Industry News
When Do Comps Requests Cross the Line?
The following Q&A comes from attendees to the webinar The Top 5 Questions Asked of an Appraiser and How to answer presented by Richard Hagar, SRA. (For more, visit WorkingRE.com, Webinars.)
Question: Hi Richard. I took part in your webinar last week on the Top 5 Questions. Just after, I got a request to review additional comps from an AMC. I told them that it was against TILA (Truth in Lending Act) and Dodd/Frank. They sent me back this:
EXCEPTIONS.—The requirements of subsection (b) shall not be construed as prohibiting a mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, consumer, or any other person with an interest in a real estate transaction from asking an appraiser to undertake 1 or more of the following:
‘‘(1) Consider additional, appropriate property information, including the consideration of additional comparable properties to make or support an appraisal.
‘‘(2) Provide further detail, substantiation, or explanation for the appraiser’s value conclusion.
‘‘(3) Correct errors in the appraisal report.
How do appraisers defend against this? Is there a place in the law that clearly states that appraisers are not to be influenced? I really need your help on this because I have already tried to fight the good fight after participating in your webinar but when this quote was pointed out to me, I was stumped. It appears that the law has a huge “loop-hole” by which the AMCs can still try and influence value. Any help you can offer will be greatly appreciated. – J. Bentley Rainwater, CREA
Answer: The text they sent you is correct and from the law. Is the fact that they sent you “comparables” an attempt at influence? Maybe. Depends on the quality of your appraisal and the quality of their “comparables.” One way to measure “influence” is- did the “comparables” they send all have sales prices higher than your appraised value? If they are, then it appears to be an attempt at pushing the appraiser to a higher value (influence). If, and this is a big if, what they sent are better comparables, they would likely have prices below and above your value point. Since they ALL have prices above your value and – let me guess – likely not “comparable” (shock), it appears to be an attempt at influencing the appraisal outcome– an illegal act. Comparables should bracket the subject, some higher in price some lower, bigger and smaller, younger and older (etc.). If this is what they sent, then maybe…. just maybe….. they are trying to improve the quality of the appraisal.
Next point– who decides that they are “comparable” and “appropriate?” Likely, it is someone with a financial interest in the property – hmmmmm? People are allowed to interact with the appraiser to try to help by sending information. However, it’s a razor’s edge between help and influence. Every lender and AMC is required to have written policies and procedures that outline what is allowed and what is “influence.” My suggestion is to have the lender/AMC send you a copy of their written policies and procedures regarding the additional information. And if they don’t have them, you have the option of letting their federal regulator know about the failure. Nicer Solution: you can give them a simple reply: “I did consider these sales in the original appraisal process. None of them were considered superior to the comparables used in the report.” Place it on your letterhead, PDF and send it back.
Now if you want to take it a step further: analyze their sales, briefly state why they are not comparable and send a written response to the Chief Compliance Officer of the bank and tell that person: “This appears to be an attempt at influencing the outcome of the appraisal.” In brief, provide the who, what, when and where. That will get their attention and likely stop the problem in the future. Here is a general tip: If you think something is wrong, document everything and shine light on it. Then sit back and see who scatters. These are the kinds of soultions we provide to both sides (in the OREP/WRE webinars)-appraisers and AMCs/lenders. This is why it is so important that every appraiser and AMC/lender who cares about staying in business attend these webinars. Even one mistake can be a game ender. You need to learn what to do to remain insulated and protected and what not to do, that will get you into trouble. You need to do some things and there are some things you need to avoid doing. This environment is like a mine field. – Richard Hagar, SRA
Do you Need General Liability Insurance?
Do you need general liability insurance? You just might. Business Owner’s / General Liability Policy has been compared to a homeowner’s policy for your business. Coverage includes but is not limited to Property Damage to others, Bodily Injury, Business Interruption and Loss of Income coverage, Personal Property Coverage (computers, client records, buildings) and employee dishonesty. Inspectors, appraisers and real estate agents/brokers need this coverage. Minimum premium is $500. Workers Comp also available. Call OREP.org for details and a free quote (888) 347-5273 or email: info@orep.org with your request.
OREP.org/WorkingRE.com Blogs & Surveys AMC Rater
This blog is an information exchange by and for appraisers on the best AMCs to work for. Check out this one and other by visiting the Blogs tab of our Main Menu.
