Taking a Breath
According to Thomas Inserra, MAI, SRA the issue of whether requests for additional comps and other information are veiled attempts to influence value is never clear cut, even to someone who has been on all sides of the issue. “I've worked all sides of this issue; as an independent fee appraiser, Chief Appraiser for a lender, federal regulator, state investigator, appraisal management company (AMC), Realtor supplying comps to an appraiser, homeowner trying to refinance and supplying comps to an appraiser and as a Receiver, tasked with cleaning up banks that failed because of these and other lending abuses,” Inserra said.
 
“I had an AMC come back five times to ‘dispute’ a value when I was a fee appraiser, which, in my book, is clearly an attempt to compromise the independent nature of the relationship,” said Inserra.  But, Inserra says, multiple comp requests could just be an honest attempt to ensure that the appraiser has not missed relevant data. In the wake of the real estate collapse, lenders have tightened underwriting and increased the demands on appraisers. He also says that some appraisers may be oversensitive to the issue because of the years of abuse. “I've caught myself a few times overreacting when presented with comps from a lender/AMC,” Inserra said.  “A good rule of thumb is to give the client the benefit of the doubt and to know when to professionally respond with a letter (only) and when to push back when the line is crossed. On occasion, I have responded in writing to loan officers, Realtors and AMCs with something like: ‘Gee, the three comps you supplied me are already among the seven comps I supplied in my report, so no, the fact that you are providing them will not alter the value.’  What I really wanted to say was, ‘Did you actually read the report?’”
 

John Shives, an appraiser for 30 years, owns and operates the AMC SAMCO. “Working only for community banks, I have seen the review of the appraisal intensify dramatically. This has been caused by Fannie/Freddie taking a hard look at the file of every mortgage that is heading to foreclosure, and the first item they look at is the appraisal,” said Shives. “If there is any item that doesn’t conform exactly to their requirements, Fannie/Freddie force a buy back or cram down of the loan. My first concern is working with appraisers who will create USPAP-compliant reports that then pass Fannie/Freddie guidelines. Many appraisers have been working ‘solo’ or in very small shops and have fallen into habits of creating a report a certain way. The 2010 Interagency Appraisal and Evaluation Guidelines have placed a renewed emphasis on USPAP reviews for all appraisals. I believe this has been a significant, positive turning point for the appraisal profession. If an appraiser has written a logical report that complies with USPAP and provided detailed Search Parameters and Results explanation, if the comparable sales are challenging, then that appraiser will not have any back and forth. The issue is that many appraisers do not truly understand USPAP or how to write a defensible report. At SAMCO, we very seldom receive underwriting requests for additional comparables or information. That is because the appraisers who work with us do the job right the first time. There is no back and forth.” 

A highly-placed executive at a very large AMC who wishes to not to be named, also a veteran appraiser, told WRE that he hears loud and clear the common complaints of the excessive back and forth between appraisers and AMCs and that most appraisers believe that AMC personnel don’t know what they’re doing. He says each lender has their own way of doing things and progress toward standardization is slow.  “Appraisers are used to doing things one way but they have to accommodate what the client (lender) wants,” he said.  “Appraisers complain that AMC staff asks for things that are already in the report, so they think the staff is not reading the reports but each appraiser puts things in a different place. It would be good to explain more, to give a better road map and/or standardize things, and that is what’s coming.”

Shives also sees things improving. “The appraisal industry is becoming more professional. The quality is getting better and better. Appraisers aren’t being pressured for value anymore, at least I don’t hear about it. And the industry is going more towards ‘customary and reasonable’ fees. I just see positives in the future.”

Diffusing Complaints: Appraiser Survey Cards
Complaints by homeowners who are disgruntled with a low value result are rampant in today’s down market. Taking a complaint from a citizen too lightly, by not responding completely and professionally, can be a big mistake even if the complaint is half baked or flatly ridiculous. But responding properly takes time and effort. According to Inserra, the use of appraiser survey cards can dramatically reduce complaints and value disputes. “As the lender, we supplied the borrower with a survey postcard to rate the appraiser. Did they show up on time? Were they appropriately and professionally dressed? Did they explain the appraisal process, provide an opportunity to supply comps and ask questions about the quality and features of your home? The beauty of the survey is that 95 percent of appraisers always received the highest rating, indicating the homeowner was pleased with the appraisal service,” Inserra said. “That meant that later, if and when they were unhappy with the value, they couldn't make up stories about the appraiser's poor service as an excuse to get us to order a new appraisal. I can't tell you how many times a homeowner rated the appraiser ‘very good’ in writing and then later complained about the value and tried to raise service issues. The survey was extremely effective at establishing and documenting that the service was professionally rendered and at defusing all future complaints against the appraiser. Our rate of value disputes declined by 90 percent once we implemented the survey.”  

Dodd-Frank: Mandatory Reporting
Concern is growing among appraisers that the “Mandatory Reporting” section of Dodd-Frank is an open invitation to pressure or punish appraisers who won’t play ball. The language says: ‘‘(e) MANDATORY REPORTING.—Any mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, or any other person involved in a real estate transaction involving an appraisal in connection with a consumer credit transaction secured by the principal dwelling of a consumer who has a reasonable basis to believe an appraiser is failing to comply with the Uniform Standards of Professional Appraisal Practice, is violating applicable laws, or is otherwise engaging in unethical or unprofessional conduct, shall refer the matter to the applicable State appraiser certifying and licensing agency.”

Even though the language seems intended to address legitimate USPAP violations, any complaint, even a frivolous one, can tie an appraiser in knots, whether it’s from a lender, AMC or homeowner.  A completed survey card showing high marks for the appraiser is one more exhibit for the defense in any dispute.
 

Inserra says fee appraisers can implement their own survey so that when they get a complaint, they can pull out the survey card and say, “That complaint is strange: this card shows the homeowner rated me with the highest ratings in all categories, so why are they complaining now?” This will help confirm that the appraiser acted professionally. The appraiser can then legitimately raise the issue that this “complaint” might be nothing more than an attempt to get the appraiser to change the value.

Appraiser Independence
Inserra says other steps implemented at banks where he has worked were effective at supporting appraiser independence. “We notified loan officers, who in turn informed borrowers, that once the appraisal was received, there would be no appeal since an appraisal, by design, is an independent judgment,” Inserra said.  “We also explained to borrowers that an appraiser's opinion of value may differ with the opinion of value of the homeowner or Realtor, and that we can't force an appraiser to change their value because if that were to occur, it would no longer be an independent estimate of value from a third party. With the survey card, in effect, we limited the role of the loan officer and homeowner to providing feedback regarding service issues only, and we let our review staff independently determine whether the appraisal quality and value were reasonable. If the review appraiser discovered quality issues, they were required to provide the appraiser with the opportunity to respond.”
 
Another helpful tip, says Inserra, is giving the homeowner the opportunity to submit comps up front. “I wish the industry would establish a best practice that all comps or relevant information is to be supplied to the appraiser at the time of inspection and then from that point forward, there is to be no further contact,” Inserra said. “Quality and value issues should be off limits and reserved exclusively to review appraisal departments.”