The Appraiser Page The A PUBLICATION OF THE ARKANSAS

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					The Appraiser                                                                                                    Page 1

                               The
                                  APPRAISER
A PUBLICATION OF THE ARKANSAS APPRAISER LICENSING & CERTIFICATION BOARD


Volume 9, Number 1                                   Fall Issue                                       September 2000


          Opinion                      Complaint Rate No Longer Slow;
             Value
          Of Value                     Board Receives 11 Through July
          By Jack Larrison                In May, the Board reported the rate of complaints received about apprais-
            Board Chairman             ers appeared to be slowing. That didn’t last long.
     There are seven appraiser            Through July, the Board had received 11 complaints this year, which is
 members of the Arkansas Ap-           a rate that tracks previous years. Of the 11 complaints, 7 came from con-
 praiser Licensing and Certifica-      sumers, 2 from review appraisers, 1 was referred by a government agency,
 tion Board. It is the duty of these   and 1 was initiated by a mortgage/lender.
 seven and the four non-appraiser         Five of the 11 were dismissed because the Board’s investigations did not
 members of the Board to enforce       find probable cause. Three complaints went on to be considered by a non-
 the numerous provisions of the
                                       judicial panel of the Board, and three are still pending. So far this year, the
 Uniform Standards of Profes-
 sional Appraisal Practice             Board has conducted five non-judicial hearings in an effort to resolve the
 (USPAP).                              complaints short of a full administrative hearing.
     The Board does not create            The leading cause among this year’s complaints is appraisers tending to
 new appraisal policies. Nor does      take prepaid assignments and then failing to complete them in a timely
 it direct appraisal theory. Our of-   manner or neglecting to respond to their clients/borrowers or doing so in a
 ten difficult chore is to decide      less than cordial or professional manner. The appraisers’ attitude seems
 when and if the sometimes nebu-       to be that “I am the appraiser, and what I say is final, and don’t bother me
 lous terminology of USPAP has         with any questions.” This certainly does not sit well with the customers.
 been violated. And if it has been,       In addition to the attitude problem, these are the infractions alleged in the
 we must determine what is a           complaints filed with the Board:
 reasonable measure of disci-             * The appraiser failed to consider comparable sales within the neighbor-
 pline.
                                            hood and went into a more upscale area for comps that appear to push
     Our routine investigations usu-
 ally involve Standard One and              the value;
 Standard Two, which are con-             * The appraiser made sizable errors in the sales adjustment grid for site
 cerned with the formation and              amenities;
 reporting of creditable appraisals       * The appraiser failed to respond to a borrower’s request to update an
 of real property.                          appraisal;
                (See OPINION page 5)
                                                                                            (See COMPLAINTS page 2)


✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶                                                               ✶
✶                     Visit the Board’s website at                                                                  ✶
✶                          www.state.ar.us/alcb/                                                                    ✶
✶     for directory, regulations, newsletter, forms, and other helpful information                                  ✶
✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶ ✶                                                               ✶
Page 2                                                                                                                        The Appraiser


