Appraisal Reviews and the Golden Rule

As I have mentioned before, when I was going through my Trainee years, my Supervisor was actually located in another state.  It was a different world back then.  Though my Trainer was geographically competent in the area I worked, he was not physically ‘there’ most of the time.  Fortunately, I was able to find a local—and seasoned—appraiser who lived 20 minutes from my office.  Though he was technically my ‘competition,’ this grandfatherly man was always happy to sit down for a soda and a visit whenever I stopped in.  His help in finding comparables and navigating the treacherous waters of appraisal was invaluable.

On one such visit, he taught me a great lesson about peer reviews.  “As you become more seasoned,” he began in his baritone drawl, “you will be called upon to perform reviews of your colleague’s work.  Don’t do what so many appraisers do in those situations and get a big head.  Be careful what you criticize.  You are not Mr. Perfect, either.”  He continued, “If you don’t understand why an appraiser did something, don’t just assume it is wrong.  I believe in the Golden Rule when it comes to field and desk reviews.  Remember, you did not inspect the property and you did not sit in that appraiser’s shoes.  So, tread lightly.” 

I thought that was sage advice, and I have always tried to live by it.  Just because we are tasked with reviewing work from our competition does not mean we need to destroy them at all costs.  Sometimes it is not a matter of right vs. wrong as much as it is a matter of my opinion vs. yours.  Now, do not misunderstand; my wise mentor did not say to ignore all mistakes and pass the Original Appraiser (AO) at all costs.  If mistakes are made, point them out.  If reports are incompetently done, make the needed corrections.  For heaven sakes, if there is fraud, do your duty!

So, what was Mr. Tutor trying to teach an aspiring, young appraiser?  I think the lesson was simply to avoid pride when it comes to the role of a review appraiser.  I was taught as a young boy that whenever a person is given a little bit of authority, it is usually in their nature to take that authority to the extreme.  Give a man a badge and a gun, and suddenly he is Mao Tse-tung.

Let me give you a perfect example of what I mean from my own files.  I recently had one of my appraisals reviewed by a local peer.  I was given the chance to respond to the failing grade he gave my report, so I had the chance to review his review.  It was a good thing I was in a light mood that day because what I read might have made a lesser man a bit angry.  I believe his methodology of review was to put an “X” in the “NO” box and then to think up a reason to justify the mark.  I will not bore you with the details, but the majority of his findings were unfounded at worse and a simple difference of opinion at best.  In fact, a difference of opinion was the sum-total of about 90% of his findings.  What’s more, rather than state this, his modus-operandi was to point out the difference and then in capital and bold letters exclaim, “THIS IS AN UNACCEPTABLE APPRAISAL PRACTICE!”  Really?  Using the comps I chose which had no basement (like the subject) but were slightly older than 6 months (in a proven stable market) was UNACCEPTABLE as compared with using his comps which were within 3 months, but had basements?  A difference of comp choice is not always a sign of incompetency.  To his credit, 10% of his criticism was well-founded (though minor in nature).  After nearly 20 years in this industry, I have yet to turn in a perfect appraisal report.  As a side-note, he agreed with my value, just not the methodology of deriving it.  In the end, there was no fraud committed, no incompetency displayed, no blatant mistakes.  Just a reviewer with a proverbial gun, badge, and a big head.

Here are some rules to live by if you are going to accept assignments to review your peers:

  • Give the OA the benefit of the doubt when you can (remember, they walked through the property and drove the comps on the effective date of the appraisal, and… well, you didn’t).
  • It is not your job to criticize every aspect of the report.
  • It IS your job to look for real incompetency, deception, or fraud.
  • Do not make accusations if you cannot back them up yourself.
  • Do not resort to judgments or name-calling (yes, it does happen).
  • Live the Golden Rule (do unto others as you would have them do unto you).

If something is amiss, make a comment.  If the OA did something wrong, demonstrate how it should have been done better.  If they did what they should have, be willing to point that out as well.  In the end, remember that just because something is different than what you would have done, does not make it wrong.  Above all, quit stabbing your peers in the back just because you have been given a little authority to review their work.

Now, go create some value!

