Category Archives: Reviewer Thoughts & Tips

The main attempt of this blog is for me to give back to the real property valuation industry. I can’t take my knowledge with me when I leave this world. So, my goal is to share everything I know through writing articles, teaching classes and seminars, and this blog.

I usually receive several questions a week from fee appraisers, appraisal reviewers, and chief appraisers regarding appraisal reports, FIRREA, or USPAP. Hopefully, these will provide most of the content for this blog. In this way, we can all learn from the same issue under discussion. Obviously, items will be redacted as needed to maintain confidentiality.

If I hit a lull in inquiries, I have a huge treasure trove of topics to draw on. I will try to discuss interesting topics I have encountered in international reports. It is a neat world out there and us American valuers should be amazed at how the rest of the world handles various items.

Yes, I will give my interpretation of FIRREA and USPAP. Everyone knows I am not shy. However, to CYA, I need to give the standard verbiage that my interpretations are not legal interpretations….they have not and cannot be approved by examiners and regulators. Each Bank should contact their specific examiner and/or the appropriate regulator in Washington DC that interprets FIRREA.

ASB RELEASES CONCEPT PAPER ON EVALUATIONS

September 3, 2019 – As promised a month ago, The ASB has issued their concept paper with ample time for everyone to comment.  Also, there will be a webinar on September 10th and a public meeting on October 18th.

The concept paper can be found at:

https://www.appraisalfoundation.org/imis/TAF/Standards/Exposure_Discussion_Drafts/TAF/Exposure_Drafts.aspx?hkey=d6d47266-eca5-4178-8919-2d3e827a5f36&WebsiteKey=e12b6085-ff54-45c1-853e-b838ca4b9895

If this URL is too long, go to the Standards & Qualifications tab on TAF website.

After reading the document, I believe it is well explained and gives everyone a chance to opine.  I think a statement or two are slightly misleading, but they explain why they say what they say and that is just fine.  If I am up for it one day, I might add a post here listing out the items I disagree with.

My stance will never change.  Evaluations need to stay outside of TAF.  Just leave this product under the domain of federal regulators who actually do have the power to go after anyone who performs fraudulent evaluations.  The federal regulators have enforcement power that TAF and ASB do not have.

Please take the time to send them your comments.  They do read everything they receive.  Obviously, some meat to your stance will carry more weight.  Try to give some factual information.  Simply saying evaluations are more risky is factually wrong.  People like myself that have ordered and reviewed appraisals and evaluations on all property types, performed due diligence on dozens of good and bad banks, et al, know loans allowing evaluations are, and likely always will be, less risky than loans requiring appraisals.

Unlike our politics, it will help if you don’t say you are a Never-Evaluations person and leave it at that.  No need to call each other Appraisalphobic or Evaluationphobic lol

Give the ASB some real substance and they will give your comments significant weight.  Give them suggested wording and they will consider it.

Just saying ‘because’ is what a 5-year old says:)

Take advantage of your chance to comment…

The Mann

 

HEY ASB, STAY THE EXPLETIVE DELETED OUT OF THE EVALUATIONS WORLD!!!

August 1, 2019 – I was bombarded throughout the day with appraisers emailing me the ASB announcement that they are going to consider drafting standards for Evaluations.  Their announcement is full of blatant lies.  It is typical of what the Fake News Media puts out.  Therefore, I will list their lies and provide the actual truth below.  Too many people who have no to minimal experience with evaluations put out Fake News all of the time.  It is criminal.  I have ordered and performed evaluations since essentially the beginning of their existence in 1992.  The truth follows….

LIE #1 – “Currently, there are no uniform standards for appraisers to follow when conducting an evaluation, ” – THE TRUTH – Since October 1994, there have been uniform standards for appraisers to follow when conducting an evaluation.  These standards were updated in the December 2010 Interagency Appraisal and Evaluation Guidelines.  And get this, these requirements apply to not only appraisers, but NON-appraisers!!!  USPAP only applies to appraisers.

LIES #2 and #3 – “, which leads to greater risk to the safety and soundness of the real estate transaction and diminished protection for consumers….With the increased use of evaluations in the marketplace lenders and consumers are being exposed to an unnecessary level of risk not seen since the 1980s when national appraiser qualifications and appraisal standards had not yet been created….” – THE TRUTH FOR #2 – First, evaluations are only allowed in transactions that are lower risk than appraisals.  Therefore, they cannot possibly add risk to lending.  In my 27+ years of working for banks, I cannot recall a bad loan that originated with the use of an evaluation.  But, all the bad real estate loans I have seen did contain an appraisal.  Inflated appraised values alone do not make loans go bad.  That is not what I am insinuating.  But, I will confidently say that no bank has ever or will ever go under because of the use of evaluations.  However, many banks have gone and will go under with appraisals being a contributing factor.  THE TRUTH FOR #3 – ‘…diminished protection for consumers.’  Everyone loves to claim they are trying to help the consumer.  I guess we can call it using the ‘Consumer Card.’  The ‘consumer’ usually means the general public that buys houses.  The fact is FIRREA does not apply to 90%+ of residential loans.  Everything that Fannie Mae, Freddie Mac, the VA, HUD, and on and on are involved in is exempted from FIRREA.  (If you are honestly concerned about the consumer, it is Fannie Mae and Freddie Mac that must be stopped from loosening appraisals standards…and remember evaluations are not in their world, so don’t get the issues confused.)  The consumer BENEFITS from evaluations as they are cheaper and faster than appraisals.  It is a flat out, despicable lie to say that the ‘consumer’ is hurt by the use of evaluations.  Actual proof has been the real world since 1992.  Evaluation volume is estimated to be 4x-6x that of appraisals.  Has anyone ever said an evaluation caused a loan to go bad or a bank to go under?  NO!

LIE #4 – “This important development by the ASB shows how the Board has their ear to the ground, listening to the concerns of working appraisers in a rapidly evolving marketplace where there is an increasing demand for different valuation products,” said David Bunton, president of the Foundation.” – THE TRUTH – Ear to the ground?  What a ridiculous statement!  Evaluations were an option when the original FIRREA was placed into law in 1989.  30 YEARS AGO!!!  The ASB reminds me of the quote attributed to Mark Twain about one of my favorite cities, Cincinnati – “When the end of the world comes, I want to be in Cincinnati because it’s always twenty years behind the times.”  When it comes to evaluations, I want to be the ASB because they are 30 years behind the times:)  The demand for evaluations has existed mainly since 1992.  (Any of you remember BC-225:) )  Nothing has changed.  Except if The Appraisal Foundation will say the truth they are scared to death of a non-appraisal product.  They want to control their fiefdom.  Hey ASB, the first step is admitting what you are!