          THE APPRAISER                                     Complaints
                                                            (Continued from page 1)
Publication of the Arkansas Appraiser Licens-
ing and Certification Board, Suite 202, 2725
Cantrell Road, Little Rock, Arkansas, 72202.                   * A consumer misunderstood the scope of a drive-by appraisal;
Telephone (501) 296-1843; Fax (501) 296-
1844; E-mail - ALCB@mail.state.ar.us;                          * A consumer paid the appraiser directly for the appraisal but said he
Website - www.state.ar.us/alcb/.                                 was never provided a copy of the report.
Charles Ainley . . . . . . . . . . . . . . Paragould           * An appraiser, in the eyes of a reviewer, failed to diminish property val-
Mary Lou Brainerd . . . . . . . . . . . . . . . Mena
Jonathan Street . . . . . . . . . . . . . Jonesboro              ues on the same parcel of land under two different eminent domain tak-
Richard Gillespie . . . . . . . . . . . . Little Rock            ings that were appraised on a retroactive basis with effective dates
Frank White . . . . . . . . . . . . . . . . Little Rock
Molly Hageman . . . . . . . . . . . . . . . . DeWitt             seven years apart;
Donald Jordan . . . . . . . . . . . . . . . . . . Hope         * A client was unhappy with the value rendered on an appraisal based
Jack Larrison . . . . . . . . . . . . . . . Little Rock
Thomas Scott . . . . . . . . . . . . . . . Little Rock           on gross living area that did not treat the basement as living area.
David Reinold . . . . . . . . . . . . . . Russellville         Consent agreements were reached at the three non-judicial hearings.
Isaac Ross . . . . . . . . . . . . . . . . . Little Rock
                                                            Education remediation and monitoring future work products were the dis-
  All inquiries, including those about copy
deadlines, should be directed to the above                  ciplinary results.
address and telephone number to:                               Board Executive Director Jim Martin observed that the infractions cited
Jim Martin . . . . . . . . . . . . . . . . . . . . Editor   in complaints received this year do not appear to be as serious as those
             Technical editing by:
                  Carol Griffee                             the agency has seen in the past. “This is encouraging...apparently apprais-
           Editorial Services, Inc.                         ers are doing a better job of reviewing their work products and exercising
            Little Rock, Arkansas
        SUBSCRIPTION: $10 a year                            due diligence in their practices,” he said.
“The Appraiser” is seeking timely articles or
comments on practical appraisal subjects of
interest to both residential and nonresiden-
tial appraisers from appraisers, lending insti-
tutions, and other mortgage lenders. The ar-
ticles or letters should be sent to the Board’s                            Education Offerings
office at the above address.
       Entered as second class matter:                         Baker’s Professional Real Estate College - Contact Billie Joe Baker
         United States Postal Service
         Little Rock, Arkansas 72201                         (318) 222-7459, Shreveport, LA. “Residential Appraisal, Measuring and
                                                             Appraising the Residential Properties.” 30 hrs. QE/28 hrs. CE beginning
                                                             Oct. 2.
       Do Your                                                  Kelton Schools - Contact Ron Kelton, (870) 932-7202, Jonesboro, AR,
   Clients Know?                                             for future continuing education seminars.
                                                               Lifetime Learning - Contact Dennis McIlroy, 1-800-383-3365. “Uniform
   One of your best clients can’t                            Standards,” 15 hrs. QE/CE, Sept. 27-28 and Dec. 20-21; “Advanced Ap-
find you because you moved and                               praisal III,” 15 hrs. QE/CE, Oct. 23-24; “Advanced Appraisal IV,” 15 hrs.
forgot to tell him or the Appraiser                          QE/CE, Oct. 25-26.
Licensing and Certification Board.
                                                               National Association of Independent Fee Appraisers - Call 1-800- 335-
   You not only missed out on a
                                                             1751 for information.
great assignment but you violated a
Board regulation. Appraisers are                                National Association of Master Appraisers (The Lincoln Graduate Cen-
required to notify the Board office in                       ter) - Call 1-800-531-5333. These courses to be offered in Little Rock:
writing within 30 days about any                             “#111 USPAP Update,” 7 hrs. CE, Sept. 23; and “#669 Manufactured
change in name, principal place of                           Housing Appraisal,” 15 hrs. CE, Oct. 21-22.
business, or telephone number.                                  RCI Career Enhancement Systems - Contact David Reinold, (501)
(Section 1(K)).                                              968- 7752. “Timber and Timberland Fundamentals for Real Estate Pro-
   Why is it important to comply                             fessionals and Appraisers,” 14 hrs. CE; with exam, 15 hrs. QE; Sept. 18-
with this requirement? Three rea-                            19, Little Rock.
sons: 1) It’s the rule! 2) You have                             The Columbia Institute - Contact George Harrison at 1-800-460-3147
cut yourself off from information                            for future course offerings.
from the agency that regulates your
                                                                University Seminars, Inc. (ASU Division) - Contact Don Feather-ston
business. 3) Your address and                                at (501) 315-8777. “Special Techniques of Income Approach,” 15 hrs. QE/
phone number are incorrect in the                            CE, Sept. 26-27.
National Registry.
The Appraiser                                                                                                 Page 3


