Low
Cost E&O Insurance: OREP
Live and Learn
Complaints, Errors, Actions
Blue Grass Missteps
Larry Disney, Executive Director, Kentucky Real Estate Appraisers Board says
that approximately 95 percent of all Kentucky complaints are real property
appraisal assignments of one-four unit properties. He says the reasons for
complaints vary but the most frequent violations are one of the following.
* Not
developing or reporting exposure time. Typically the appraiser includes
marketing time but omits exposure time.
* Not understanding the Departure Rule and
not correctly identifying the report option. In most cases the appraisers fail
to realize the Departure Rule applies only to Standards Rules 1-4 and 1-3.
* The scope-of-work is often so lacking the
appraiser has little or no defense against the complaint.
* Failure to analyze and develop a credible
opinion of highest and best use which leads to selection of market information
that is not comparable with the subject property being appraised.
* Failure to understand or properly use extraordinary assumptions and
hypothetical conditions.
* Lacking the competency to perform real
property appraisal assignments in specific markets or to perform particular
methods and techniques necessary to complete certain assignments.
No Hits, 21
Errors
According to Brad Davis, Director of Valuations Morgan Stanley, the
following are the most common appraisal errors that impact loan salability.
* Comps Out of the
Neighborhood
* Unsupported Adjustments
* Fair or Poor Property Condition
* Dated Comparable Sales
* High REO Concentration Markets
* Health and Safety Problems
* Functional or External Obsolescence Not
Mentioned by Appraiser
* All
* Subject Sales History Not Properly
Reconciled by the Appraiser
* Age of Subject Not Similar to Age of Comps
* 2 Bedroom Subject vs. All 3 Bedroom
Comparable Sales
* Comps Out of the Neighborhood
USPAP
Violations from AZ
The following is a list of common USPAP
violations published by the Arizona Board. Note that some of these violations
are impacted by changes in 2005 USPAP.
1. The appraisal reports do not include the intended use or intended user. Suggested language: This report is intended for mortgage lending with Any Bank as the intended user.
2. Concerning a trainee's contributions to an appraisal report, the addendum should include the following language: "It is noted that [Trainee's Name] assisted significantly with this report by performing the following tasks under the direction of the appraiser: [Choose from] Considered the intended use/user; researched subject and comparable sale information; performed onsite inspection; developed the report; reconciled using the three approaches to value; offered a final opinion of value"; [OR indicate the assistance specifically performed].
3. The estimated completion date of a proposed improvement is not included in the appraisal report.
4. The exposure time is not included in the appraisal reports.
5. The marketing time is not included in the appraisal reports.
6. The scope of work is not included in the appraisal reports.
7. Not identifying and clearly explaining a departure.
8. Lack of compliance with the (three year) sales history requirement. If history of information is unobtainable, written appraisal report must include a commentary on efforts to obtain the information.
9.
The appropriate report type does not appear in the appraisal reports.
(Appraisal/Appraisal Report: Complete/Self-Contained, Complete/Summary,
Complete/Restricted Use, etc…) Reprinted by permission from the
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