Can We Stop Attributing Geographic Competency to Distance?

Last year, I mentored an appraiser over the phone from New York. He had just moved to New York from Florida He had lived and worked as an appraiser in Florida for over 25 years. His business consisted mostly of lender (AMC) work. Though he was now living full-time in New York, he still had a home in Florida and had plans to live there during the cold months (about 3 months out of the year). The problem was this, though he had more experience and was more familiar with the Florida real estate market, his new permanent address and that of his office was in New York. Due to arbitrary AMC rules, he is no longer able to appraise in Florida. He is no longer competent.


Can someone please explain to me why distance should always determine an appraiser’s geographic competency?

35 thoughts on “Can We Stop Attributing Geographic Competency to Distance?”

  1. Pingback: Can We Stop Attributing Geographic Competency to Distance? - Appraisal Buzz

  2. I would think the geographic incompetency would by in New York…IF he had never lived there before. I perform now in TN for the last 10 years, however I did appraisals in Michigan for nine years which is where I grew up and I am well aware of both markets. Why should I not be able to perform appraisals in both states if I were licensed in both states? Some of the rules/laws…SMH

  3. This is one of the many reasons I choose not to work for AMCs anymore. I cover 5 counties in MD, 2 in WV and 1 in PA. AMCs will only give me work in my county and sometimes the neighboring counties. I am in a rural area, but if it isn’t within 30 miles, they won’t offer it to me unless they are desperate. Most of my work is directly for the banks. They give me my fees as well as all my counties I cover.

  4. I’ve been at this for almost 30 years and cover 18 counties in WI. The area is due in large part to the fact I do unique/high value properties other appraiser’s won’t or frankly, can’t. I have a slightly unique perspective having been an assessor for almost 20 years as well. That said, while I could rattle off numerous instances, this was a classic: I conducted a field review on a property that was approximately 80 miles away from my residence (considered your place of business in WI). It wasn’t exactly favorable, and they gave the original appraiser an opportunity to write a rebuttal. A copy was provided to me for my response. In it, the appraiser went on a rant about geographic competency, citing the fact I couldn’t possibly know the market being based that far away. He didn’t have much more to say after I pointed out the fact I conducted the appraisals for sales purposes on 2 of the 4 closed sales cited in his report. This was turned over to the state for possible actions and/or sanctions. I got a call from the state and I immediately thought the poop had hit the fan. Turns out they were short-handed and wondered if I had an interest in doing contract work reviewing reports that had been submitted for potential legal action.
    Moral of the story: I don’t need to know who’s dog is pooping in who’s yard to develop a credible, supportable and defensible appraisal report on a property farther than a block away from my office. This is commonly referred to as professionalism but, not practiced as often as it should be.

  5. I’m a commercial appraiser, but wouldn’t you want a residential person who specializes in historic, atypical, or large homes to be noted as the most qualified for those specific jobs – especially if the asset is in a location where there are no similarly experienced appraisers in that town?

  6. If you live and work in the area for at least part of the year and are experienced, I don’t see a problem. Just be sure to do your homework. The problem is when AMC’s mostly keep hiring appraisers from 2 counties away for regular work because they are $5 cheaper than the local people have quoted. This entire fiasco of being hired based upon FEE ONLY has GOT to be stopped. STOP IT !!!!

  7. CompetentAppraiser

    “Geographic competency” should be stricken from appraisal terminology, “competency” is the only term we need to be concerned with.

    But I don’t blame AMCs or lenders for this mess. During the last bust, which happened to be the largest real estate crash in history, whenever the magic number wasn’t hit real estate agents, loan officers, borrowers, buyers/sellers screamed and hollered “The appraiser killed the deal! He/she is incompetent, doesn’t know the market, is holding back the recovery, etc.” Never mind the fact that the real estate market crashed, that couldn’t have been the real reason sale prices were tanking, it was incompetent appraisers. Then at a time when appraisers should have been coming together as a profession to many appraisers jumped on the “incompetent appraiser” band wagon and added fuel to the fire by blaming “out of area” appraisers for slow business. So the term “geographic competency” started making the rounds. Now if an appraiser lives 20 miles away he isn’t geographically competent, if he hasn’t performed several appraisals in the development he isn’t geographically competent, the list goes on and on. The appraisers who pushed geographic competency did it for one reason: To protect their turf. They blamed the “out of town” appraiser for business being slow, not the real estate crash. This was nothing more than an attempt to limit competition.

