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Listen, Lenders! Please Stop Doing These Two Things

Bryan Reynolds suggests two changes lenders should make to help appraisal companies operate more efficiently: Let appraisal trainees do inspections and appraisal firms make assignments.

Listen, lenders! No, I’m not talking about the adorable Listen Linda Kid, although he is absolutely fantastic. But I am gonna rip off his best line: Listen, lenders!

In fairness, I give everybody a hard time: appraisers, agents, underwriters. Today it’s the lending community’s turn — you lenders out there, hear me out.

It’s not news to anyone to say that we’re in unprecedented times. Everybody’s waiting for appraisals. Everyone wants to solve the backlog problem with new ideas and products and hybrids. Everyone has “the solution.”

Let’s look at this for a minute. You know why supervisory appraisers are apprehensive about taking on appraiser trainees? It’s because, what value do they add? If I’ve got to go out on every inspection and hold the trainee’s hand, they really don’t add any value to me as a business owner.

USPAP, Fannie Mae, Freddie Mac, your states all allow appraisers to send trainees out on their own, after a certain period and once you feel the trainee is competent . But the lending community continues to push back on this. If the lenders are willing to send an insurance agent out to do inspections, why in the world are they not letting me send my trainee out to do an inspection without me?

Lenders, just listen a minute: A lot of these problems would be solved if you let us appraisers do what USPAP, Fannie Mae, Freddie Mac and our states allow for. Let me teach a trainee the proper methods of observation, and let me send them out. I can hire three trainees! I can expand my book of business!

But if I have to accompany them on every inspection, why would I bring someone on to train at all? Dustin Harris makes the point beautifully on his blog at theappraisercoach.com:

“Our clients (AMCs and Lenders) have made it next to impossible to take on a new recruit. Most of the engagement letters I receive have the following little statement attached, ‘The Certified Appraiser must physically inspect the property, all comparables, and complete the appraisal report. The use of Trainees for this assignment is not allowed.’ So, let me get this straight: I can hire and train a new appraiser, but they cannot do anything to help my business grow until they are fully Certified. Gee, sign me up!” —Dustin Harris, The Appraiser Coach Blog

Well said.

Here’s another thing, lenders (and maybe this goes out to AMCs as well): If I want to hire three certified appraisers, and now I can hire three trainee appraisers for each of them, that’s nine more trainees and three certified appraisers. I have an army now! I’m ready to take on lots of work. But here’s the problem: The lender is going to send the appraisal request to the specific appraiser. Why don’t they send it to the firm? Why don’t they send it to me?

For instance, I have an appraiser. Matt. You send an order to my firm, I could say, that’s outside of Matt’s immediate area. He services that area, but that’s an hour drive. Let me send Kelsey! She’s ten minutes away from that property. So let me assign it based on what makes more business sense. Or maybe Matt’s two weeks behind and Kelsey doesn’t have anything to do. Doesn’t it make sense that I, the business owner, make the assigning decisions, for efficiency purposes?

Listen, lenders. We can solve a lot of problems if you do two things:

1. Let appraisal companies make assignments.

Start assigning the appraisal to the firm, and let the firm decide he best person for the job. Think about it. You send over a fourplex. Kelsey’s only done one in her life. Matt’s done 400 in the last three years! Wouldn’t it make sense for me to assign that multiplex to Matt? I as the business owner know how to delegate those assignments a lot better than you do.

So why don’t we look at approving appraisal firms instead of individual appraisers. If you need to vet them, I understand that. But approve my firm, let me hire more appraisers, and I’ll delegate the assignments out responsibly.

And then finally, listen lenders:

2. Let trainees do inspections.

Let me start using my trainees to their full potential. Trust me to choose them, then let me trust them to do the work I assign. This helps you, it helps me, and it helps the communities we serve.

Most of all, if lenders and AMCs don’t make it less onerous for us to take on and train new appraisers, then how do they expect new appraisers to enter the profession? Our industry is aging. We need excited, sharp young people to take up the trade. Which means we veterans are gonna need to show them the ropes. But we can’t do it out of charity. There need to be incentives for all of us — supervisory appraisers and trainees.

Just listen!

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The Client Accommodation Trap

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Appraisers try to accommodate their client’s interests. There is nothing wrong with this per se.  Appraisers commonly write, “at the client’s instruction…” or “per the client’s request…”, then the appraiser describes what the client instructed or what the client requested, as well as what the appraiser did to comply with the instruction or request.

This language, however, implies the appraiser is trying to do the appraisal, or write the appraisal report, in a manner that pleases the client, a potential USPAP violation. By definition, a real estate appraiser must be independent, impartial, and objective. Such accommodating language not only calls into question whether the appraiser has complied with these three qualifications but also smacks of advocacy.

Omit the offending language.  For example, appraisers commonly omit the analyses of the Cost approach. However, certain clients may request the inclusion of these analyses as part of the appraiser’s value conclusion. Instead of saying, “at the client’s request, the appraiser has included the protocols of the cost approach…”, please consider saying, “the appraiser included the protocols of the cost approach as both applicable and necessary to the formation of a credible value conclusion”, never mentioning the client’s request.

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USPAP Compliance and Desktop Appraisals

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Many appraisers are worried that a so-called desktop appraisal will not be USPAP compliant if a third party to inspects and/or photographs the subject property.

USPAP does not make an issue of who inspects the property, nor who photographs it. USPAP does not require the appraiser to inspect the subject property. Nor does USPAP require the appraiser to photograph the subject property or the comparables. USPAP requires the appraiser to disclose the extent of the inspection of the subject property, which includes no inspection at all. Further, USPAP makes no mention of the need to include photographs of the subject as part of the formation of a credible value opinion. Both these requirements are a function of lender requirements, not USPAP.

Fannie Mae requires the appraiser to inspect the subject property, as well as to inspect the comparable property from at least the road in front of the it (assuming that’s possible). However, Fannie Mae has no requirements the appraiser take these photographs. In other words, a contractor the appraiser hires to take photographs could do this and the report would still be fully Fannie Mae, as well as USPAP, compliant.

An individual lender may require the appraiser to take the subject and comparable photographs him- or herself. If the appraiser agrees to this condition, then the appraiser has no choice but to do so. However, the key point here is that the appraiser personally taking the photographs of the subject and/or the comparables is a lender requirement, not a requirement of USPAP, and not necessarily a requirement of Fannie Mae.

Therefore, under certain conditions, an appraiser doing a desktop appraisal is perfectly USPAP compliant.  Providing photos is not significant appraisal assistance. The appraiser is under no ethical obligation to disclose the photographer’s name, nor the extent of his/her assistance.

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