        Are You                           Conference Provides Opportunity
         Being                            To Look Back (And Forward)
      Pressured?
                                                                      By Don Jordan
    The Board regularly receives                                     Board Vice-Chairman
complaints from appraisers who
are having trouble collecting fees           Valuation 2000, held July 11-13 in Las Vegas, was a first of its kind—
from out-of-state mortgage bro-           a conference held by multiple appraisal organizations. The key sponsors
kers. In other instances, appraisers      were the American Society of Appraisers (ASA), the Appraisal Institute
complain about pressure from mort-        (AI), and the American Society of Farm Managers and Rural Appraisers
gage brokers to report a specific         (ASFMR), but the IRWA, IFA, NSREA, ISA, the Appraisal Foundation,
value. In most cases, the two prob-       Appraisal Subcommittee, AARO, and several foreign countries also par-
lems are related: the appraiser           ticipated.
probably didn’t report the value re-         More than 2,000 registered participants were able to choose from
quested; therefore, payment is de-        among 80 half-day sessions on varying topics to attend during the three-
layed.                                    day conference. I concentrated on technology subjects—what exists now
    What’s an appraiser to do?            and what is coming—and also attended two sessions on international
    The ETHICS RULE is clear on           appraising because I wanted to find out what other countries are doing
this issue. “To promote and pre-          in the profession and how they stand on such matters as standards and
serve the public trust inherent in        ethics. Persons from Canada, the United Kingdom, Australia, Malaysia,
professional appraisal practice, an       South Africa, and Mexico discussed their country’s appraisal regulation
appraiser must observe the high-          status at the sessions I attended.
est standards of professional eth-           American Appraisers need to stay alert on the issue of International
ics.” Both the Conduct and Man-           Valuation Standards.
agement sections in the USPAP                These standards are in published form, and 52 countries have
also apply. “Whenever an appraiser        adopted them. Pressure is being exerted on the United States to join, but
develops an opinion of value, it is
                                          there are some fundamental differences that prevent this now.
unethical for the appraiser to ac-
                                             I also attended part of the AQB summer meeting at which certifying
cept compensation in developing
                                          instructors to teach USPAP was discussed. A final decision was post-
that opinion when it is contingent
                                          poned until October. The Arkansas Board is opposed to this requirement,
upon:
                                          and the AQB knows this. However, of the 21 states that have weighed-
    1) the reporting of a predeter-
                                          in on this issue to date, only seven are opposed.
mined value; or
    2) a direction in value that favors      The issue of requiring a college degree for licensing and certification
the cause of the client; or               as an appraiser also was discussed by the AQB, but I had to leave the
    3) the amount of the value opin-      meeting before it ended. The Arkansas Board has not taken a position
ion; or                                   on this issue yet because it is relatively new. If the AQB hasn’t acted on
    4) the attainment of a stipulated     this yet, we need to monitor it. I’m sure the Arkansas Board would like
result; or                                to hear from appraisers in the state if there are strong feelings one way
    5) the occurrence of a subse-         or the other.
quent event directly related to the          I found the conference was a high-quality event with knowledgeable
value opinion.”                           speakers, including Hjalma Johnson, president of the American Bankers
    If you are having this kind of        Association; former U.S. Sen. George Mitchell (D-Me.); Thomas Wilson
problem with a mortgage banker,           of the Internal Revenue Service; and Don Tapscott, who is a technology
please notify the Board’s office. The     expert with a mile-long list of credentials.
Board is tracking these complaints           Arkansas participation was low—two practicing fee appraisers, two
and will advise the Arkansas Secu-        review appraisers from the Army Corps of Engineers, and a farm man-
rities Commissioner about any ir-         ager—for a total of five. We suspect there will be similar conferences in
regularities.                             the future because this one was such a success.
Page 4                                                                                                           The Appraiser