LIE #5 – “Currently, the Interagency Appraisal and Evaluation Guidelines for federally regulated financial institutions provide guidance on evaluations, but that guidance is directed at lenders, not appraisers.” – THE TRUTH – OMG, the misleading statements get more ridiculous.  This is like saying the 5 appraisal requirements in FIRREA are directed at lenders, but not appraisers.  Just not true.  Appraisers must provide Market Value ‘As Is’ per FIRREA, not USPAP.  That applies to both appraisals and evaluations, BTW.  Appraisals must be written per FIRREA, not per USPAP.  The IAEG requires the subject property be inspected for evaluations.  USPAP doesn’t even require an inspection for appraisals!  As a reminder, the IAEG requirements apply to BOTH appraisers and non-appraisers for evaluations.  Just imagine if USPAP applied to non-appraisers!  That idea is as ridiculous as the ASB trying to provide standards for evaluations.

LIE #6 – “Under federal regulations, evaluations may be performed by non-appraisers who have not demonstrated a level of expertise through education, training, and examination.” – THE TRUTH – Do you ever wonder why people tell a lie that can easily be proven wrong?  Here is what the IAEG says about who can complete an evaluation – “An institution should maintain documentation to demonstrate that the appraiser or person performing an evaluation is competent, independent, and has the relevant experience and knowledge for the market, location, and type of real property being valued. Further, the person who selects or oversees the selection of appraisers or persons providing evaluation services should be independent from the loan production area.”  The requirements are the exact same for appraisals and evaluations.  Shouldn’t the ASB be made to retract their lie?  Shouldn’t they have to issue a new announcement with truths, instead of lies?  How does a group of people look themselves in the mirror each morning knowing they published numerous lies to the public they love to claim they protect?  I have never understood how people live like that.

LIE #7 – “If appraisers are not completing an evaluation, there is no recourse for a lender or consumer to appeal a bad evaluation.” – THE TRUTH – Why not?  I have asked for evaluations to be revised.  I have rejected evaluations.  I have done both for appraisals, also.  There is no difference in how these products are treated in this regard.  Whoever did the evaluation can be sued as easily as one of us appraisers that did an appraisal.  And it is likely an evaluation doesn’t contain that funny limiting condition that many appraisers put in appraisals about their liability being limited to the appraisal fee:)  That one has always cracked me up.  I am sure lawyers have been stopped in their tracks when they see that clause, not!

Those are what I would label as bald-faced lies.  (I learn something every day….there are bald-faced and bold-faced lies and they are different….interesting.)  Below are just statements that are hyperbole or unsupported or such.

“Appraisers are valuation experts. When hiring a licensed or certified real property appraiser to develop and report market value, the client should expect the work to be performed in accordance with USPAP,” said Wayne Miller, chair of the Appraisal Standards Board” – COMMENT – No, they should not.  USPAP is not a law, as we all know.  USPAP has never been the only set of standards for valuation.  Many states do not require USPAP for all appraisals.  (Read my blog post of a few years ago where I contend that all ‘Mandatory’ laws are in violation of Federal Law.  I believe this issue was settled by a Federal Court ruling in 2004 in Pennsylvania.)   Many large clients do not either.  The Yellow Book (UASFLA as the word police are now wanting it to be referred to) is its own set of valuation standards.   USPAP says the following:

“USPAP does not establish who or which assignments must comply. Neither The Appraisal Foundation nor its Appraisal Standards Board is a government entity with the power to make, judge, or enforce law. An appraiser must comply with USPAP when either the service or the appraiser is required by law, regulation, or agreement with the client or intended user. Individuals may also choose to comply with USPAP any time that individual is performing the service as an appraiser.”

It is NOT needed for all assignments.  Appraisers do NOT need to comply if it is not necessary.  Clients do NOT need USPAP appraisals all of the time.

“The Board is eager to receive stakeholder feedback from the planned concept paper and public hearing on the impediments, if any, to appraisers completing evaluations in accordance with USPAP.” – COMMENT – This one is simple.  The lone impediment are the state laws that require licensed appraisers to meet USPAP for ALL appraisals, including those for financial institutions.  As I note above, I believe these laws are unconstitutional and have ignored them my whole career.  Federal law trumps state law.  My grass roots campaign since 1994 to get the Tennessee Law, as I refer to it, passed in all other states has gained traction in the past few years.  Numerous states now allow us licensed appraisers to perform non-USPAP Evaluations.  That is the solution.  Change the state laws, one by one.  And keep the ASB the heck out of the Evaluation world!  The banking agencies already set the standards for evaluations and they can enforce them.  Probably much better than the states have enforced USPAP!  People who violate FIRREA are subject to civil money penalties and jail time.  That applies not only to lenders or credit people or anyone else in a bank or credit union, but also to appraisers and evaluators!

In closing, let me point out the obvious….remember what the ‘A’ stands for in USPAP, TAF, ASB, et al.  Evaluations are NOT appraisals.  Appraisals are NOT evaluations.  They may coincidentally have some similarities, but they also have significant differences.  They each have more than adequate standards.

Some facts that I have had to share over and over for 25+ years….Evaluations have been around as long as appraisals in regard to FIRREA.  They are not something new.  They have not negatively affected the appraisal industry.  The volume of appraisal work has increased significantly over the past 25-30 years – evaluations have been done all along.  Mostly by non-appraisers.  Passing state laws like TN and GA and FL and LA and VA and others now have is all that is needed to open this world to appraisers.  Those who do not want to do them, don’t do them.  Your business decision.  But, don’t stop your peers from making a living that includes doing them.  That is selfish.

I am 100% positive that evaluations have not negatively affected the banking industry or our economy over the past 30 years.  They will not over the next 30 years.  If you understand the transactions they can be used on, you understand that almost always, if not always, evaluations are involved in lower risk loans than appraisals.  If you are concerned about the banking industry, the economy, the consumer, then figure out how to provide appraisals that are more accurate than the plus or minus 20% minimum range of accuracy that numerous studies have proven them to be!  How do you convince the public that a professional doing a valuation is adding something of value (no pun intended…or is it) when their appraisal on a $1,000,000 property is not more accurate than $800,000 to $1,200,000?  Do you not think that most of the public knows to a smaller range than that what their property is worth?

