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Is YOUR Appraiser Licensed to Appraise That Property?

By
Real Estate Appraiser with Apple Appraisal, Inc

As someone that does a lot of reviews, I see some interesting appraisals come across my desk. Some give me pause to wonder. And some just give me pause.

One issue that has come up more and more of late, is appraisers not being licensed to appraise the property in question.

Specifically, I'm speaking to the license limitations of a "Licensed" or "Residential" appraiser.

Here in California, we have 4 licensing levels. Other states have similar licensing, however, the designations may differ.

· AT-Trainee Appraiser-Can appraise any property the supervising appraiser is licensed to appraise.

· AL-Residential Appraiser-Can appraise any "NON-COMPLEX" 1-4 family property with a transaction value up to $1,000,000

· AR-Certified Residential-Can appraise any 1-4 family property without regard to transaction value

· AG-Certified General-Can appraise all real estate without regard to transaction value or complexity.

The sticking point that I see is the "NON-COMPLEX" issue. Many AL or "Residential Appraisers" here in CA, appraise complex properties as a part of their regular business.

Federal Reserve Regulations, from which USPAP was born and which all licensed appraisers are required by law to follow, defines a "Complex" appraisal as "...one in which the property to be appraised, the form of ownership, or market conditions are atypical."

Can you say "Vague"?

I called my state office of real estate appraisers and spoke to an investigator about this issue.

While I didn't ask them to go on record or put it in writing, I was told the CA OREA considers examples of "complex" to be anything that has

· Functional Obsolescence

· External Obsolescence

· Acreage

· Views

That takes a whole lot of properties out of the pool of homes a residential appraiser, or AL level appraiser, here in CA, can appraise.

I recently did a field review of an appraisal on a home that was a lakefront property, on a few acres of steeply sloping property, in an area where there are very few similar sales and the few that there are, were up to 26 miles away, by road.

OK, now that is definitely complex by anyone's standard. Even the appraiser admitted it was very complex when I called her. The problem I had with the appraisal is that she is an AL or residential appraisal, as is her supervisor, that signed on the URAR.

When I asked her why she completed an admittedly complex appraisal that is outside the scope of her license, she had a few reasons.

· She has appraised these types of properties in the past

· She thought she was competent to do the appraisal

· She didn't realize it was so complex until she inspected the property

· She didn't know the definition of complex

· No one ever said anything to her before about doing homes like this.

 These are all well and good, but unfortunately, none flies with USPAP.

 Unfortunately, it seems that the CA OREA doesn't prosecute this offense, specifically, because, as the investigator told me, the definition of complex is too vague and in an investigation, there are usually many other issues. The policy does have a negative impact on the Certified Residential appraisers who all worked so hard for their AR licenses, because they lose business when an AL does a complex appraisal. It should be noted that other states may prosecute this offense.

When an AL level appraiser, or residential appraiser completes a complex appraisal, even if the value is fine and there are no issues in the appraisal itself, it can put you, the originator or the lender at risk of a buyback, or at the least, some heartache in dealing with a lender/investor looking for ANY reason to get satisfaction from SOMEONE on a defaulted loan. Residential appraisers are not likely to turn away work in this market just because a home has a view or a pool causing functional obsolescence. It is incumbent on us, as appraisers, to police ourselves and follow state and federal law.

But let's face it, that doesn't always happen the way it should.

If you are a loan originator, here are some tips to remember whn ordering an appraisal.

 · If the property is unusual in any way for the area, make sure you order your appraisal from an "AR" or "Certified" level appraiser.

If the property is on a busy street, is "over-built" for the area, has really nice views, etc, make sure you order your appraisal from an "AR" or "Certified" level appraiser. 

You can limit any potential liability from an investor requiring a buy back by ordering complex appraisals with an AR level appraiser.

Yes, I know it's a long shot that would happen, but why risk it?

Ordering your appraisals with Apple Appraisal, Inc. eliminates that risk. We have several AR level appraisers and our AL appraisers do not do complex assignments without the proper supervision.

With Apple Appraisal, Inc, you can be sure the right person is doing your appraisal.

Because it matters to you and it matters to us.

Comments (5)

Associate Broker Falmouth MA Cape Cod Heath Coker
https://teamcoker.robertpaul.com - Falmouth, MA
Heath Coker Berkshire Hathaway HS Robert Paul Prop

It looks like there are more closets to open in this real estate problem in CA, and probably elsewhere.

Jul 08, 2008 04:19 AM
Anthony Blackburn
Apple Appraisal, Inc - Martinez, CA

Let's just say that the Winchester Mystery House has fewer closets....;)

Jul 08, 2008 04:22 AM
Erik Hitzelberger
RE/MAX Alliance - Louisville REALTOR-Luxury Homes - Louisville, KY
Louisville - Middletown Real Estate

Anthony - I found this interesting and informative.  I was left wondering how many appraisers would have turned down that assignment.  Also, are their no repercussions whatsoever for completing an appraisal outside of your area?

 

Jul 08, 2008 04:27 AM
Anthony Blackburn
Apple Appraisal, Inc - Martinez, CA

In this market, probably few would have turned the assignment down, as there is very little enforcement of that licensing rule.

The problem with the whole "Completeing an appraisal outside of your area" issue, is...who decides what is someone's given "area"? There are some commercial aprpaisers that because of the nature of some properties, have to cover several states! What if an appraiser has all the data they need to competently do an appraisal 200 miles away, and they do it competently, should they be sanctioned for going "Out of thier area"? There are far mor questions than answers on this issue, but I enjoyed responding to your question.

Jul 12, 2008 08:02 AM
Alix Pinzon
Open Mortgage, LLC NMLS # 2975 - Downey, CA
(562)743-6086

In the past I've provided information to OREA on an appraiser who should have lost their license or at least been suspened, but they didn't do anything to him.  It's a sad state of affairs.

Oct 19, 2008 12:41 PM