    An appraiser is either competent or not, it’s that simple. Any appraiser who is well versed in sound methodology and follows Stds 1 and 2 is competent to practice in any market they feel comfortable in. The issue of competency is between an appraiser and his client, NOT an angry Realtor or a jealous appraiser who thinks they are the only competent appraiser in any particular neighborhood.

    1. What needs to be understood by lenders/clients/AMCs is that appraisers decide their competency — not them. When I call realtors or homeowners to make an appointment the very first question I am asked is where are you coming from? Where I choose to live and where I choose to work should not have anything to do with each other. I choose to live in the country and drive to larger markets (within an hour) where I have also lived but got out. That is the first complaint thrown out there by realtors and/or homeowners if they don’t like the results of my reports. If an appraiser consistently works in market areas on a weekly basis and subscribes to necessary resources to stay competent, it shouldn’t matter where I choose to reside.

      1. I understand why Realtors and homeowners ask where we are coming from. I am located less than 30 miles from a large city; however, we also have a huge lake here and too often the appraisers coming up from the big city have no idea about the market in our area. Night and day from the big city. After too many bad appraisals, I think it only makes sense to ask not only where the appraiser is coming from but how long have they been working in the area/market. Appraisers are required to consider whether they are competent, but many don’t.

    2. One of best responses yet, in my opinion. When I started appraising in 1986 50% of our work was semi local and 50% in the five to six county area surrounding us. This accounts for most (more than half) of California’s entire population centers. We did not have “regional mls” services then. Anything outside of our back yard was data fiche and CMDC data driven for initial screening. Before going to appraisals we invited contacts (agents or owners) to compile and provide any data that they believed to be relevant for our additional considerations. Either before or after each appointment, we also visited as many Realtors(r) as was necessary to understand local market nuances AND to get local area mls access! I also actually drove the competitive market area-not merely ‘to and from’ the subject or comparable sales. Visits to planning departments and city halls were common then. While I COULD write a report up in half a day, it may well have taken two to three days to get to the point of starting that write up. Some jobs took longer. We charged proportionately. I have performed Catalina Island appraisals to distant mountain community resort properties (SFR & commercial); and commercial jobs as far away as Pennsylvania (a bit more than the magical AMC 25 miles). I did 50% of the Portuguese Bend Bay Club (Landslide area) leased land cottage conversions to condo appraisals. NONE of these were cases where “geographic proximity” was more relevant than having the necessary professional skills; adequate time for research and compensation commensurate with the degree of assignment difficulty.

      Federal regulators need to focus more on an AMCs ability to properly screen for professional competency, and the lenders track record of paying fees related to assignment complexity than on how far the appraiser lives from the subject. When the AMC sends the bottom of the barrel, low fee incompetent out from fifty miles away, THAT is another story.

  8. I’m trying to understand where most of your are coming from, but, I just don’t agree with your concepts. To be geographically competent mean that you understand the nuances of each market you appraise in, not just being able to find 3 or 4 comps, do the adjustments and come up with a value. If that’s all anyone wanted we could just go back to letting the realtors set the market pricing like they did up to the late 1980’s. As an appraiser we must not only be competent on the specific type of property we’re being asked to appraise, but, also know what is happening in each market area. Has there been something good or bad that’s been impacting sales prices? Does the busy street have any impact? Is the market suddenly improving or declining and if so why? When you don’t have acces to this information on a regular basis, how can you be competent and provide an accurate assessment of the property you are appraising to your client?

    1. Do you know how to knock on a door? ASK people! Interview neighbors, local realtors and planning department officials. of course THAT takes time. You phrased the relevant questions / issues in your post here, why couldn’t you do the same in the field where local real estate agents operate? IF you are using sound, professional appraisal techniques, then this is data you either develop new or at least recheck for EVERY SINGLE appraisal anyway, right? I just finished an appraisal in the Porter Ranch Gas Leak area. Its been years since I did anything up there. I did EXTENSIVE online research; interviewed half a dozen local area residents; two recent buyers, and area agents. I also drove the immediate area north, south, east and west-not merely the periphery of where comparable sales were. I researched historic city records and rechecked my own files and records dating back 20 years and forty miles away from this area for other areas of ground subsidence related to old petroleum wells. Respectfully Steve, competence comes in many forms. PS I ALSO found REAL paired sales for time!