I am sworn to secrecy about a similar professional study on the accuracy of evaluations that showed the range to be plus or minus 5%.  Now, tell the world that there is more risk when using evaluations than appraisals.  See how that flies with people that know that plus or minus 5% is far superior to plus or minus 20%.

Folks, know what the facts are versus the Fake News about evaluations that is passed around by individuals and organizations with a bias.  I try not to have any bias as I have made my living off of both products in one way or another for 27+ years.  I have spent 25 of those years trying to help the appraisal industry see the light and get their state laws passed so they can access the non-USPAP Evaluation world.  That is what will help appraisers.

What will not help appraisers is the ASB putting out their own standards for evaluations.  Who is going to follow them anyway?  The banking/credit union world already have evaluation standards.  Why would they want to amend Federal Law to require that evaluations follow some new ASB standards?  Hopefully, the ABA, MBA, and others will be sure to squash that idea.  The Federal Agencies that have examined banks all along can factually say that although evaluation programs can be improved overall, they have not added any risk to banks or the economy or consumer.  They know the most.  If there was a concern, it would have been made public already.

What will not help appraisers is appraisers wanting to only provide the Black Model T Ford.  If you think evaluations will lower the quality of appraisals, you have been proven wrong for 30 years.  If you think evaluations will lower appraisal fees, you have been proven wrong for 30 years.  (The continuous decline in appraisal fees is due to many other factors, but I am certain it has nothing to do with evaluations.)  If you think evaluations will add risk to the financial industry, you have been wrong for 30 years.

If you think appraisers like yourself are the best people to provide non-USPAP Evaluations and have been missing out on a ton of revenue for 30 years and that clients would prefer to be using licensed appraiser to do non-USPAP evaluations, YOU ARE RIGHT…..

mic drop

The Mann

(Obviously feel free to share the above…it is out on the web, not like there is any taking it back lol  I will post something new if an error is pointed out or I hear lies about what I said or misinterpretations et al…so check back now and then….and be sure to let the ASB know what you think when they open this up to public comment.)

NCUA RAISED DE MINIMUS TO $1,000,000

July 19, 2019 – See the link below for more info about the NCUA’s decision to one up banks and raise the commercial appraisal threshold from $250,000 to $1,000,000.  Banks recently had their threshold for this loan category raised to $500,000.  The obvious question is will banks be able to get their regulators to follow what the NCUA did….we shall see.

For those who are jumping on my Evaluation bandwagon after 25+ years, this only means more work for you.  If your State does not allow licensed/certified appraisers to perform non-USPAP Evaluations, you need to get them moving on this.  Can you hear me North and South Carolina:)

The Mann

https://www.ncua.gov/newsroom/press-release/2019/appraisal-rule-will-help-boost-economic-activity-job-creation-communities

2 MORE STATES JOIN THE NON-USPAP EVALUATION WORLD!!!

June 6, 2019 – Most importantly, my thanks to all past and present Veterans on this 75th Anniversary of D-Day.  I visited Normandy and Omaha Beach last year.  So serene.  Humbling.  One of my wife’s uncles was in the second wave that landed at Omaha Beach.  He didn’t tell anyone that until a few months before he died in his 90’s.  The Greatest Generation rarely talked about the War.  But, they saved the World.  Literally.  We owe those young men everything.  God Bless them all and our Country.

Per the Appraisal Institute’s Appraiser News Online, 2 more states will allow licensed/certified appraisers to perform non-USPAP Evaluations.  As predicted, this is the year for this to finally take off across our country.

If you are an appraiser in adjacent states, you should start a campaign to get your state to pass a similar law.  Else, you are missing out on a ton of business!  I hope North and South Carolinas wake up and join the movement.  Soon, the entire Southeastern USA will allow appraisers to perform non-USPAP Evaluations.  Following is from the AI:

ALABAMA

Alabama enacted legislation, effective May 29, allowing state-licensed appraisers to perform evaluations for federally regulated financial institutions.
HB 304 states that appraisers “shall not be subject to any provision” of the state’s appraiser licensing law when performing an evaluation that includes a disclaimer stating it is not an appraisal, and the requirements for a licensed real estate appraiser to comply with the Uniform Standards of Professional Appraisal Practice do not apply.
Additionally, the law clarifies that evaluations are “governed by federal law and rules of the federal financial institution regulatory agencies, and not the board.”
LOUISIANA
Louisiana Gov. John Bel Edwards on May 30 signed HB 340, legislation that allows appraisers in the state to provide evaluations for federally insured depository institutions. The law takes effect Aug. 1.
The legislation states that appraisers are not prohibited by the state’s appraiser licensing law from providing evaluations to federally regulated institutions in accordance with “federal law, regulation or the guidance for evaluations established by the federal financial institutions regulatory agency of the depository institution.”

OREGON – WELCOME TO THE NON-USPAP EVALUATION WORLD

May 23, 2019 – Licensed appraisers will finally be allowed to perform non-USPAP Evaluations for financial institutions.  I like how the State makes it clear that Evaluations are not even real estate appraisal activity.  Strong statement.  Below is from the Appraisal Institute:

SB 109 will allow state-licensed and state-certified appraisers to provide evaluations to financial institutions beginning Jan. 1.
The new law clarifies that a person who is licensed or certified as an appraiser is not engaged in real estate appraisal activity when providing an evaluation that includes a required disclaimer and are not required to, but may choose to, comply with the Uniform Standards of Professional Appraisal Practice when providing evaluation services to financial institutions. Providing evaluations is not considered a real estate appraisal activity, and therefore appraisers are not subject to the jurisdiction of the Oregon Appraiser Certification and Licensure Board.
SB 109 also clarifies that financial institutions may utilize evaluations provided by third parties, and such activity does not constitute real estate appraisal activity. Currently, an evaluation is only exempt from the definition of “real estate appraisal activity” if it is prepared by the financial institution.
In testimony supporting the legislation, the Coalition of Oregon Real Estate Appraisers stated, “We believe Oregon’s citizens and financial institutions would be best served and protected by allowing appraisers to perform evaluation services.” COREA concluded, “We are not opposed to qualified non‐appraisers performing evaluations, however, [sic] we strongly feel that it is in the best interest of Oregonians that those most qualified to perform evaluations (appraisers) not be prohibited from doing so.”

APPLYING USPAP FAIRLY IN A REVIEW by Ted Whitmer

May 1, 2019 – This thought provoking article by Mr. Whitmer first appeared in WorkingRE magazine earlier this year.  Thanks to Mr. Whitmer for permission to publish it on my web site.

