Todd Huttunen began appraising more than 20 years ago with a few years off in between to pursue a career in cabinet making. He relegated that to hobby status and is currently an appraiser in an assessor’s office. His best friend dubbed him The Hall Monitor because of his rigidity and respect for rules. He offers Soapbox readers tongue-in-groove insight on appraisal issues.
Todd’s suggested changes for USPAP (with tongue in cheek) simply…rules…
As a fan of “Real Time” with Bill Maher, especially New Rules I think it’s time to rewrite USPAP into something USEFUL. Let’s start by getting rid of the term USPAP and replacing it with something simpler, like New Rules!
New Rule: Use different size fonts and/or typeface.
Let’s face reality. When it comes to writing, most appraisers are somewhat challenged. That’s why most of the report consists of boilerplate identical to that found in every other report. So the first new rule is that the boilerplate must literally be written in fine print and the two or three statements that are actually unique to that report must be oversize. I don’t think it’s fair to ask the user of the appraisal to read something the appraiser himself didn’t proof read before he (electronically) signed the report. The fine print makes it more likely that the client won’t notice the myriad misstatements that appear in the addenda of most every appraisal. Who has not sent out a report, at least once, with the statement “this appraisal is intended for financing purposes only” when in fact it was written to settle an estate? Such oversights as “the client is ABC Bank” rather than “the client is John Q. Public” will more likely be forgiven if they’re only in the fine print. Why? Because, since you didn’t read it when you wrote it, your client shouldn’t have to read it either! After all, your clients are just as busy and stressed out as you are.
New Rule: Fewer words, more pictures.
There are way too many words, especially adjectives, in appraisals and not nearly enough pictures. Think about it words like fair, average, good, modern, updated, or deferred, are totally subjective. So instead of narrative description that doesn’t describe anything, all appraisals will have interior photographs of every room and bathroom in the house. The appraiser’s words should be limited to a caption underneath a photograph, like “kitchen”. Wouldn’t that be easier and more informative than a statement like, “The kitchen, which was renovated in 2006, has cherry wood frame and raised-panel cabinets and black granite counters?”
New Rule: Photographs will be “maximally productive” and not misleading.
Most houses have a front, rear, and two sides to them. With detached houses in suburban neighborhoods, the picture of the front of the house should illustrate – not just the front – but the front and one of the sides of the house. Ideally, the rear photo should illustrate – not just the rear – but the rear and the other side of the house. These days, when so many houses have been expanded to twice their original size and the expansion has been out the back, a front view without the context provided by the elongated side is indeed misleading. Granted, due to site conditions or topography it is not always possible to show two sides of the house with one photo. In that case, take another photo.
New Rule: The “Street Scene” is not supposed to be a picture of the street, and nothing but the street, taken by some schmuck standing on the double-yellow line in the middle of the street!
Everybody knows what pavement looks like. The focal point of the street “scene” photo should be the improvements alongside the street, and not the vanishing point.
New Rule: There must be at least one declarative sentence in every appraisal.
So much appraisal verbiage consists of what the appraiser is not. “The appraiser is not” an expert in environmental contamination, an engineer, a surveyor, etc. For reasons of building self-esteem if nothing else, every appraisal must include a declarative statement. It shouldn’t have anything to do with the appraisal. But it must say something about what the appraiser is, versus what he is not. It can be as simple as “the appraiser is tall.”
As the original USPAP was the result of a collaborative effort, so too should be its successor, “New Rules” and in that spirit I welcome reader’s suggestions.
Tags: Soapbox Blog, Todd Huttunen, USPAP, The Hall Monitor
Let’s add Critical Thinking to the core subjects taught in Appraisal Ethics. Such a cluster of subjects would be a welcome addition to Appraisal Review and Report Writing courses as well. See: http://www.criticalthinking.org/ for the gist of what I mean. The instruction of critical thought in appraisal is long-overdue.
And while we are on the subject of making appraisals better, perhaps appraisers can honor copyrights and trademarks by marking them as such? Realtor(tm) or Tyvek(tm) is not much extra work. And perhaps stop plagiarizing your peer’s reports? “Wow that’s a great line! I think I’ll add it to all of my reports, whether it makes sense in all circumstances or not!”
