Matrix Blog

Posts Tagged ‘USPAP’

[on Matrix] Appraisal Inflation Is More Widespread Than You Think

July 25, 2006 | 12:01 am |

Here is an appraisal-related post on our other blog Matrix: Appraisal Inflation Is More Widespread Than You Think that discusses the issue of appraiser inflation and how many institutions are actually in on it.


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[Commercial Grade] CCC: The New Order Means Sifting Through Lengthy Memos

July 14, 2006 | 10:16 am |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John talks the newly created art of sifting through client memos regarding the new USPAP.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays Fridays, one of the smartest guys I know. …Jonathan Miller


The new and supposedly improved USPAP went into effect on July 1, and there has been a flurry of memos sent out by major lending institutions to “clarify” their positions. Two such institutions, amongst the largest in the country, have adopted the following guidelines:

Since USPAP now says that the terms “limited” and “complete” are obsolete, their internal guidelines calll for “comprehensive”, “condensed” and “concise,” each with its own requirements.

The three C’s. Simple! Another major institution reports that they will continue to use “complete” and “limited” in order to provide minimum standards and guidance for scope of work determination. In this case the “complete” and “limited” labels, although eliminated from USPAP, have been adopted by internal Bank policy. Its clear that other institutions will follow suit and adopt their own creative policies to communicate what they expect.

So in this new order, the fee appraiser need only to sift through a 12 page memo issued by a Bank in order to understand their defintion of different levels of Scope of Work.

[Can we make it anymore difficult for appraisers? -ed]


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[Commercial Grade] Appraiser Qualifications Board (AQB): Take 2

April 27, 2006 | 9:29 pm |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John talks about going back to the drawing board and re-thinking the AQB.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays, one of the smartest guys I know. …Jonathan Miller

When Congress created the Appraisal Foundation in 1987 in response to the S & L debacle, it seemed like a logical response and perhaps even a major step forward to validating our profession. However, the state licensing system that the Appraiser Qualifications Board (AQB) put into place is, in my opinion, a dismal failure.

I maintain general certification in two states, New York and New Jersey, in addition to my membership in the Appraisal Institute as an MAI. Each state and the Appraisal Institute (AI), however, maintains its own continuing education requirementsdifferent cycles, different number of credit hours and often times different courses accepted for credit. So, if I sit through a seminar given by the AI, New York State may not accept it. Similarly, a course accepted for credit by New York State may not be accepted by New Jersey.

The need to satisfy these various continuing education requirements presents an additional burden on the appraiser, in terms of both time and expense. Not that I have anything against education – my wife is a full-time teacher, and I teach appraisal courses at New York University), but I think the continuing education system for appraisers is highly inefficient and unnecessarily burdensome.

While my appraisal practice is local, national appraisal firms that have assignments all over the country are the ones hit the hardest.

Speaking from experience, most clients want their appraisals within four weeks, and often insist on two or three. If an appraiser is going to another state for that assignment, he/she either needs to maintain on-going certification there or apply for a temporary permit. The temporary permit application process, however, can often take up to 6 to 8 weeks (depending on the state)and it hardly makes sense to maintain certification in all states.

State certification is here to stay, but I would love to see the AQB go back to the drawing board and come up with one uniform set of continuing education requirements to apply to all 50 states, with all states accepting the same courses, and a mechanism to issue a temporary practice permit within one week. Makes sense, doesn’t it?

[webmaster’s note: the current licensing laws have actually reduced the quality of appraisers, so a changing in course requirements are unlikely to be a detriment to appraisal education.]


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[Commentary] Appraisers Are Sheep

April 21, 2006 | 12:01 am |

This article reminded me how the appraisal industry is self-destructively meek – a bunch of sheep (aka scapegoats). Three plead guility in $8 million real estate ‘flipping’ scheme involving Decatur, Springfield [HR].

An appraiser was part of a 3-way flipping scheme involving 150 properties and about $8M yet…

While Ciota and Knox got profits from the transactions, Wiese received only his standard appraisal fees

The scheme would not have been possible without the appraiser yet he did not see the value of his crime. That means one of two things:

  • A: The appraiser did not see his actions as criminal or did not know better.
  • B: There were plenty of other appraisers in the area who would have gladly worked for the same fee preventing the appraiser from receiving a higher fee for his services.

I’m banking on B.

With the daily reports of mortgage fraud, I don’t think I have ever seen an appraiser who got a piece of the action or an inflated fee in one of these mortgage fraud scams. Isn’t that amazing?

This seems to correlate with past patterns of meekness in the appraisal industry. I am not suggesting anything criminal, just the fact that the whole world walks over us and its mainly our own fault.

  • There is no separation between the sale and underwriting function in many lending institutions allowing loan reps to directly pressure appraisers to “make the number.” Many succumb to the pressure.
  • Field reviews are a way to “get your competitor off the approved list of your client.”
  • There is no real review function any more so quality is not much of a concern and speed is readily quantifiable and rewarded (absent of quality reviews).
  • National appraisal management companies see appraisers as form-fillers.
  • The appraisal review function is performed by inexperienced, young entries in to the professional responsible for large swaths of the country.
  • Appraisal trade groups were asleep at the wheel during the licensing law process in 1991.
  • Appraisers are used as a scapegoat by some lenders to explain to the applicant that they were turned because of a low appraisal when the loan turndown was for poor credit (this one drives me crazy).
  • Appraisers were scapegoated for the S&L crisis in the late 1980’s.
  • Appraisers are being squeezed out of the lending process as banks seek to commoditize the reports down to the level of a flood cert.
  • USPAP is out of sync with real world business practices.

These are the real crimes here…


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[Commercial Grade] What’s The Use

April 12, 2006 | 8:33 pm |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John talks about the dilemma facing appraisers when unintended users are wearing our tires out ’til they’re bald. Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays, one of the smartest guys I know. …Jonathan Miller

In appraisal parlance, every appraisal report must state who the intended user is. USPAP mandates that the intended user be specified in the report to establish the appraiser-client relationship.

I frequently receive phone calls from review appraisers or underwriters at financial institutions who are looking at an appraisal that I prepared for another client. (This week I received two such calls.) These institutions are participating in the loan and, therefore, feel justified in calling me to “ask just a couple of questions.” They were never “intended users.”

What is my responsibility to these callers this case? Per USPAP we are not permitted to discuss the report without prior permission from the client. Surprising that the review appraiser is not aware of this.

If I do get permission to discuss the report, my appraisal has already been thoroughly reviewed (questions asked and answered) by my client; should I have to go through another full review? If there are a number of participants, should I answer to a dozen different reviewers, each asking different questions?

The reality is, though, that even though answering to different reviewers was not within the original scope of services, not co-operating with the participant is simply bad business. After all, the participants are also potential clients.

[This is the harsh reality of the commercial appraisal world. Contrarian viewpoint: Its up to them to get the original client allow the conversation with you. Of course, this would never happen so I say charge them for your additional time – calling for permission, speaking to several parties, etc. It all adds up. If the new client doesn’t value your time as a professional, then I am not so sure they are going to send that much business your way in the future. -JM]


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