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The Competence to Perform an Assignment

by Timothy C. Andersen, MAI

“No man but a blockhead ever wrote, except for money.” – Samuel Johnson, 1776

Question: I recently bought a multivariable regression analysis (MVRA) app for my computer. I didn’t have much data because my subject was a rural property, but I entered the data into the MVRA as the instructions said. The app gave me a value that was 15 percent higher than the purchase and sale agreement. I thought this meant the buyer got a good deal. I turned in the report on time with a properly signed certificate. Now, the seller, buyer, broker, AMC, and lender are threatening to sue me and might report me to the state because they say my value was wrong. I don’t understand! If anything is wrong, it’s the app. How do I sue the app company?

Response: There are too many issues to cover all of them, so let’s focus on one—using the app. We’ll also look at what Uniform Standards of Professional Appraisal Practice (USPAP) thinks about this. Only the appraiser (not the app!) is responsible for the appraisal (Standard 1) and the appraisal report (Standard 2). So, the use of the MVRA app is not the issue. The issue is that you didn’t understand how to use the app, so you didn’t know how accurate or dependable the app’s output was. The MVRA app’s output is always mathematically correct, but that doesn’t mean it’s dependable or accurate. If you input bad or incomplete data, the output will be bad or incomplete. Your state appraisal board would call this ignorance incompetence.

Since you were in a rural area with few sales to use as comps, you were dealing with all the sales, not just a sample of those comparable to it. An MVRA app assumes you’re dealing with a sample. This means the math behind inferential statistics (what the app assumed) and descriptive statistics (what you were doing) are different. The app didn’t understand your question because it assumed you wanted an answer based on inferential statistics. So, the app gave the best answer it could, but it was wrong.

Inferential statistics (what the MVRA assumed) needs 15 to 30 data points for each variable you want to evaluate (the more similar the comps, the fewer data points necessary). For example, if you wanted to evaluate five adjustments, you’d need between 45 and 150 individual sales, all verified. Not understanding this concept goes to your competence to employ the app. Without enough data, inferential statistics will give an you an irrelevant answer.

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Since we’ve already mentioned the USPAP issue of Competence, let’s look at USPAP’s Ethics Rule. “An appraiser must promote and preserve the public trust inherent in appraisal practice by observing the highest standards of professional ethics.” Misusing an app in this way fails to promote and maintain the public’s trust in appraisal practice.

“An appraiser must not use or communicate a report or assignment results known by the appraiser to be misleading or fraudulent.” Since you knew you were not familiar with this app or MVRA in general, you knew its use and results could be misleading.

“An appraiser must not perform an assignment in a grossly negligent manner.” Using an app you knew you were not familiar with, and then ignorantly relying on its output, is grossly negligent.

“An appraiser must be competent to perform the assignment. In all cases, the appraiser must perform competently when completing the assignment.” See above as to competence.

“An appraiser must determine, before agreeing to perform an assignment, that they can perform the assignment competently.” Given your lack of familiarity with the app, you were not competent to use it.

In addition to the above, there are also issues with the Scope of Work Rule, SR1-1(a, b, and c); possibly with SR1-3(a and b) [relative to the number of sales in the MVRA that were truly comparable sales]; SR1-4 in that the results of the appraisal were not credible; SR2-1(a) in that the report was misleading (since the appraisal formed the value opinion so poorly); and SR2-2(a)(vii) [in that the improper use of the MVRA was an improper scope of work]. See also AO-37.

Suing the app company will serve no purpose. To put this as favorably as possible, your decision to use the app, without understanding its application and mission completely, even though you signed the Certification saying you understood it, was a misstep you will not likely make again. Now, you’ll need to tell your E&O company what has happened, as well as retain an administrative law attorney.

About the Author
Timothy C. Andersen, MAI, MSc, USPAP instructor and CEO of TheAppraisersAdvocate.com, is the instructor of How to Raise Appraisal Quality and Minimize Risk (7 Hours CE) at OREPEducation.org (OREP Members enjoy the course at no cost.) Andersen has been in real estate and consulting since 1975 and is an AQB-certified USPAP instructor, USPAP consultant, author, instructor and expert witness. Andersen can be reached at tim@theappraisersadvocate.com.

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