Signing-Off On The Appraisal Report
When you sign-off on an appraisal report you don't want to create a lot of problems for yourself later. Problems can arise later if the client finds out that your data is inaccurate or your market value estimate is way off base. So make sure you know what you're doing and that you have sufficient information about the subject property, the comparable sales and the local market. Don't include any data that's PFA, which stands for Plucked From the Air. Meaning, don't make up information just to fill out sections of the report. As I said before, if you need to obtain more data, then take the time to go and get it before finishing the appraisal report.
Don't include any data that's PFA, which stands for Plucked From the Air. Meaning don't make up information just to fill out sections of the report.
It's very important hat you understand the fact that when you sign an appraisal report, you will be held accountable for everything in it. Also, when you sign-off on a report as the review appraiser, then you're just as liable for the accuracy of the data in that appraisal report as the appraiser himself. So don't just flip through a report and sign-off as the review appraiser. Make sure the data you're reviewing is accurate and that the appraiser that has viewed the property is competent and thorough.
Anyone can file a complaint against you for any of your appraisal reports if it's found to have serious inaccuracies and problems in it. It doesn't have to be your client who has to be the one to file a complaint against you. If someone off the street was given a copy of your report by a client they can create problems for you if you do poor quality work. You don't want one of your reports coming back to haunt you down the road. The State Certification Committee in your State can bring you up in front of a review board. This will happen if you're guilty of doing poor appraisal reports that have serious inaccuracies and inconsistencies in them.
I had an experience with an MAI designated appraiser who was signing-off on appraisal reports as the reviewer and he wasn't even reading the reports!!! An MAI is a very high designation for an appraiser to get. I had gotten very busy at one point and I had to subcontract out some of my work. This was because my office couldn't handle all of the work we had and I didn't have the time to hire and train any new appraisers. The appraisal office that I had hired to do some of my appraisals ended up doing some of the worst appraisal reports I have ever seen. These appraisals were so bad that they weren't even worth the paper they were written on! There were so many inconsistencies and problems in these reports that it was amazing to me how anyone could sign-off on them. As a result, I had to throw away all of those reports. (Of course I told them I wasn't paying their bill). I called their office and told them that I was considering filing a complaint against them with the Appraisal Institute and the State Certification Board. Coincidentally, they never sent me another bill for their work and I never heard from them again.
What apparently had happened was that this MAI and his appraisal office were only concerned with pumping out as many reports per day as possible. They couldn't care less about the quality of the appraisals. All they wanted to know was how much money they could make each day. So learn a lesson from this experience like I did. If you ever get very busy and have to subcontract out some appraisal work or hire new appraisers quickly, you better make sure that they do quality work. You'll be in just as much trouble as them if you send in bad reports to anyone!
If you do poor quality work like that you're going to get sued and you'll end up losing your license, your certification, and your designation. There's no doubt about it. You might get away with doing garbage work for a short time, but eventually you're going to pay for it. If you lose your State license and/or certification than no one will accept your appraisals and you'll be out of work! If this happens then no one is going to hire you with a black mark on your record. You can't find work when you don't have the required State and Federal approvals to be an appraiser.
I'll tell you another bedtime war story from my own experience in the appraisal business. This should definitely give you a good reason to verify all information yourself and not to rely on someone else's word about it. I was doing a foreclosure appraisal for a bank that had to take a property back from a borrower because they stopped making their mortgage payments. In this particular case I found out later that there was a very dishonest Realtor involved in the transaction. (You'll encounter plenty of them during your career!) I had finished my on-site inspection of the property and I was leaving to obtain my sales comparables and other field data. This Realtor told me that she had some good comps for me to use back at her office. I said, "Fine, I'll take a look at them." There's nothing wrong with having someone assist you on an appraisal report in obtaining your data. The more information you have, the better off you are. In fact you'll usually need someone at town hall, a real estate office or some other place to assist you on most of your reports. You just have to verify that the information they're giving you is accurate before you use it in your appraisal report.
Anyway, I went back to this Realtor's office and she gave me three sales comparables that she said were good comps to use. The only problem with these sales was that they were handwritten on a sheet of paper and weren't from a published data source that was widely accepted. This immediately raised a red flag in my mind about the validity of these sales comps and it should for you too if you ever encounter a situation like that. Coincidentally, the sales prices of these comps appeared abnormal for that area. So I asked her where she obtained this data and comps from and she said that they were all verified by her as recent sales.