I encourage you to be open minded.  Read it once.  Mull it over.  Read it again and again.  I am thru one reading.  Quite eye-opening.  Definitely interesting information.  I have not formed an opinion, yet.  The one thing Ted does is to ‘prove’ his point with specific quotes.  I do the same when debating or explaining an issue.  I like proof to close a case.  And where there is not proof I like to say hey this is a gray area o choose your side and support it the best you can.

I hope you enjoy this article.  I would be interested in your thoughts.  I am sure Mr. Whitmer would be, too.  Our contact info is readily available on the web.  Feel free to email us.

Applying USPAP Fairly in a Review

By Ted Whitmer, CRE, CCIM, MAI, AI-GRS

The reviewer must correctly employ recognized review methods and techniques. This is not possible if the reviewer cannot distinguish how to apply the Uniform Standards of Professional Appraisal Practice (USPAP) to a multitude of different scenarios. This article sets forth common sense review methods and techniques that should be used by reviewers, as well as educating appraisers whose work may be the subject of a review, either by a client, opposing counsel, or a state board.

An appraisal review is defined in USPAP as “the act or process of developing and communicating an opinion about the quality of another appraiser’s work that was performed as part of an appraisal or appraisal review assignment.” An appraiser is one who is expected to perform valuation services competently and in a manner that is independent, impartial and objective. An appraiser who is in fact objective must learn to apply the standards fairly in the review process.

Where USPAP does not set forth acceptable methods and techniques, it is the intent of this article to do so for appraisal reviews. This will not cover every aspect of appraisal reviews, but sets forth guidelines on how to fairly develop and communicate an opinion about the quality of another appraiser’s work.

Interpretation v. Application
The only entity that is charged with interpretation of USPAP is the Appraisal Standards Board (ASB) of the Appraisal Foundation (TAF). Every other person or entity who uses USPAP applies the standards and does not interpret the standards.

The following is from the Forward of the current USPAP:
The Appraisal Standards Board (ASB) of The Appraisal Foundation develops, interprets, and amends the Uniform Standards of Professional Appraisal Practice (USPAP) on behalf of appraisers and users of appraisal services.

All other persons and entities should apply the standards and not attempt to interpret the standards. In fact, the ASB issues Advisory Opinions (AO) and Frequently Asked Questions (FAQ) as guidance. Even AOs and FAQs are not interpretations, nor are they a part of USPAP. They illustrate the applicability of Standards in specific situations and offer advice from the ASB for the resolution of specific appraisal issues and problems.

It stands to reason that if guidance put out by the ASB is not interpretation, then a reviewer should avoid trying to interpret USPAP and merely apply the standards to a review. Instead of interpreting USPAP, if the standard can be applied in more than one way, then the standard should be applied in the best light of the appraiser and not against the appraiser. Keep this in mind as you read through this article.

One Size Does Not Fit All
Assume the same appraisal and appraisal report developed and written by the same appraiser is reviewed in the following settings: mortgage lending, board enforcement, civil court proceedings, criminal action, experience credits, to secure a job, and to become approved on an appraiser roster (list). This same report should not be reviewed in the same manner. USPAP is the same, as are all the rules contained in USPAP. However, the proof of noncompliance with USPAP should be under different standards of proof. The application of USPAP rules should change depending upon a multitude of factors.

Review Continuum
A continuum is defined as “a coherent whole characterized as a collection, sequence, or progression of values or elements varying by minute degrees” (Merriam Webster Dictionary).

Potential Harm to Appraiser
An appraisal review is an activity that can result in harm to the reputation of the appraiser. Needless to say, reputation is one of the greatest assets an appraiser has in the marketplace. Good reputation must be maintained by an appraiser. Actionable defamation is the publishing of a false fact that damages the reputation of another. Therefore, there are legal consequences to damaging the reputation by publishing false facts. However, the reviewer should go beyond just trying to avoid publishing false facts. Any allegation that the appraiser is in noncompliance with USPAP should never be based solely on the opinion of the reviewer, but should be supported with facts or other objective evidence.

The following are examples of needed facts or evidence to support USPAP noncompliance.

Scope of Work

USPAP states: “the scope of work is acceptable when it meets or exceeds the expectations of parties who are regularly intended users for similar assignments, and what an appraiser’s peers’ actions would be in performing the same or a similar assignment.” A reviewer should not conclude an improper scope of work by the appraiser unless there is a showing that the work did not (1) meet the expectations of the parties who are regularly intended users, and (2) what an appraiser’s peers’ actions would be in performing the same or similar work. It should be noted that a “peer” is on an assignment-specific basis. A reviewer for a state enforcement action should not claim to be a “peer” unless they can establish they are, in fact, a peer. Additionally, even if they are a “peer,” there needs to be evidence that other “peers” would not have found the scope of work acceptable.

Making Client Requirements a USPAP Issue
Many reviewers are critical of appraisers for not detailing client requirements in the appraisal report. This is from Residential Appraisal Review and USPAP Compliance, Student Manual, published by the Appraisal Foundation, 2016: “Reviewers are responsible, as necessary, to address client and regulatory guidelines in addition to USPAP compliance (emphasis added). Some of the entities who have such additional guidelines are Fannie Mae, Freddie Mac, FHA/HUD, and VA, as well as Interagency Group Members.”

Note that the Appraisal Foundation in this publication states that regulatory guidelines are in addition to USPAP compliance. They do not say it is a part of USPAP compliance.

Reviewers often, and incorrectly, make client requirements (FNMA, FHA, etc.) equal to USPAP. The Scope of Work Rule is a development rule, not a reporting rule. The following are the assignment elements set forth in the rule:
• Client and any other intended users,
• Intended use of the appraiser’s opinions and conclusions,
• Type and definition of value,
• Effective date of the appraiser’s opinions and conclusions,
• Subject of the assignment and its relevant characteristics, and
• Assignment conditions.

This list does not include client requirements. The definition of Scope of Work from USPAP narrowly applies to the extent of the research and analysis, not the checking of boxes and inclusion of report elements. USPAP defines it as:
“the type and extent of research and analyses in an appraisal or appraisal review assignment.”

Misleading Report
“Misleading” is set forth in Conduct (Ethics) and in Standard 2. The ASB is clear that the target of the report is the client and any other intended users. As with any document, any other nonintended users, even knowledgeable reviewers, can be misled or may not understand portions of appraisal reports.