Sam Martin, MA, BSc, IFA
I agree – critical thinking is missing from appraisals. I’m beginning to feel that the appraisal profession is – to borrow from Seinfeld – a profession about “NOTHING”. What many appraisers (form fillers, really) have to fear is that one day someone is actually going to READ their appraisal. Worse yet, they’ll read two reports by the same appraiser. And if that someone is a member of Congress, they’re going to read aloud, one written when the market was booming and one during its obvious decline. And both will wrongly state “property values are stable and supply and demand are in balance”.
And the Congressman will correctly point out that if most appraisals are nothing more than the same report with the same insipid pablum, irrespective of market conditions, why do we need them?
So, to all the “form fillers” out there, your job is safe for now. Just hope that your client doesn’t one day decide to actually read what you wrote. Because once they do that, you’re screwed.
The thing is, you’re incorrect in your flip criticism of appraisal reports and their role in the lending process. In fact, the appraisal DOES reflect current market conditions and DOES determine whether property values are stable or if supply and demand are in balance, provided the report was performed by a professional appraiser who was aloud to do his/her job in an objective manner (the intention behind USPAP and the their guidelines). They also report on current neighborhood and pricing trends and provide support and security for the loan amount, loan collateral, lending process and financial markets. One of the key elements in the process is to ensure there are qualified, ethical and trained appraisers being allowed and/or insisting on doing the work independently from the pressures of commissioned loan officers and banker “clients” who, until recently, have only been required to order the reports. “Form Fillers” are simply a product of the lending industry. The “clients” have created them through years of pressuring and threatening them to “tone down language” and “bring the value up a little bit” and “work a little harder on this one” or “cherry pick the comps on this” or “don’t raise any red flags for me because I like working with you”, etc. It’s all about bundling the loan and selling a product on the secondary market and getting paid. They dangle appraisal orders and payment over them like carrots and corrupt and manipulate the system all the way down the chain. The lender “clients” have done every thing they could to gut the content of the appraisal report and keep it “conforming” and moving through the system without hitting snags in underwriting or bundling; just so they can make their commission at the end of the month. And that’s all it’s ever about – money. It’s the LENDERS who own and created the “form filler” appraiser and the product you’re referring to. The professional appraiser still does the critical thinking and puts out the dependable, objective product the way it’s designed and intended. Those are my peers. We actually stand for something and offer a highly valuable service to the market(s). I’m sure you’ve noticed what is going on with the financial markets? You’ve heard about WAMU firing their entire appraisal review staff in response to billions of dollars of bad loans in the last quarter? The S&L Debaucal of the 1980’s? The hundereds of times the banking lobby has tried to congress to get rid of the appraisal process entirely? The lemmings buying into these ridiculous mortgage products? Appraisers are simply in the way of their client writing themselves a bigger pay check, so putting pressure on them to tone down language and keep everything conforming and smooth through the process is status quo. I suggest you focus your criticism and attention on the root of the problem instead of kicking the appraiser. Some of us out there give a s… and actually do the job ethically and correct – everytime.
And the Congressman will correctly point out that if most appraisals are nothing more than the same report with the same insipid pablum, irrespective of market conditions, why do we need them?…
We only have to look to the rating agencies to see plausibility in this. Terrific article. Bill Maher’s the man.
Paul, Your thoughts are very much appreciated but you’re either being too literal or very naive. You’ve completely missed the point. Its not flip criticism at all. Yes, if the appraisal is done by a professional, all your points are valid – but the exception to the norm.
Don’t you ever review appraisals done for AMCs or mortgage brokers that do heavy volume? The appraiser is not protected by the lending process to render an independent opinion. Bad appraisers enable mortgage fraud and inflated deals.
Yes its the Lenders who created the form-filler appraiser, but they made their choice to go along and people like you and I didn’t – they dominate the profession right now. They made the decision to sell their soul and we are suffer as a result.
I do empathize with the ethical appraisers out there but even if the “form-fillers” could be eliminated, technology has diminished what used to be the appraiser’s nearly “exclusive access” to the domain of market data. To a large and growing extent, this information is readily accessible to anyone with a computer, anywhere in the world. People are beginning to question the appraiser’s “sole expertise”, and they are fully justified in doing so. If the appraisal industry is to avoid the same fate as has befallen that of travel agents and numerous other professions that are no longer relevant, it is going to have to vastly improve the quality of its product.
From what I’m seeing, there is little reason to be optimistic.