I took the comps and went to another office in the area to try to confirm the validity of these sales. I couldn't find any published data source that had these sales listed. So I concluded that they were intentionally falsified by this dishonest Realtor to try to alter the final estimate of value for the subject property. The incentive for this Realtor was to "move the deal along " so she could get her commission on the sale. (Realtors do this all the time!) I went back to her office and questioned her more about these comps she had given me and suddenly she started fumbling for answers. She ended up taking the sheet of paper into the back room and then coming out later and telling me, "Oh, maybe I was mistaken about these sales." She then ripped up this paper with the false comps on it, obviously to destroy the incriminating evidence. (That Realtor is basically a white-collar criminal and guilty of fraud). This Realtor clearly intended to mislead me to line her own pockets with a sales commission on the deal. I'll tell you more about dishonest Realtors and other third parties later.
I was so angry about the dishonesty of that Realtor that I wrote a letter filing a complaint to the real estate authorities about her. (Who knows if it did any good). You shouldn't hesitate to file a complaint against anyone who is dishonest in this, or any other business. If I had trusted that Realtor by not verifying her information, I could have been in big trouble down the road. Someone reading the appraisal report could have discovered later that those sales comparables were totally false!!
You have to keep all of your field notes in your file for every appraisal. You do the same amount of work for every appraisal no matter what type of report you're doing, such as, a written report, an oral report, one page update, etc. The five different types of appraisal reports are: Oral Report, Letter of Opinion, Form Report, Narrative Report, Demonstration Appraisal Report. A Letter of Opinion is an appraisal. An Opinion of Value is not an appraisal.
I'll give you some advice that one of my instructors gave our class about doing a demonstration appraisal report. A demonstration appraisal report is a narrative appraisal report that is required for candidates trying to get an appraiser designation from certain organizations. The purpose of it is to test the knowledge and competence of an appraiser on all aspects of appraising residential real estate. It's an extremely thorough and comprehensive report that must to be done if you wish to obtain a designation.
Our instructor told us that you should follow the check list located in the pamphlet published by the appraisal organization you will get the designation from. By using this checklist, you won't forget to include anything in your demonstration report. You must be consistent throughout your report and you can't have any disparities with your statements, facts, adjustments, etc. He also said that you should use a two-family house for your demonstration report. Furthermore, you should find your vacant land and sales comparables before you choose the subject property that you'll use. Have someone who is a knowledgeable appraiser review your report before you send it into the appraisal organization for grading and evaluation.
When appraising a building based on the building plans and specifications you should get a copy of the plans to keep in your own files. This is because the plans are always changing so you need a copy to CYA, (Cover Your Assets). You should disclose in the report that your estimate of value is based upon the plans that you have been shown. You should state that the estimate of market value does not take into account any changes that have taken place from the time you originally saw those plans.
When doing an appraisal, you have to mention any of the three S's in your report to CYA (Cover Your Assets).The three S's stand for: Structural, Safety and Sanitary problems or hazards in a building.
When doing an appraisal, you have to mention any of the three S's in your report to CYA. The three S's stand for: Structural, Safety and Sanitary problems or hazards in a building or site.
There is something else that you have to be careful of to CYA. You should never say that only one or two of the sales comparables were used as the strongest representation for the value estimate in an appraisal report. The reason for this is that attorneys will try to "knockout" the strong basis for your value estimate in your defense against a lawsuit. Do not strongly emphasize that your value estimate is based upon just one or two sales comps in your report. If you do, then if an attorney can knockout those comps, you'll be left with no defense in the case. This is another reason why you should always get more than the minimum number of sales comparables or data to fill out the appraisal form. The more sales comparables and market data you have, the stronger your appraisal report is. With a strong appraisal there will be much less of a chance anyone could question your report later on
There's nothing wrong with making a true statement in your report if you provided some additional weight on a few of the sales comparables you included. You have every right to give some more emphasis on a few of the better sales comps in your report to estimate market value. You will always have some sales that are better comps than others in relation to the subject property. That's why the estimate of market value is not just an average of the adjusted sales prices for all of the comps you used. During your reconciliation process you have to decide which sales carry more weight and are a closer indication to the estimate of market value of the subject property. Then use an estimate of value for the subject property that's closer to the adjusted sales prices of those comps. Since they're a better representation of the subject property, you'll have a closer estimate of value.