“Misleading Conduct” should only be alleged by proving intent of the appraiser to mislead and showing that the client and/or intended users were misled by the report. Standard 2 “misleading” should not be tested against anyone but the intended users. Not even knowledgeable appraisers should conclude that an appraiser was in noncompliance with Standard 2 (misleading) unless the reviewer shows the intended user was misled.

Some reviewers conclude that they are knowledgeable about appraisal theory, standards and ethics and even a particular market or property type, therefore, if they are misled by something in an appraisal report, any intended user would be misled. The reviewer’s conclusion is “intended users may not be informed enough to know they were misled.” This is an incorrect application of USPAP and ignores that the intended user may have thousands of pages of documents concerning the subject, have various studies and considerable research into the market and discussions with those knowledgeable about the property.

Failure to Correctly Employ Recognized Methods & Techniques
A reviewer should cite failure of the appraiser to employ recognized methods and techniques only if they can cite sources showing that what was done is not acceptable. In addition, the reviewer should show that there are no other alternative texts, articles or schools of thought that don’t agree with what they can produce in a text or article. Finally, any text or course that states it is “for educational purposes only” should not be used to impeach the appraiser related to the application of methods or techniques employed by that appraiser.

Wrong Comparables
There must to be a strong showing, not that there were better comparables, but that the appraiser failed to use reasonable comparables. An attorney and a doctor are given considerable leeway in judgment calls on applying trial strategy (attorney) or treatment (doctor). It stands to reason that since an “appraisal” is an opinion of value and the appraiser must exercise judgment, the judgment should only be questioned with a strong showing that there was not a reasonable basis for choosing certain comparables. In addition, the reviewer should always produce “better” comparables before concluding the appraiser chose poor or wrong comparables.

Unreasonable Adjustments
The reviewer should have to show better adjustments, with support, to communicate an opinion that the original appraiser has unreasonable adjustments. As with the choice of comparables, the reviewer should show that the judgment of the appraiser was so unreasonable that other reasonable appraisers would not have applied the adjustments. As previously stated, the appraiser should be given wide latitude to exercise judgment.

Omission of Necessary Information
The reviewer should not only have to show that omission of information concerning the subject or comparables resulted in a non-credible analysis, they should have to show (1) that it is not just a reporting error, where the appraiser did in fact consider the information but failed to report it, and (2) it wasn’t built into the comparables or adjustments and therefore did not cause non-credible results.

Use of the Report to Allege Development Error
One cannot tell from an omission in a report what the appraiser did or did not do in the development of an appraisal. A reviewer should be careful to separate a development error from a possible reporting error. For example, a report may have no analysis of the history of the subject, the highest and best use, nor land value. However, the appraiser may have done all the analysis and failed to report that analysis. A reviewer should not allege a development error when the report is absent a discussion of analysis.

Date of Appraisal Report
I commonly see reviewers apply USPAP rules equally to ten-year-old appraisals and contemporaneous appraisals. The appraiser should be given “the benefit of the doubt” on older appraisals. If an appraiser conducts 200 appraisals per year, then an appraisal conducted five years earlier could have been 1,000 appraisals in the past. To judge that appraisal as though it is contemporaneous makes no sense. The appraiser often cannot remember what was done the previous month, much less answer questions about a five-year-old appraisal. Furthermore, there are a number of factors that cannot be assessed later such as the market, knowledge of the intended user for the property appraised, the factors in reviews contemporaneous at the time of the appraisal and many other factors set forth in this article.

Workfile & Access to Appraiser
This is related to the previous factor; the date of the appraisal report. The appraiser, appraisal and report should not be held to the same application of USPAP rules if the workfile is no longer in existence or is not available to the reviewer. Additionally, if the reviewer cannot interview the appraiser, then the “benefit of the doubt” should go to the appraisal and appraiser without additional evidence to the contrary.

Complexity of the Problem
Almost every appraisal that proceeds through board enforcement involves strange properties or markets. We almost never see an appraisal of a residence in the middle of a subdivision be a problem appraisal for board enforcement.

The following are cases that I was involved in that were subject to Board action:
• A log house in a rural area
• A power plant
• A unique small apartment property
• A subdivision
• A house that was in a gated community that was constructed like an office building
• A house with considerable excess land
• A house in a transitioning area

These are examples of properties that created a problem for enforcement and the appraiser. These properties should not have USPAP applied in the same manner as the house in the middle of the subdivision. However, in all of the above cases, testimony was that the appraiser “did not correctly employ recognized methods and techniques,” the appraiser was not “competent” and the appraiser produced a “misleading report.” These general and broad-based USPAP provisions should not be a fallback to criticism of the appraiser.

Data Availability & Number of Approaches Needed
One appraiser tells his clients that he is really good when he has five comparables that are exactly like his subject, that recently sold, and all for the same amount of money. The truth is, this does not a “good” appraiser make and the lack of data does not make the appraiser incompetent. Lack of data generally means the subject and/or market are unique. The application of the standards should slide depending upon the amount of data that is available and comparable at the time of the appraisal. As a general rule, the more approaches that are used, the better the data in the market. The omission of any of the approaches may mean there is less data available.

Premises of the Appraisal
When there are many premises supplied by attorneys in litigation, there is a greater chance that there will be drastically different values between two appraisers. A Texas case had testimony from one appraiser that a property was worth close to $25 million. The other appraiser, for the identical legal description, testified the property was worth $300,000. The difference between the two were the legal instructions given and the input from other experts.

An extraordinary assumption may be used in an assignment only if:
• It is required to properly develop credible opinions and conclusions,
• The appraiser has a reasonable basis for the extraordinary assumption,
• Use of the extraordinary assumption results in a credible analysis, and
• The appraiser complies with the disclosure requirements set forth in USPAP for extraordinary assumptions.

There is a duty to not just take instructions, but to ensure the use of an extraordinary assumption results in credible analysis. If the appraiser has done this, a reviewer should review the appraisal and report without making their own determination of the side they would be on.

Intended Use of Appraisal
There are five overarching requirements of an appraisal report. 1. It must be consistent with the intended use.
2. It must contain sufficient information for the intended users to understand the report properly.
3. It must not be misleading.
4. It must contain sufficient information to show the appraiser complied with Standard 1 in development of the appraisal.
5. It must, at a minimum, contain the requirements of SR 2-2(a).