Questions and Answers from the ASB
   (EDITOR’S NOTE: The Ap-                    See the Comments to Standards           develop an opinion of market value
praisal Standards Board does not           Rules 2-2(a)(ix), 2-2(b)(ix), and 2-       for the fee simple interest. The cur-
establish new standards or inter-          2 (c)(ix) for corresponding reporting      rent lease on the property is signifi-
pret existing ones. Its USPAP Q&A          requirements.                              cantly below market and runs for
is issued to regulators to illustrate         For example, the corresponding          another 24 months past the date of
the applicability of the Uniform           reporting requirements in Stan-            value in my appraisal. Further, the
Standards of Professional Ap-              dards Rule 2-2(a)(ix), in the Com-         lease would survive a transfer of
praisal Practice in specific situa-        ment, are, in part:                        ownership. Does USPAP require
tions, and to offer advice for the            ... If such information was un-         that I analyze and reflect the exist-
resolution of appraisal issues and                                                    ence of the lease in the valuation?
problems. This does not constitute                                                    ANSWER: No, because the sub-
a legal opinion of the ASB.)                 New Q&A Book                             ject of your assignment is the fee
                                                                                      simple interest, not the leased fee
QUESTION: I recently was en-                  Is Available                            interest.
gaged to conduct a market value                 A book containing 107 commonly           However, given the difference
appraisal of a one-to-four unit resi-       asked questions and answers about         between the ownership to be re-
dential property. The intended use          USPAP has been published by The           flected in the appraisal and the ac-
of the appraisal was for mortgage           Appraisal Foundation and is avail-        tual ownership, this assignment re-
lending purposes associated with            able to the public.                       quires the use of a hypothetical
the proper ty’s purchase. I re-                 The first annual edition of Fre-      condition, i.e., the fee simple inter-
quested a copy of the purchase              quently Asked Questions contains          est is contrary to the known owner-
contract from the client, but they          opinions of the Appraisal Standards       ship condition. The use of the hypo-
refused to provide it although they         Board (ASB) that illustrate the appli-    thetical must be in compliance with
acknowledged a contract for pur-            cability of appraisal standards in spe-   Standards Rule 1-2(h), and its use
chase of the property in fee simple         cific situations and offer advice to      must be disclosed properly in any
existed. However, they did provide          resolve appraisal issues and prob-        written or oral real property ap-
a sale price verbally. Can I continue       lems. It also contains a comprehen-       praisal report as required by Stan-
this assignment, without the pur-           sive index that can be used to            dards Rule 2-1(c). The disclosure
chase contract, and still comply            search for questions and answers          re- quirement is stated in Standards
with USPAP?                                 on specific topics.                       Rule 2-2(a), (b), or (c)(x) for a writ-
ANSWER: Yes, you can complete                   A single copy costs $25 with vol-
                                                                                      ten report and in Standards Rule
                                            ume discounts available. The book
the assignment in compliance with                                                     2-4 for an oral report.
                                            may be obtained by e-mailing:
USPAP. However, you will need to                                                         Not disclosing the lease and its
                                            Mavis@appraisalfoundation.org or
ensure compliance with Standards                                                      effect (if any) on the opinion of
                                            calling 202-624-3050.
Rule 1-5(a) in developing the ap-                                                     value and marketability would be a
praisal, and Standards Rule 2-                                                        violation of Standards Rule 2-1(c),
2(a)(ix), (b)(ix), or (c)(ix), as appli-   obtainable, a statement on the ef-         which states, “Each written or oral
cable to the type of appraisal report      forts undertaken by the appraiser          real property appraisal report must:
involved, in reporting the assign-         to obtain the information is required.     ...clearly and accurately disclose
ment results. Note that all of these          Completing these binding re-            any extraordinary assumption, hy-
Standards Rules are binding re-            quirements ensures that the exist-         pothetical condition, or limiting con-
quirements.                                ence and unavailability of the pur-        dition that directly affects the ap-
   Standards Rule 1-5(a) states: In        chase contract are disclosed ap-           praisal and indicate its effect on
developing a real property ap-             propriately, and any reader of the         value.”
praisal, an appraiser must:                appraiser’s report will not be misled         In this example, the length of the
   (a) analyze any current Agree-          about how this situation was               lease, the below-market nature of
ment of Sale, ..., if such information     handled in the analysis and report.        the lease, and its survivorship of
is available to the appraiser in the       QUESTION: I am performing an               transfer are factors that should be
normal course of business;                 appraisal of a single-family dwell-        included as par t of the hypo-
   The Comment to Standards Rule           ing that is used as a rental property.
1-5 states:                                The purpose of the appraisal is to         (See QUESTIONS AND ANSWERS, page 5)
The Appraiser                                                                                                              Page 5

