used this technique and that technique. When they were pinned down by Attorneys, they all had to admit, under oath, that they in fact had NONE of the data they said in their reports that they used. Very embarrassing.

I feel that this is the information that these AMCs will be looking for when they Blitzkrieg into your office and grill you about your appraisals & work files.If you have all of the above information that you allege you use in your reports – GREAT, you have nothing to worry about. If you don’t, it’s going to be a very embarrassing several hours having to admit that you don’t have the data. Perhaps you open yourself up to liability with regard to your reports and this AMC???

I would pass this (AMC Engagement Contract) by your E&O Company as to what liability you will be taking on by agreeing to allow these AMC Nazi’s to come into your office and tear you apart about your appraisals. Think about this very carefully. Everyone think about this very carefully !!!!!!!

 

AUTHOR: John C. Carlson, John C. Carlson Real Estate Appraisals, 556 N. Diamond Bar Blvd. Suite 308 Diamond Bar, CA   91765, Office:  909-861-6186  Cell:  951-255-6466.  Historic, Architectural & Luxury Home Valuations.  Industrial Buildings  Apartments Forensic Reviews* Litigation and Expert Witness www.jccrea.com