If the appraisal assignment is being used for litigation purposes, then the content should be minimal and not detailed. The reason is that the opposing side is going to use the report for discovery and ultimately will use the report to discredit the testimony and the appraiser witness. The opposing side in a court case is almost never the intended user. The intended user is the attorney, their client and possibly the court. Not only is the other side not the intended user but (1) they will use their own appraiser’s appraisal and report, and (2) not only will they not use your report, they will make every attempt to discredit the report, the appraisal and you as an appraiser. This certainly is not an intended use.

Furthermore, in most every case, the appraisal report is not admissible into evidence but the testimony of the appraiser is. When the intended use is for mortgage loan purposes, the application of USPAP is on a sliding scale (continuum). The higher the loan-tovalue ratio, the more complex the property, the higher the risk, the more likely the appraiser would have to expand the scope of the appraisal and be more detailed with the report. If the report is for HUD or FNMA, it is more likely that minimal content is necessary. This is because (1) the intended users generally have significant information about the property and transaction, (2) the appraisal report is on a standardized form, and (3) the participants, including reviewers, are familiar with the forms and property type.

More is required in a report for unsophisticated users of appraisal reports and services and less is required for those who frequently receive reports. A reviewer should apply USPAP differently if the appraisal and report are developed and written for users who daily or frequently read reports and interact with appraisers versus users who infrequently see appraisal reports.

Factual v. Opinion-Based Noncompliance
Not all USPAP rules are created equal. Allegations of noncompliance with USPAP can be either “factual” or “opinion” based. USPAP sets forth reporting requirements in twelve rules. Seven of the 12 start with “state,” four begin with “summarize” and one rule says to “include” (the certification). However, the rules are set forth in compound sentences and there are requirements in the comments that are not in bold rules. All this creates confusion to both the appraiser, who is to apply USPAP as a minimum standard set, and to the users of appraisal services.

If one of the following is missing from an appraisal report, it is factually noncompliant. There are some rules that are conditional. For example, if the value definition is “market value” and there is a reference to exposure time, then a statement as to the exposure time is necessary. If the value definition does not include exposure time, then there is no USPAP requirement for stating the exposure time. The same goes for many other provisions, such as competency. One must look at the conditional precedents of USPAP before applying a rule to an appraiser.

For example, the following 15 items are required to be stated in an appraisal report: Identity of client, identity of intended users, intended use of report, real property interest appraised, substantiation of real property interest by title descriptions or other documents, type of value, definition of value, cite the source of value, if in terms of cash or other non-market financing & summarize terms if not cash, exposure time if developed in compliance with SR 1-2(c), effective date of the appraisal, effective date of the report, use of the real estate existing as of the date of value, use of the real estate reflected in the appraisal, and report option.

The following are required to be “summarized” in an appraisal report: information to identify the real estate involved in the appraisal, physical property characteristics relevant to the assignment, legal property characteristics relevant to the assignment, economic characteristics relevant to the assignment, scope of work used to develop the appraisal (research & analysis used and not used), extent of significant professional assistance, information analyzed, appraisal methods & techniques employed, reasoning that supports the analysis, opinions & conclusions, provide sufficient info to understand the rationale for opinions & conclusions, must contain sufficient info to understand the reconciliation of data and approaches per SR 1-6, results of analyzing subject sales, etc. per SR 1-5, if info for SR 1-5 is unattainable steps taken to obtain info is required.

Another example of this is found in SR 1-4. The rule says that when the sales comparison (cost or income) approach is necessary, then the rules following apply. This means that if the certain approach is not necessary, then the rules don’t apply. The condition precedent to the application of the rules is that the approach is necessary for credible results.

There is one requirement to “explain”: the exclusion of any approaches to value. There is also potentially one requirement to “describe.” This is in the Competency Rule: the steps taken for an appraiser to become competent. There is one requirement to “include” a signed certification that has ten parts. Signed certification in accordance with Standard 2-3:

I certify to the best of my knowledge and belief:
1. Statement of facts
2. Limited by…
3. No interest
4. Prior services
5. No bias
6. No predetermined
7. Compensation
8. Per USPAP
9. Inspection
10. Significant assistance

The following must be “sufficient,” and according to the comment in SR 2-2(a) (viii), the detail depends upon “significance.” Other parts of Standard 1 are arguably in the state and summary requirements of Standard 2.
1. Aware of, understand & correctly employ recognized methods and techniques.
2. Not commit a substantial error of omission or commission.
3. Did not render appraisal services in a careless or negligent manner.
4. Any personal property, trade fixtures or intangibles that are not real property but are included in the appraisal.
5. Any known easements, restrictions, encumbrances, leases, reservations, covenants, etc.
6. Whether the subject property is a fractional interest, physical segment, or partial holding.
7. Determine scope of work necessary for credible results.
8. Effect on use and value of existing land use regulations.
9. Reasonably probable modifications of land use.
10. Economic supply & demand.
11. Physical adaptability of the real estate.
12. Market area trends.
13. If applicable, the assemblage and refrain from valuing the whole by addition.
14. Anticipated public or private improvements.
15. When applicable, personal property, trade fixtures or intangibles.

If the appraisal report excludes any of the above and the condition for inclusion is met, then it is factually not in compliance with USPAP. However, if the requirements above are in the report, then a reviewer could say they are not summarized enough. This is not fact-based but opinion-based. The reviewer could say that the description of the subject is not adequate. It is clear that a property and a market description could take hundreds of pages to write and could include many details of the subject and the market. A reviewer can always find an aspect of the subject, market or data and say the appraisal and appraisal report is deficient and does not comply with USPAP.

Similarly, allegations that the appraisal did not correctly employ recognized appraisal methods and techniques, that the report is misleading or the scope is insufficient are opinion-based issues of noncompliance. A reviewer should err on the side of the appraiser, unless there is little potential harm to the appraiser for such an allegation. For example, if one is reviewing an appraisal for mortgage loan purposes, the reviewer should have greater leeway to be critical of the application of the opinion-based standards versus if one is reviewing for court testimony, civil suits, criminal cases or board enforcement. Those settings should require evidence and not mere conjecture or opinion of the reviewer.

The reviewer should never make an allegation of noncompliance by the appraiser for not employing recognized methods and techniques without citing references to the proper methods and techniques. This should not be done with any text or course materials that warn the reader that the contents “are for educational purposes only.”