                                         Opinion
    7 Appraisers                         (Continued from page 1)
                                                                                        Status Report
   Drop Licenses                             As par t of the process, the
                                         Board investigates a wide range of             As of August 25, 2000, Board
                                         complaints, most of which are dis-         records show these totals for ap-
    Seven appraisers failed to ad-
                                                                                    praisers:
 vise the Arkansas Appraiser Li-         missed. All of the complaints, how-
 censing and Certification Board         ever, provide some insight into the          State Certified General ......... 362
 about their status or intent to re-     concerns of property owners or the
                                                                                      State Certified Residential .... 295
 new their licenses by the June          users of the appraisals that we pro-
                                         duce.                                        State Licensed ........................ 99
 30 deadline. The appraisers who
 have allowed their licenses to              All elements of the appraisal re-
                                                                                         (Includes Temporary and
 lapse as a result are:                  port and the appraisal process are              Non-Resident Appraisers)
                                         scrutinized carefully in the investi-
     David Dallas - CG0965               gation process. There is a box on                      NEXT EXAM
    Donald Gantz - CR1488                the URAR that asks the appraiser                        April 7, 2001
        Tim Gary - CR0928                to say whether a personal inspec-
  William Gunderman - SL0800             tion was made of the subject and                Potential applicants should
     Frank Reeder - CR0408               the comparable sales. In several in-       contact the Board’s staff for cur-
   Thomas Watson - SL1075                stances, the thoroughness of the           rent information on the application
    Lisa Woodson - CG0302                appraiser’s inspection of the prop-        process, exam schedules, fees,
                                         erty has been brought into question.       and other licensing-related matters
   Users of appraisal services           In one instance, the appraiser             by calling (501) 296-1843,
 should note that these persons          claimed the inspection was made
                                                                                    or through its website at
 no longer have the proper cre-          by reviewing video tapes of the
                                                                                    www.state.ar.us/alcb/ or write the
 dentials to appraise federally re-      property made by another person.
                                         In another instance, inspections of        Arkansas Licensing and Certifica-
 lated transactions and their
                                         the comparables were made by re-           tion Board at 2725 Cantrell Road,
 names have been removed from
                                         viewing photos made by others.             Suite 202, Little Rock, AR 72202.
 the Federal Registry.
                                             I don’t know if either of these
                                         practices is a USPAP violation, but
Questions and Answers                    it seems that both could deteriorate
(Continued from page 4)                  into a serious infraction if not exam-   not considered to be unethical.
                                         ined. Videos and photos, it seems        Competency, rather than financial
thetical condition disclosure in any     to me, are used best to refresh our      incentives, should be the primary
written or oral real property ap-        memories of what we have seen            basis for awarding an assign-
praisal report. Your appraisal report    personally and not to take the place     ment.”
should ensure any user of the ap-        of our mental images.                       Therefore, payment of the refer-
praisal recognizes that the value of         Please be careful!                   ral fee to the home inspection com-
the leased fee interest in the prop-                                              pany is acceptable as long as this
erty has not been reflected in the                                                relationship is disclosed in the ap-
appraisal.                               with the procurement of appraisal,       praisal certification and any trans-
QUESTION: It has come to my at-          appraisal review, or consulting as-      mittal letter where conclusions are
tention that a local appraiser is pay-   signments is unethical.”                 stated.
ing a home inspection firm a $25 re-        The Comment to the Manage-            QUESTION: I recently completed
ferral fee for each appraisal assign-    ment section goes on to say, “Dis-       an appraisal and forwarded the re-
ment the home inspector refers to        closure of fees, commissions, or         port to the client. After receiving the
the appraiser. Is it unethical to ac-    things of value connected to the         report, the client called and said
cept an assignment if the appraiser      procurement of an assignment             they had another appraisal that
paid a fee for the assignment?           must appear in the certification of a    was completed recently and the
ANSWER: No, but accepting such           written report and in and transmit-      values differed significantly. The cli-
a fee requires specific disclosures.     tal letter in which conclusions are      ent asked if I would look over the
   The Management section of the         stated. In groups or organizations       other report and point out the pri-
Ethics Rule reads, “The payment          engaged in appraisal practice, in-       mary differences. Does this as-
of undisclosed fees, commissions,        tra-company payments to employ-
or things of value in connection         ees for business development are         (See QUESTIONS AND ANSWERS, page 5)
Page 6                                                                                                           The Appraiser