  9. What are the “arbitrary AMC rules”? How can one provide an answer without knowing the issue behind the question. Does Florida law require the appraiser live in the state for a minimum number of days? Does New York prohibit an appraiser licensed by their state, from completing appraisal assignments in other states where they are licensed? Does either state not allow resiprocity? Answer these first to understand more thoroughly the question being raised.
    Just noodling………..Being geographically competent is only one part of competency. I have reviewed appraisal reports where I would question the appraiser’s competency and understanding of the form itself. And while on review; is everyone OK with an appraiser from another state (licensed in your state or not) reviewing your work? Are they competent to do so? I am in favor of geo competency being a part of the conversation.

    1. Of COURSE they can review my work from another state! What they CANNOT do is suggest a different value or alternative comparables, from another state. THEY cannot (credibly) suggest different adjustments. What they CAN do is identify whether or not I have supported and adequately explained my conclusions in accordance with USPAP and generally accepted sound appraisal practices; giving me the benefit of the doubt on ANYTHING remotely related to area competency.

      The fly in the ointment comes about because THAT is not what out of area “national appraisal reviewers” or phony “reconcilers” are hired to do.

  10. I work a small resort area, I would say no distance should not be the sole indicator but lets be honest the farther away someone goes from their office it is highly likely they don’t know the market due to distance, you need to live in the area you appraise or have lived there to know the nuances of an area, if an appraiser is good and knows there area why are they taking jobs that require more than an hour one way trip, it does not make sense as you make zero money behind the windshield. I only work about a 30 mile radius of my office, If I need a map I don’t take the job. just my two cents worth.

  11. I live in the lower Peninsula of Michigan and 11 years ago ended up in a coma after cutting the deer in half of the motorcycle. When I got out of the hospital 2 months later, I had no clients left, because they all figured I would either be dead or permanently incapacitated. I needed to work so I expanded my work area to include 85 counties in the lower Peninsula of Michigan. (I know the best places to eat all of the state – LOL). I find it frustrating that my geographic competency is questioned from time to time. From my point of view and appraisal analysis involves the same steps in the same scope of work, which includes either competency from past assignments or gaining competency in a given area by researching the market in-depth. I believe it’s the appraiser’s responsibility to determine their competency when accepting assignments in a given area. For example, I don’t do the Detroit Metropolitan Area because it is a geographically complex market region and I don’t feel I have the geographic competency to adequately service that area. I don’t think geographic competency should be determined by client staff members that more than likely do not have the training or competency to determine the geographic competency of an appraiser. Thanks, Jim

  12. I live in a smaller metropolitan area and have obviously completed numerous appraisals in that market. But during a certain 2-year time period, I also completed many appraisals in a more rural area bordering the metropolitan area. After a while the appraisal spigot in the rural area was turned off for 3 years and then suddenly began to flow again. After my 3 year hiatus in the rural market, did the new appraisal work in the rural market constitute geographic incompetency? Also, even though I appraised 2-4 family dwellings in the metro area, I never appraised a 2-4 family dwelling in the rural area, will that constitute geographic incompetency in the future? So confused.

  13. I think if the appraiser does not live near the subject property, then maybe it would be appropriate to ask some questions about the competency of the appraiser, but an appraiser should never be blocked from an assignment based on where they live. When I started my career in appraisal, I was assigned a remote area that was almost two hours from my home. At that time, I was appraising more homes in that area than anyone else and I appraised more homes in one six month period than there were recorded sales in the county. I was geographically competent, but I had to work twice as hard to show it in the report because of the address listed on the signature block.

    1. CompetentAppraiser

      Who should ask the questions? The Realtor? The buyer or seller? The borrower for a refinance? The question of competency is between the appraiser and their client. Allowing Realtors, buyers/sellers, borrowers to question an appraiser’s competency based on where the appraiser lives is ridiculous. All they care about is if the number works, not a single complaint from any of them about geographic competency when the deal gets done.

