GEOGRAPHIC COMPETENCY, BROUHAHA
Recently there has been a lot of hubbub about appraisers going far from their office to conduct appraisals. And, it is being said that appraisers are legally bound to stay close to home when conducting an appraisal. The following was taken from a recent Appraisal Institute article.
Appraisers must conform to The Appraisal Foundation’s Uniform Standards of Professional Appraisal Practice (USPAP). The Appraisal Foundation is a not-for-profit organization established by the appraisal profession in the United States.
USPAP’s Competency Rule states: “Prior to accepting an assignment or entering into an agreement to perform any assignment, an appraiser must properly identify the problem to be addressed and have the knowledge and experience to complete the assignment competently …”
USPAP further states: “In an assignment where geographic competency is necessary, an appraiser preparing an appraisal in an unfamiliar location must spend sufficient time to understand the nuances of the local market and the supply and demand factors relating to the specific property type and the location involved. Such understanding will not be imparted solely from a consideration of specific data such as demographics, costs, sales, and rentals. The necessary understanding of local market conditions provides the bridge between a sale and a comparable sale or a rental and a comparable rental. If an appraiser is not in a position to spend the necessary amount of time in a market area to obtain this understanding, affiliation with a qualified local appraiser may be the appropriate response to ensure development of credible assignment results.”
There is nothing in all this that says an appraiser can’t go anywhere and be an effective real estate analyst.
An appraiser is just that; a real estate analyst. We go to the property, inspect it t gain good familiarity with it. Then we examine the market to get familiar with it. Once having done those two things we gather the most pertinent data and write a report presenting our findings.
As long as we are adhering to the Uniform Standards of Professional Appraisal Practice and working in capitalist societies that publish data, this task is easy. If the data is not published, the task can be very hard. If there is no free trade of properties, the task can be impossible or just nonsensical.
We are in a moment in the evolution of the appraisal profession where many interests are scrambling to gain territory in their battle to preserve their self interest. Those appraisers who have integrity and adhere to USPAP want to do their work honestly and provide the service that the law/industry has charged them with providing. Of course, as in so many areas of life, there are those who want to cheat, steal, manipulate and defraud their way to greater profitability.
Real estate appraisers (especially in the residential sector) have tremendous power. We have the opportunity to shake the industry into compliance with the law. We have the opportunity to chase the weasels out of our house. But, as a group, we mostly act like a bunch of scared chickens.
I recently asked an appraisal management company if they in any way gave favor to those appraisers who have advanced degrees from private professional appraisal organizations (i.e. designations), such as those offered by the Appraisal Institute or the National Association of Real Estate Appraisers. They refused to answer the question.
My experience with the residential real estate lending industry is that it is, for the most part, corrupt to the bone and completely addicted to its fraudulent habits. HVCC isn’t going to save it.
Ralph K. Olsen
Pacific West Appraisal Services, Inc.
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