Appraisals in the News – the flaws with news stories

We have posted certain news stories which discuss aspects of the appraisal industry, and changes to appraisal regulations, etc.

As with any media story, most of these reports contain some good information – as well as some that is mis-leading or inaccurate. The problem seems to always be that the reporters of news outlets report wide generalities as hard facts, which may or may not apply in all areas of the country or in all cases.

Here is an example: in one story which we posted a link to, which contained some good information about AMC’s (Appraisal Management Companies) it also contained the following paragraph:

  • Here’s how appraisals used to work: The agent would meet the appraiser at the door of the property with a stack of comps, and they’d discuss what was happening with sales in the local area in the past few months. The appraiser would be knowledgeable about the area, having worked in it for a long time. He or she would have direct contact with the agent, and most appraisals would come in at or just above the purchase price.

This statement contains so many generalities, under the premise of “Here’s how appraisals used to work” that are untrue (at least in the case of our practice). Yes, the appraiser should have knowledge of the market area… but the idea that the “comps” be provided by the listing or selling agent to the appraiser (which would be a potentially biased start to your sales research), or that most appraisals would “come in at or just above the purchase price” are the concepts that gave appraisers (the Good and the Bad) all a bad name.

Bottom line is that appraisers should be:

  1. Geographically competent – the exact distance they may have travelled that day to perform the appraisal is not the issue, but their actual experience and knowledge of a market area IS. And appraisers should be knowlegable about the market they are performing the appraisal assignment in.
  2. Unbiased and professional in their valuation – and unswayed by ANY party to the sale/transaction etc.
  3. Take the appropriate time and perform all required work to provide an accurate and complete appraisal report.

There are other requirements of course, but those are just a few basics (which are also included in the requirements of USPAP).

So, while these news articles are all interesting and discuss some issues which are occurring in the industry (ie. appraisers working for low fees for AMC’s in areas which they may not be experienced, turning in sloppy work to meet unrealistic deadlines), they should not be assumed to reflect the entire industry. This type of thing is what those of us (like us here at CMG) are fighting against, and have been struggling to resist for several years now – the ability to compete in business against bad practices for low fees, and maintain a professional and accurate product (and hopefully be able to maintain our fees at a level where we can stay in business).