Appraiser Talkback Blog

By David Brauner, Editor

Editor’s Note: A large lender is giving appraisers an ultimatum, saying in effect, violate USPAP or be placed on a “do not use” list. John Dingeman is one such appraiser who finds himself between that rock and that hard place. But he understands his rights and is fighting back.

Talk about being between a rock and a hard place.

The new normal for too many appraisers these days is being banished to a “do not use” list by a lender, without any opportunity for rebuttal or even knowing why (See Suspension Merry-Go-Round pg. 26). Now here’s a new twist: at least one large lender is giving appraisers the chance to rebut a questionable review- the problem is that doing so may violate the Uniform Standards of Professional Appraisal Practice (USPAP).

John Dingeman, a Certified Appraiser in Ariz., recently received a letter from Chase, citing “possible USPAP violations” and demanding a response within 21 days or else. The or else is exile to Chase’s Ineligible Appraiser List. Appraisers who have faced a similar fate say that orders from appraiser management companies (AMCs) dry up almost overnight as a result. Not only do orders stop that are associated with that particular lender but all orders cease. Here’s why: AMCs can’t take the chance that a loan, any loan, might end up at that lender someday- so they simply turn off the spigot and skip to the next appraiser on the call list; it makes sense given the consolidation taking place leaving fewer (big box) lenders controlling a larger share of the business.

Fighting Back
Faced with violating USPAP or the loss of business, Dingeman chose a third option: fighting back. He responded to Chase with chapter and verse of various state and federal laws protecting appraiser independence. “Per USPAP’s Confidentiality section of the ETHICS RULE I am not permitted to discuss the appraisal or the results with anyone other than my Client or Intended User, and Chase is neither,” Dingeman said. “Even if the Client is no longer in business (Per USPAP FAQ 69) the appraiser-client confidentiality is not terminated and the appraiser is still required to comply with the requirements set forth, regardless of the status of the client.”

Because, in his words, he was threatened and intimidated with “placement on the Chase Ineligible Appraiser List” if he failed to respond within 21 days, Dingeman says he was compelled to send copies of the letter and his response to various state and federal regulatory agencies for action, as well as to the FBI and the Chase Appraisal Compliance Officer. “This type of intimidation placed upon appraisers is inexcusable and should not be tolerated. Chase should be accountable for knowing what USPAP requires,” Dingeman says.

Other problems cited by Dingeman are that he was not furnished with a copy of the appraisal, so he has no idea whether the bank has a true and complete copy. He also was not provided any information on the reviewer so can not be certain about their qualifications or geographic competency.

It’s good to know one’s rights, Dingeman says. In his rebuttal letter to Chase, Dingeman writes, “Please be advised that Arizona Revised Statute 32-3603 specifically states that all real estate appraisals and appraisal reviews performed in this state on a property in this state shall be performed only by individuals licensed or certified in this state. Please note that if the review appraiser involved is not licensed or certified in the State of Arizona as a real estate appraiser they are in violation of state law and subject to disciplinary proceedings from the Arizona Board of Appraisal.”

Richard Hagar, SRA, who advised Dingeman on the Chase issue, says, “Let’s be clear about this, Chase is asking the appraiser to violate USPAP and talk to them about an appraisal where they were not the client. If the appraiser won’t violate USPAP and talk to them, Chase says the appraiser is violating USPAP and will be blacklisted. Talk about twisting USPAP. How do you fight back? Know more than they do and fight back with the law, rules and regulations.”

Hagar, the presenter for the webinar How to Limit Liability, Maintain Independence, and Fight Influence, says it is critical for appraisers to know and understand their rights. “John and I talked extensively about his problem including the ethics and privacy issues,” said Hagar. “He is correct. There is a difference between a ‘client’ and ‘intended users.’ From my point of view, Chase was an intended user but not the client. While they may have obtained a copy of an appraisal, from someone, it does not make them the client. Since Chase did not ‘communicate’ with the appraiser at the time the assignment was created, nor identified as the client when the report was created, Chase does not appear to be the client. Issues like these are exactly why we created the Appraiser Independence webinars.”