Question and
Answer
(Continued from page 5)

signment constitute an appraisal              firm’s banking business as part of       unethical.
review?                                       this mutually beneficial relationship.       Comment: Disclosure of fees,
ANSWER: No. In this case, the cli-            I would like to make them happy          commissions or things of value
ent is not asking you to assess the           because they could provide my            connected to the procurement of an
quality of the other appraisal or             firm a great deal of business. If I      assignment must appear in the cer-
your opinion of its conclusions. Be-          take my banking business to this         tification of a written report and in
cause you are only noting the dif-            company while I’m engaged as an          any transmittal letter in which con-
ferences between the two apprais-             appraiser, would I be violating          clusions are stated. ...
als, you are not performing an ap-            USPAP?                                       If the lender has stated that your
praisal, appraisal review, or con-            ANSWER: This depends on                  firm can only have its appraisal
sulting assignment.                           whether the bank’s approval of           business if you bank there, this re-
QUESTION: A new bank client re-               your firm as a “preferred provider”      lationship must be disclosed as de-
cently sent me a letter acknowl-              is conditional on you moving your        scribed in the ETHICS RULE.
edging that my firm had been ap-              banking business to that bank.               However, if the client is merely
proved to conduct appraisals for              The Management section of the            soliciting your business as it would
their company. It goes on to state            ETHICS Rule in USPAP reads:              any other potential customer, and
that we are now “preferred provid-               The payment of undisclosed            you subsequently moved your
ers,” and expresses the bank’s de-            fees, commissions, or things of          banking business to it, there is no
sire to embark on a mutually ben-             value in connection with the pro-        requirement in USPAP to disclose
eficial long-term relationship. The           curement of appraisal, appraisal re-     your banking relationship.
letter ends with a solicitation of my         view, or consulting assignments is




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                               ARKANSAS                                                                     U.S. Postage
                                                                                                                  Paid
                                                                                                           Little Rock, AR
                                                                                                           Permit No. 1069



   APPRAISER LICENSING & CERTIFICATION BOARD
                      2725 Cantrell Road a Suite 202
                        Little Rock, Arkansas 72202

				
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