Six Ways to Stay Out of Trouble

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Editor’s Note: This story first appeared in Working RE, Spring 2013. Click here for subscription details.

Six Ways to Stay Out of Trouble
by Larry Disney

My first commandment for appraisers is:  Know the truth and let the truth set you free.  In this context, it means that you are in control of both the appraisal development and reporting.  Therefore, let no person coerce, threaten or influence your objectivity, impartiality, or independence.

After that, and based on my 10 years’ experience as Executive Director of the Kentucky Real Estate Appraisers Board, I have seen that the most common appraisal mistakes occur because of a failure to report credible assignment results.  Here are six common appraisal mistakes and ways to avoid them.  Value opinions may differ but the question is always: Is the report credible and defendable, no matter the value?

Mistake 1 – Failure on the part of the appraiser to recognize that he or she is a professional; therefore, having sole responsibility for knowing and understanding the requirements for developing and reporting a credible opinion of value.  This means developing a credible and accurate Scope of Work, including knowing how long a report will take to complete competently and what fee is required to take the proper time to do the job right.

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Mistake 2 – Failure to perform assignments ethically and competently.  Being ethical and competent require two different but necessary skill sets. An ethics violation is intentional.  A violation of competency is usually not understanding or not knowing.  Negligence and gross negligence typically happen due to a failure to thoroughly review the work.  Review your work completely. Avoid boilerplate. That’s how mistakes happen.

Mistake 3 – Failure to complete meaningful education that will enhance knowledge and understanding of the appraisal process. The best method for ensuring professional success is to continually diversify your practice. The best way to do this is to broaden your experience by learning and growing on a continuing basis. This opens new doors of opportunity which allows more opportunity to pick and choose assignments.  Choice is good. Try to set aside time each month for professional development that exceeds your mandated continuing education hours. This includes gaining insights into professional appraisal practices as well as business strategies and the latest technology issues.

Mistake 4 – Failure to associate with peers on a regular basis. Too many appraisers fail to grow and develop because they work in isolation. Consider affiliating with a professional organization. Attend meetings of the appraiser regulatory agency in your state. Sign up to receive information from the Appraisal Foundation- these folks control your profession.  Remain up-to-date on the work of the Appraisal Standards Board, Appraiser Qualifications Board and the new Appraisal Practices Board. Make comments on proposed changes to the Uniform Standards of Professional Practice when that is permitted.  Comments are read and considered.  Visit the Appraisal Subcommittee website regularly to review the latest information (ASC.gov).

Mistake 5 – Failure to identify an appropriate scope of work for each appraisal assignment.  How do you combat this?  Identify relevant assignment characteristics; identify extraordinary assumptions and hypothetical conditions; disclose research and analyses performed and not performed; disclose significant real property appraisal assistance.

Another problem is failure to include a signed certification that includes the required information. Here are several examples of verbiage that can keep you out of trouble:  I have performed no (or the specified) services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment.

Another is:  I have (or have not) made a personal inspection of the property that is the subject of this report. (If more than one person signs this certification, the certification must clearly specify which individuals did and which individuals did not make a personal inspection of the appraised property.)

And another is:  No one provided significant real property appraisal assistance to the person signing this certification.  (If there are exceptions, the name of each individual providing significant real property appraisal assistance must be stated.)  Assistance must be noted in the certification by name, and include a list within the body of the report of each step completed, if the person does not sign the report.

Mistake 6 – Failure to identify and understand applicable client conditions for each assignment.  This problem is solved by knowing, understanding and following the various professional guidelines, such as:  the Interagency Appraisal and Evaluation Guidelines; Fannie Mae Selling Guidelines and FHA Requirements. And in allocating value contributions:  Real Property STD 1 & 2, Personal Property (FF&E) STD 7 & 8 and Business STD 9 & 10.
Story excerpted from a presentation at the Appraisal Summit 2012.

About the Author
Larry Disney began appraising in 1977. He has been an investigator with the Kentucky Appraisal Board since 1999 and the Executive Director since 2003.  Mr. Disney can be reached at larry.disney@ky.gov.

We’re always listening: Send your story submission/idea to the Editor: dbrauner@orep.org.

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One Comment

  1. Excellent article and advice.
    I am finding increasing instances where appraisers either do not truly understand what scope of work means, and / or understand its impact on their work product. Especially true among loan production appraisers.
    Excellent distinction between ethical versus competency violations; recognizing that BOTH ARE violations.
    I continue to see lenders farm out complex appraisal assignments to non certified appraisers who don’t understand the required scope of work necessary to perform competently. In essence, they don’t have enough training to realize what they do not know. You folks could spend an entire article on the scope of work necessary to complete ANY appraisal competently. Too many appraisers think its nothing more than lip service, that their boilerplate covers.
    Thank you Mr. Disney, keep writing!

    - Reply

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