    2. When I was an agent, the WORST mistake my broker father and I ever made was in rejecting a listing for $179,000 on the border of my own agent farm area. An area in which I grew up in. An area that many of my old high school friends from fifteen year before had lived in. The area directly (diagonally) across the street from my old high school. WHY did we reject it? Because WE KNEW it was technically OUTSIDE of the Hollywood Riviera area of Torrance. We told the owners; and a fellow agent that had asked to solicit the listing that even if they managed to sell it, it would not appraise. We KNEW the area.

      What we didn’t ‘know’ was that the current market of outsiders moving in to the area, no longer distinguished between the original premium neighborhood and its artificial ‘boundaries’. It sold two weeks later and an appraiser that merely did his job had no problem appraising it. THAT is the event that made me learn to let the market tell me, rather than for me to impose MY views on the market. Its also when I learned to become an appraiser.

  14. How is it that the typical real estate agent can close 2 deals a month for 30 years and touch 720 transactions, while some appraisers complete 720 assignments while just in training, yet we are considered not competent? This argument may not hold up against Michael who has 40 years of experience, but still gives value to above ground pools, electric (mobile) fireplaces, and portable covered patios.

    1. It’s been entertaining watching you and Michael go at it. The above ground pool adjustment comment will never die I’m sure. Very funny.

      1. Its important to remember Tim at property tax time to pay a little extra when the pool liner is in as the city only gives value for above ground pools in the summer. Pay a little less in the winter when the lining has been removed. I would also question Michaels value applied to those glowing plastic logs he calls a fireplace. Mitch, if you can wheel it into grandmas room and you must use an extension cord, think twice before applying value. Just saying.

  15. The issue as I see it was addressed earlier. The cheapest appraiser may get the job even though they may be out of the area. My question has always been; why are they not working in the area they are in?

  16. I would say Geo-competency in its best self would mean appraisers would barely appraise past their doorstep. There is a certain function of keeping a person busy that factors in which is aligned with the reality of the business. Appraisers decide for themselves if they are geo competent or not. Clients use distance as a filter, which skews the natural order of things. This appraiser could find different clients for each state maybe?

  17. It does raise another big question other than Geographical Competency, “How is the appraiser going to inspect a property in Florida when he resides in New York? ” As in most cases, AMC’s do require the appraiser to physically inspect the subject property. It sounds like your friend is an exception to the rule (for 3 months out of the year anyways). You have to admit though, it does raise a red flag to an AMC or lender that his office and primary residence are in another state. AMC’s can only send orders to appraiser’s with a physical address within “X” miles from the subject property within their state. You would think he would use his Florida residence were he still resides for 3 months out of the year as his office address for the AMC’s in Florida.

  18. Because no one has come up with a good way & distance is just the simplest & easiest way, something a computer or someone with low skills can figure out.

    Should be as simple as experience. Use distance to weed people out & if you want in, then prove it with experience or some other way like affiliation with someone who is known to be geographically competent. How does an appraiser prove to him or her self that they are geographically competent?

  19. AMCs brought on the whole “geographic competency” issue themselves by broadcasting for the “cheapest and fastest” without regard to competency. As someone said previously, the appraiser from 2 hrs away would get the appraisal order because he was $10 cheaper. Who CARED if he was competent.
    *It IS up the appraiser to determine our own competency, and is a USPAP requirement.
    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; or alternatively, must:
    1. disclose the lack of knowledge and/or experience to the client before accepting the assignment;
    2. take all steps necessary or appropriate to complete the assignment competently; and
    3. describe the lack of knowledge and/or experience and the steps taken to complete the assignment competently in the report.
    Competency applies to factors such as, but not limited to, an appraiser’s familiarity
    with a specific type of property, a market, a geographic area, or an analytical method. If such
    a factor is necessary for an appraiser to develop credible assignment results, the appraiser is
    responsible for having the competency to address that factor or for following the steps
    outlined above to satisfy this COMPETENCY RULE.

    As usual, it’s up to the appraiser to educate our clients and the public, and to remember that WE are in control of our business.
    Before the AMCs came to be, no one cared what the appraiser’s address was. 🙂

  20. – I’m a loyal Big Bamboo regular but the food is, shall we say, not its strong point! Your home made dinner on the other hand sounds great. Mac and cheese!@Stimpy – I didn’t really celebrate, I felt like a nice turkey dinner so organised a group of friends to come with.

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