Dustin Harris is a multi-business owner, but he has found most of his success as a self-employed, residential real estate appraiser. He has been appraising for nearly two decades. He is the owner and President of Appraisal Precision and Consulting Group, Inc., and is a popular author, speaker and consultant. He owns and operates The Appraiser Coach where he personally advises and mentors other appraisers helping them to also run successful appraisal companies and increase their net worth.   He and his wife reside in Idaho with their four children.

14 thoughts on “Appraisal Reviews and the Golden Rule”

  1. In addition to being a full time appraiser, I have worked part time as a Deputy Sheriff for over 20 years. I certainly don’t consider myself Mao and resent the implication!

  2. Well written and you would hope that most appraisers would look at it this way. I don’t do a lot of review work mainly because I feel everybody has their own opinion and most of the time it’s not looked upon objectively by our peers as well as others in our industry (ie clients, AMC reviewers, homeowners ect). What we do is no easy task most times, especially in this economy with the lack of similar comps in most places around the country. If others in and out of the industry would realize there is an art to appraising that it’s not always an exact science like some would want it to be, we would would all be better off. Great article I hope other appraisers read this and take heed of it.

    1. I do Appraisal Reviews for an AMC. Many appraisers think we make up reasons to fail a report but we are bound by guidelines the Lenders set up for us. Our staff consists of licensed appraisers who found it better on the inside than out. The Lender (Intended User) sends us the Scope of Work and we make sure the lender’s Scope of Work is followed. As the middle person we get the negative feedback. It’s seems AMCs are the bad guys because they do everything to give the intended users what they are looking for. Some of it is nit picking but it is what the intended user wants. When doing a review I acknowledge I did not do the actual field work and because I do reviews across the nation I do not know the market. Basically we look for whatever is in the Intended User’s scope and we follow Fannie Mae and USPAP guidelines. The knives in the back for AMC’s should stop. I also wished the know- it – all appraisers who have been appraising for the past 30 years stop saying it. Your report is not always perfect because you did not follow the scope and you continue to forget Fannie Mae, Appraisal Practices and Procedures, and USPAP constantly go thru changes. Try coming up to the present.

      1. The scope of work is determined by the appraiser. In my opinion, the AMC advocates for the client whereas the appraiser is not an advocate for anyone. Appraisers have no agenda but market value. Sometimes at the cost of losing clients and AMCs. In my opinion, most AMCs are not solvent enough to “Kill” the deal(s) in some cases. I’m not solvent enough either but yet the “Deal” can not be a factor for appraisers. I am not a fan of AMCs but have chosen to work “Through” a select few. I’d rather respond directly to the client and help educate them and better handle borrowers’ issues, when necessary. Unfortunately there exist a high turn-over of lenders, agents and now AMCs. I find myself more than ever spending hours researching and writing the report, supporting the value and methodology in part because of the high turn-over in Intended User(s) the other due to new patterns in the national and regional marketplace that never existed 30 years ago. I agree with you that appraisers should “Try coming up to the present”. Appraisers are required to take the USPAP course every two years to remain current on the changes.

        Appraising is not an exact science, however, a good appraiser can give the client a supported value and comfort level in the scope of work utilized etc. The age old problem is when the value does not come in. That’s been going on for over 30 years. Dear AMC employee, how do you “Try coming up the present” with that persistent legacy?

      2. [Lovetta] Reviews are an important part of the lending process, and you may be an exception to the rule. However, when I receive a notice of an omission and I point out what page of the appraisal the information is on, and receive instructions to repeat it again in an email anyway- something is amiss?
        Sorry if you are taking heat from your AMC peer reviewers.

  3. Well said!! I have actually learned a ton from reviews. I have incorporated several techniques and comments that I have discovered on reviews into my own work. When I was new, I would review other appraisals so that I could become more competant and be a better appraiser myself.
    This is the first article I have found if this type and is very appropriate.