The Supreme Court in Alaska in the Wold case said there should not be allegations of violations of USPAP that the appraiser used the wrong comparables or adjustments without showing the correct comparables or adjustments. Even with a showing of a different set of comparables or adjustments, one must keep in mind that an “appraisal” is by legal definition “an opinion of value.” If selection of comparables and adjustments made to the comparables was definitive, then an appraisal is not an opinion of value and could be performed by an algorithm in a computer program. Rather than an immutable mathematical algorithm, as Dr. Charles Gilliland, PhD says, an appraisal is an interpretive art.

A client’s intended use, principals’ motivations, number of competitors and a myriad of other circumstances can impact observed market transactions. All of these factors drive modern appraisal applications. These complicating factors guarantee that no single hard-and-fast formula can reliably produce a credible estimate of market value. An appraiser is called upon to skillfully transform market information into an estimate of value for a subject property. That estimate must reflect the realities of the economic and legal environment of that subject property. The results rely on a set of assumptions and interpretations designed to capture those realities.

Conclusion
The Preamble to USPAP states…”The purpose of the Uniform Standards of Professional Appraisal Practice (USPAP) is to promote and maintain a high level of public trust in appraisal practice by establishing requirements for appraisers.” The frequent practice of applying USPAP the same way to all reviews does not “promote and maintain a high level of public trust in appraisal practice.” This article did not provide an inclusive list of all factors that should be considered in the application of USPAP rules. However, it does provide the basics for a fairer application of USPAP rules.

Click here for Guidelines for Proper Application of USPAP.

About the Author

Mr. Ted Whitmer, JD, MBA is an appraiser, attorney, instructor, asset manager and consultant. Mr. Whitmer holds the MAI & AI-GRS designations from the Appraisal Institute. He is CRE & CCIM member of the National Association of Realtors, a licensed broker and Certified General appraiser.

2019 – THE YEAR EVALUATIONS BREAK THROUGH

April 19, 2019 – It has been exactly 25 years that I have been campaigning for non-USPAP Evaluations to be performed by licensed/certified appraisers.  Most of the time it has been a one-man campaign.  Thankfully, times have changed and appraisers have come around to the need for Evaluations.

It looks like this year will see many States pass the requisite law to allow its most qualified valuers to finally perform non-USPAP Evaluations.  If your State isn’t mentioned below, I encourage you to take action.  For almost 30 years, non-appraisers have been doing all the Evaluation work in your State.   With Evaluation volume about 4x-6x that of Appraisal volume think how much business you have missed out on:(

The following are from the Appraisal Institute:

Utah Allows Appraisers to Perform Evaluations for Federally Regulated Lenders
Utah Gov. Gary Herbert on March 26 signed SB 140, legislation that allows state-licensed and state-certified appraisers to perform evaluations for federally regulated financial institutions.
Under the new law, appraisers who provide evaluations in compliance with the Interagency Appraisal and Evaluation Guidelines are exempt from compliance with the Uniform Standards of Professional Appraisal Practice. Appraisers will sign the evaluations, certifying that they comply with the IAEG. However, they must still abide by the basic elements of USPAP’s Ethics, Competency, Scope of Work and Recordkeeping rules. This concept has been advanced by several Appraisal Institute chapters in recent years.
The legislation takes effect May 14.
• Evaluations
Alabama (HB 304) Louisiana (SB 42) and Oregon (SB 109) are considering bills that will amend appraiser licensing laws so that appraisers can perform for financial institutions evaluations that do not comply with the Uniform Standards of Professional Appraisal Practice when not required by federal law. If the laws pass in these states, they will join Florida, Georgia, Illinois, Indiana, Tennessee, Utah, and Virginia in allowing appraisers to perform these services.

 

New AEI dataset: Housing Market Indicators in the 60 largest US metropolitan areas

April 9, 2019 – In my opinion, the AEI provides the most neutral analysis of the housing market.  They likely have the most data.  Unlike NAR, there is no bias.  Below is their major announcement today.  I hope you find their reports useful.

Just to be transparent – I am not a member of AEI (not even sure if such exists).  I do not contribute to them.  I have attended some of their meetings on housing.

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New AEI dataset analyzes the 60 largest US metropolitan areas

Housing markets are inherently local, making them notoriously difficult to analyze due to the lack of reliable data at the local level. A new dataset from the AEI Housing Center, the first in a series of quarterly reports, aims to fill this void by analyzing housing market data for the 60 largest US metropolitan areas, as well as for the nation as a whole. The current dataset looks at housing data from 2018:Q4.

AEI Housing Center Codirector Edward Pinto and Senior Research Analyst Tobias Peter explain “Our goal is to provide the public, media, and decision makers with accurate and reliable metrics to assess the state of their local housing market in near-real time. A well-informed market place and its participants will aid in promoting sustainable homeownership.”

Among the national Housing Market Indicators for 2018:Q4:

  • Rate of house price appreciation (HPA): 3.9%
  • Mortgage risk index: 11.1%
  • Share of buyers of entry level homes: 55%
  • Average sale price for entry level homes: $197,000
  • Share of new construction sales (compared to all home sales): 11.2%

The Housing Market Indicators for the 60 largest US metropolitan areas, along with all associated data, are available on an interactive website here.

This was made possible by AEI’s new merged property and mortgage financing national dataset, which consists of over 34 million home purchase transactions.

The data are updated quarterly. The next release of Housing Market Indicators, which will analyze housing data for 2019:Q1, is scheduled for May.

Codirector, AEI Center on Housing Markets and Finance
240-423-2848

MARKET VALUE ‘AS IS’ MUST CONSIDER EXISTING LEASES

February 21, 2019 – Every once in awhile the same question arises from several people in different parts of the country.  I wonder if people attended the same seminar and were told the same (erroneous) information.  Or just plain coincidence.

The topic du jour is bank/credit union clients asking appraisers to ignore existing subject leases and appraise Fee Simple Estate only.  There are two main scenarios to deal with – one where such a request is not acceptable and one where it is.

