Southwest Florida Real Estate Appraisals By Cape Appraisals

Cape Appraisals Blog

Common USPAP Questions Part III

May 21st, 2008 7:44 AM

Geographic Competency in Appraisal Reviews

Question:

I have a client who has asked me to perform a desk review on a property located in a different state. I have no knowledge of the real estate market in that state and have never even stepped foot there. Can I perform a USPAP-compliant appraisal review on this property?

Response:

Yes. If you are engaged to determine whether or not the appraisal under review complies with certain guidelines or standards, geographic competence is not typically relevant. Alternatively, review assignments that include evaluating the selection and adjustment of comparable sales typically require geographic competence. As in all assignments, an appraiser must identify the scope of work required for the assignment and determine if he or she has the knowledge and experience to complete the assignment competently.

This is an issue that is very often brought up by clients and Appraisers. As you know in the "Real World", ALL appraisal review assignments ordered by lenders include a requirement for the appraiser to give their own opinion of value of the subject and/or state whether they agree or disagree with the original appraiser's opinion of value.

USPAP states that if the appraiser is not competent (example: does not know the market area), then he/she must decline the assignment or disclose to the client exactly how they intend to become competent to complete the assignment. For example, we often appraise bulk assignments outside of our local market area. In all of those reports, we state that we have studied the local market by several methods: continuous travel over the appraiser's lifetime in and out of the market area, conversations with local Real Estate professionals, conversations with homeowners, conversations with property managers, study of the local Real Estate trends, conversations with builders/developers, etc. If these disclosures are not made, then the appraisal is in violation of USPAP.

I am sure most of our clients have experienced having a deal killed by a review appraiser from accross the state (or country) that did not agree with the value state in an appraisal completed by an appraiser that lives in the heart of the subject's market area. As the original appraiser, it is very difficult and very expensive to fight these issues, however as the client, you have the absolute right to DEMAND that the review appraiser provide their reasoning for determining their competency to give an opinion of value in a market area that they do not live in and most likely have never physically seen. If you do not demand this information from the lender or the review appraiser, you are not protecting the borrower's or the lender's interests.

For more information regarding USPAP or if you have a specific question regarding review appraisals, please contact Jim at 239-458-2463 or email Jim@capeappraisalsfl.com.

Posted by James Kreider on May 21st, 2008 7:44 AMPost a Comment (0)

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Common USPAP Questions Part II

May 2nd, 2008 7:51 PM

Question:

I was recently contacted by a lender regarding an appraisal I had performed for another client. The lender had somehow obtained a copy of my appraisal report and had some questions they wanted me to answer. However, this lender was not my original client and was not named as an intended user. Are there any USPAP prohibitions against discussing my appraisal with this lender?

Yes. USPAP prohibits the appraiser from communicating assignment results or confidential information (as defined in USPAP) to anyone other than the client and parties specifically authorized by the client (with the exception of those authorized by due process of law, etc.) Even if the lender who had contacted the appraiser was identified as an intended user in the original appraisal report, that lender is not part of the appraiser-client relationship. Therefore, authorization from the client would be needed if that lender wanted to discuss assignment results or confidential information.

Barring an agreement between the appraiser and the original client prohibiting disclosure of any information pertaining to the assignment, the appraiser may confirm that he or she performed an appraisal on the subject property, and may communicate anything other than assignment results (which include the appraiser’s opinions and conclusions, in addition to the value conclusion) or confidential information (as defined in USPAP).

If you have a specific question regarding appraisal practices or appraisals in general, please email our compliance officer Jim Kreider at Jim@capeappraisalsfl.com or call (239) 458-2463.

Posted by James Kreider on May 2nd, 2008 7:51 PMPost a Comment (0)

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