  4. I have been doing reviews for a significant portion of my life. You took my opening line in calls with my peers I’ve reviewed..”the next perfect report I write will be my first”. As such, I always begin by reminding myself that it is the report that is being critiqued and not the person. I’ve made life long friends with some of the best appraisers in the country by helping them from a position of humility and a quest for the common goal of a professional; reliable opinion of value that is defendable no matter where, or who, ends up with a copy of that document. Prideful, defensive responses to the appraisal process is diminishing to everyone, even on a good day. I agree…the golden rule applies, at all times, and all places as we review our own lives. Remember; the rule that we measure others by is the same rule that will be used with us. Strive for excellence because perfection will not be achieved.

  5. I was once given a failing grade on one of my appraisals, but was given the chance to refute the reviewer. It was by a “Licensed” newbie (not Certified and less than 2 years in real estate, let alone appraising) and supposedly reviewed by an MAI. I don’t think the MAI ever looked over her report. In addition to slamming every aspect of my report (especially my choice of comps), the reviewer admitted that she did not know the area from which the appraisal was geographically based (70 miles north and in a major lake resort area) and did not have access to MLS data from that area. She instead cited comps shown on the builder’s website. The “comps” she cited on the builder’s website were 6-9 years old, which she could have verified by checking the County’s website for sales information – free to the general public. I had appraised every home built in that subdivision from the day they broke ground up to that point 10 years later. I had even appraised that particular home from interim up to closing for completion and now it was a resale, so I knew the Subject inside and out. I wrote a 4 page rebuttal to the Lender with a suggestion they get their money back from that reviewer and never use them again for as they obviously had a lack of quality assurance. A simple phone call to me would have prevented them from losing their credibility.

  6. All appraisals are really worthless if the lender refuses to accept a “Range of Values” because no appraiser can appraise to a specific penny using MLS data that is labeled as follows: Properties reported may be listed or sold by various participants in the MLS. This information may be subject to errors and should be verified by the user. Would you allow your child to fly on an airline if you looked in the cockpit and noticed warning signs and disclaimers on the flight gauges warning the pilot that the information the pilot uses to fly the plane was subject to errors? Appraisals performed by Antiques Road Show, Sotheby’s and Christy’s almost always appraise million dollar art in a range of values, not a value to a specific dollar. Additionally, any appraiser that agrees with the false assumption that a 4 year college degree is necessary compare why a college degree is not required to be a Governor, President, Juror or the Chief Justice of the US Supreme Court. Until all appraisers stop using college degrees and start using a Range of Values, appraisers will look like just lambs that follow rules that make no common sense and can’t be justified by using typical appraiser skills such as using comps to support their position. For example, if Steve Jobs, Bill Gates and Larry Ellison do not have a college degree but look professional to the world, why does a an appraisers need a college degree in Dance or Theater to look professional to the world?

  7. “Gene” wrote:
    “All appraisals are really worthless if the lender refuses to accept a “Range of Values.”

    No offense, but that statement is ridiculous and laughable because in 30 years I have heard of EXACTLY zero lenders accepting a “range of values” for any residential property. It is absolutely possible for an appraiser to support and justify a “point value” within the range of the adjusted comparables. Appraisers that are unable to do this are either inexperienced or not comfotable with supporting their opinions.

  8. Well stated Dustin. I have had both the opportunity to learn and teach with the reviews I have done over the years. No report is perfect and I agree that we should always review with the golden rule in mind. Thank you.

  9. As a former trooper, I fully agree with the comment from Mr. Charles Cross. Also, when I started doing reviews many years ago, I charged about the same fee that other appraisers in this area charge. Within a short period of time it became apparent that doing a review involves more work than doing an appraisal. So why should the fee for a review be less than a fee for an appraisal? As a consequence, we don’t offer a bid to do a review until business is REALLY slow. And even then the bid we offer is usually not very competitive. As a result, we rarely get the “opportunity” to do a review….which we consider a good thing. It means less money for us, but more peace of mind.

  10. Yes Charles Cross- Coach used a poor example. My Aunt was a deputy who was killed in the line of Duty. He should have said: “Nearly all men can stand adversity, but if you want to test a man’s character, give him power.”~ Abraham Lincoln
    On the other hand, he is quite correct with is advise on reviewing a peers work. If you are reviewing and mark anything as unacceptable you should give the exact USPAP or lending regulation that was violated.

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