Scenario #1 – The subject has one or more arm’s-length leases in place that are not all month-to-month or say expire within a month.  I just use one month as technically the appraisal will be done by then and the tenants could be removed in that time period (assuming such is legal).  In this case, Market Value ‘As Is’ MUST be of the Leased Fee Interest.  The subject must be appraised as it legally and physically stands today.  If the bank/credit union would also like to know the Fee Simple Estate value, then this can be provided IN ADDITION TO Market Value ‘As Is’ of the Leased Fee Interest.  I would call this additional value Hypothetical Value of Fee Simple Estate.  A Hypothetical Condition is needed as this value assumes the existing leases are not in place.  Now, if the subject is leased to a single tenant and that tenant is purchasing the property…we go to…

Scenario #2 – The subject is leased to a single tenant who is purchasing the property.  Obviously, when the purchase occurs the lease goes away.  Or at least for us appraisers, it is ignored because now it is no longer arm’s-length.  The bank/credit union’s request for Fee Simple Estate only is now acceptable.  With a bit of a twist though….Market Value ‘As Is’ would still be of Leased Fee Interest.  However, this value is not needed.  Why?  Because the loan is not being made until the property is purchased.  Therefore, the appraiser provides a Prospective Value as of say a month or two in the future (whenever a closing is projected to occur).  An Extraordinary Assumption is needed to say that we assume the purchase will occur and the lease will be extinguished in the stated timeframe.  What about the requisite Market Value ‘As Is’ that FIRREA requires?  Well, on the day the property is purchased and the loan is closed, the appraiser’s Prospective Value is now Market Value ‘As Is.’  And now FIRREA is satisfied and all is good in Appraisal Land:)

((As an aside, Scenario #2 is useful when a zoning change is in process.  Until it occurs, Market Value ‘As Is’ must consider the subject as currently zoned.  I encourage banks not to make the loan until the zoning change occurs.  This way an appraiser can provide a Prospective Value ‘Upon Zoning Change’ with a future date and not have to deal with Market Value ‘As Is.’  But, if the loan is being made today, then two difference scenarios must be valued.  Once again, the value difference might not be that much.))

There are likely some other less common scenarios that arise.  But, the above two seem to take care of the vast majority of transactions.

I will quickly mention one scenario that provides an example of why Market Value and Market Value ‘As Is’ are not always the same.

The subject is leased to a single tenant with say 3 or 6 months left on the lease.  The owner or a buyer is going to occupy the property once the lease expires and the tenant has moved out.

In non-bank/cu appraisals, Market Value could likely just ignore the existing lease.  We could argue that market participants don’t care about the next 3-6 months of the tenant being in place.  They know they will occupy the property very soon.  This is ok for Market Value.

However, for a bank appraisal under FIRREA, this is not acceptable.  The lease is in place and Market Value ‘As Is’ is of Leased Fee Interest and the lease must be part of the value.  Obviously, if the rental rate happens to be at market, then there is no difference in value between the Leased Fee Interest today and the hypothetical Fee Simple Estate today.  If contract rent is above or below market, then there is a difference in these two values.  Admittedly, it is likely to be a small amount.  But, it MUST be included in the Market Value ‘As Is’ conclusion.  In this case, Market Value and Market Value ‘As Is’ differ.  And this is one of several examples where USPAP and FIRREA differ.

As with FF&E, please do not pull the ol’ ‘this is absorbed in rounding and thus is not added or deducted’ routine.  Make the addition or deduction to get to Market Value ‘As Is’ and move on.

Please contact me if you have any questions.  Any other scenarios worth me addressing.  et al.  Thanks for taking the time to read my blog:)

The Mann

 

Re-Posted – Apartment Appliances are FF&E!!!!!!!! Not Real Property!!!!!!

February 2019 – This item was originally posted in 2015.  Four years later I still hear that an appraiser or reviewer wants to say that kitchen and laundry appliances are real property.  NOT!  Geez folks, get over this already.  Appliances are appliances are equipment and not real property.  This is basic knowledge.

I will add one suggestion (from my wife when she was a reviewer) for those dealing with this issue.  My wife would tell the appraiser that all they had to do is provide rent comparables of units with no appliances and rent comparables of units with appliances and if the rents were the same, then the FF&E does not contribute to value.  That simple and it would be market evidence.

In our combined 50+ years of reviewing appraisals we have not seen this analysis done.  I have seen many appraisals where a rent adjustment IS made for comps with only washer/dryer hookups versus ones with washer/dryer units.  That has been an adjustment greater than $0 in 100% of the cases I have seen.  Definitive proof that FF&E has a positive value in apartments.

I have not seen any rent comparables that lacked kitchen appliances, so no evidence there that I know of.  In foreign countries this exists.  In some markets tenants actually move their refrigerator and such from apartment to apartment:)

When I started appraising in 1986 in South Florida, my first apartment complex appraisal I separated out FF&E.  It wasn’t a requirement (that I can recall).  It was just obvious.  Common sense.

I do want to commend those appraisers that I review that always value the FF&E separately.  Some go so far as to provide a value even if there is only one or two apartment units in a property (e.g. retail first floor, 2 apartments on 2nd floor).  Might be only $400 in FF&E, but FIRREA doesn’t care about the amount.  Just that it is excluded from Market Value ‘As Is.’

Also, please do not pull the ol’ ‘this is absorbed in rounding and thus is not added or deducted’ routine.  Make the addition or deduction to get to Market Value ‘As Is’ and move on.

Please contact me if you have any questions.  Any other topics for me to blog about.  et al.  Thanks for taking the time to read my blog:)

The original post follows.

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It is 2015 and I continue to encounter appraisers (albeit fewer and fewer thankfully!) who do not value the FF&E in apartment properties.   Since 1990, FIRREA has required this.  This issue should have been settled 25+ years ago.

The most common response I get when I ask an appraiser to separately value the FF&E is ‘In our market these items transfer with the real estate.’  To which a whole list of questions and replies come to mind:

Who cares how the FF&E is transferred – it is still FF&E!

FF&E in hotels transfers with the real estate – how does that differ from an apartment complex?  The same goes for many other property types.

Having been frustrated by this issue for 23+ years as a reviewer, a few years ago I took the opportunity to have this item added to the 14th Edition of The Appraisal of Real Estate.  There is a list of property types with FF&E and that list now includes apartments:)

For bank/credit union appraisals, appraisers need to realize that it is Federal Law that requires LTV (Loan-To-Value) ratios be calculated on the Market Value As Is of REAL ESTATE ONLY.  Examiners have been focusing on this very item for the past 5 years.  It is important that fee appraisers help their clients comply with Federal Law.  Provide a value for the FF&E and be done with it.  And do NOT include the amount in the Market Value ‘As Is’ figure as again it is supposed to be Real Estate Only.

I will agree that in some cases this amount is minimal.  But, Federal Law still requires a separate value.  There are many cases where this amount can be in the millions of dollars – e.g. those high end condo projects that did not sell out before the bubble burst and have been rented as apartments ever since.

Lastly, as one instructor told a class I was in – If I can drop it on my foot, it is FF&E:)

The Mann