New 7 Hour USPAP CE Online: Convenient, Affordable
Enjoy an OREP/Working RE discount on McKissock’s new 7 Hour USPAP online continuing education course, approved in most states. Taking this mandatory continuing education coursework is now affordable and convenient with this new online course. Visit WorkingRE.com and click USPAP CE at Cost to learn more.
New Working RE Home Inspector Edition
The new edition of Working RE is dedicated to home inspector issues only. Find a link to the PDF magazine at WorkingRE.com.
Wells Fargo Paying JVI Bad Debt
Appraisers getting stiffed by appraisal management companies (AMCs) that declare bankruptcy or simply fail to pay remains a hot-button issue for the industry. JVI Solutions is one of many in the last several years to leave appraisers with a mountain of unpaid invoices. But this story, unlike so many others, has a happy ending, with one lender stepping up to make good on its share of JVI’s unpaid debts.
Insurance: How Saving Money Can Really Cost You
If you are considering letting your errors and omissions (E&O) insurance policy lapse (not renewing or canceling) to cut expenses or thinking about switching to a company that does not provide “prior acts” coverage for your past appraisals just to save money, you should think again. Appraisers are being sued in record numbers today- even the careful ones. No matter the merit, appraisers have to spend time and resources defending themselves- even if they did nothing wrong. As most claims involving appraisers take several years to surface, letting your Claims Made insurance policy lapse, cancelling midterm or willingly giving up your prior acts coverage to save a few dollars could be very costly indeed should a claim arise from the past and you have no coverage. Call your insurance agent to find out what is really at stake. For more on E&O insurance issues, see Insurance: Insight and Advice from the Inside, an interview with OREP.org Senior Broker David Brauner, who has been point of sale for appraiser E&O insurance for 20 years.
FHA Appraising Easier, More Efficient
FHA work is booming. Here’s an opportunity to make your FHA appraising faster and more efficient. The FHA Appraiser Inspection Checklist, Checklist Instructions and eBook is designed to get you up to speed and more efficient at FHA appraising. The Checklist serves as a field guide for completing your reports. The Instructions explain how to complete the two-page checklist line by line. The eBook saves you time and money by summarizing and organizing the material you need to know. Author/appraiser Lore DeAstra says, “We reviewed more than 450 pages of HUD materials and spoke with several HUD officials to compile the FHA Appraiser Inspection Form, course materials, and eBook. It will save you time and money.” The guide is updated with the following: formatting updates for improved ease of use: more concise information in an easy-to-follow eBook searchable by topic; web links to topics for easy access; symbols and pictures included by topic for at-a-glance comprehension to FHA Checklist; FAQ from appraisers and lenders by topic with detailed index by page; over 10 new ways to access information and contact FHA to check competencies and get help fast! For more, see the inside back cover or go to WorkingRE.com and click Improving FHA Appraising under the Resources tab. “Differentiating yourself from others improves your business and marketing efforts,” says author Lore DeAstra. “These revised materials will help you obtain additional avenues of income pertaining to your FHA expertise now and into the future.” OREP insureds enjoy a discount.
AMC Rater
This blog is an information exchange by and for appraisers about working with the various AMCs- read the good but mostly the bad and ugly about which AMCs to avoid, such as the following: “Boy, are you right! I had to chase (AMC name removed for publication) for months for a check. We have friends that had to chase them for 120 days for $3,000+. They are supposed to be run by an ‘ethical’ appraiser but I think not! I did an appraisal for them, busted by rear to get it in in their turn time and then I got an email back saying they had cancelled it and utilized one of the appraisers in the area that does most of their work. I never got a cancellation email. So, I was out two day’s work and $375. Nice!” Learn what you need to know about working with AMCs at this blog. Visit WorkingRE.com and under Blogs click AMC Rater.
VA Hiring
According to Gerald A. Kifer, Supervisory Appraiser at the Veterans Administration (VA), his agency’s goal is to increase VA fee appraiser panels by 25 percent by the end of the fiscal year 2013 (September 30, 2013). All fee appraiser applicants must be state-licensed or Certified and meet all additional VA qualification requirements as detailed on VA’s website (Benefits.va.gov/homeloans/appraisal.asp). According to Kifer, the VA Regional Loan Centers are the primary point of contact for applying. Read the entire story, VA Recruiting Appraisers Nationwide first published in Working RE’s Online Edition in November, 2012, at WorkingRE.com.