Dingeman wonders what’s next. “The question now is what are the nine agencies that I sent a copy of this letter and my response to going to do about it,” said Dingeman. “They have a responsibility to the public and should be knocking on Chase’s door to find out just exactly how many of these letters have been mailed out. If these large banks are allowed to continue to threaten and intimidate appraisers and send every report to a regulatory board for complaint, as they threatened to, there will be no appraisers left.”

According to Dingeman, the saddest part is that banks do have a legal and fair remedy: order a retrospective appraisal with an effective date the same as the original appraisal. “This would engage the appraiser directly and make the bank the client,” he said.

***In Working RE’s upcoming Webinar Series, Limit Liability, Maintain Independence, and Fight Influence, nationally renowned instructor and expert Richard Hagar, SRA will detail how appraisers can protect themselves and their independence in the face of AMC requests, questions, and threats of blacklisting aimed at influencing and distorting your report. Learn to protect your independence as an appraiser with Hagar’s Three Part Series.

About the Author
David Brauner is Editor of Working RE magazine and Senior Broker at OREP.org, a leading provider of E&O Insurance for appraisers, inspectors and other real estate professionals in 49 states. He has covered the appraisal profession for over 20 years. He can be contacted at dbrauner@orep.org or (888) 347-5273. Calif. Insurance Lic. #0C89873.

By T.J. McCarthy

Editor’s Note: Author T.J. McCarthy, a member of the Illinois Appraisal Board, sees a growing problem regarding lenders and AMCs filing complaints against appraisers. He offers this advice: be very careful in post-closing phone calls from AMC agents.

You receive a call from a lender or an AMC who wants to talk to you about an appraisal assignment you recently completed for them. The call usually comes from the quality control department at the post closing stage of the loan. They start questioning you on your line item adjustments. All the comparables are on smaller lots then the subject property and they feel your adjustment for lot sizes seems a bit high. You want to be a good little appraiser and not upset your client so you agree that perhaps they could have been a little lower.

While they have you on the phone, they also ask you if you think your time adjustments are a little aggressive. Again, not wanting to upset a good client, you tell them that maybe you were a little aggressive (even though you really don’t think you were…you’re just trying to appease them), and you state that you will try to find another public data source in the future that is more conservative. Your client thanks you and even tells you to have a nice day. You hang up the phone thinking you handled that rather well.

Fast Forward
To continue our hypothetical situation: a month later you receive a letter from the Department of Professional Regulation – Appraisal Division or the equivalent in your state. Your great client filed a complaint against you stating that you openly admitted to them in a phone conversation that you falsely inflated the value of your appraisal by using inappropriate site adjustments. You also stated that you often use non-traditional data sources to intentionally report market trends that are lower than normal to arrive at higher value conclusions. Yikes!

This is really happening to appraisers. And since the Dodd-Frank Act, more and more lenders and AMCs are sending in complaints on appraisers. I serve on the Illinois Appraisal Board which is involved in all appraiser complaints. In past years we used to say how we had never received a complaint from an AMC, which was true. We would receive complaints from lenders directly but never from their AMC. Now we receive complaints regularly from AMCs.

There is no question that the appraiser is getting slammed here for trying to be a “stand up” guy, attempting to clear up gray areas in their report. They’re engaging in what they perceive to be an honest dialogue with the quality control department (long after the loan has been funded). Unfortunately, at the post-closing stage, the lender isn’t looking for you to have a change of heart on your final opinion of value. There are no changes that should be made but now you have given the quality control department ammo for a state complaint.

No Changes
In addition to being careful about you say and don’t say, you should never change parts of your appraisal because you think it will make your client happy. They don’t drive the process. Perhaps you don’t even realize that you are giving someone a reason to file a complaint against you when you agree to the slightest alteration or allow the opinion of others to dictate how you will complete your assignment. In the meantime, they are on the other end of the phone writing down everything you say as they prepare to turn you and your report into the state.

I am not saying that all lenders and AMCs support this type of practice. I certainly am not telling you to ignore errors and omissions on your reports when a client discovers them and asks for corrections. Nor am I telling you to be unethical. But by trying to be accommodating, you could be creating a problem for yourself where one never existed.

I am a member of the Illinois Appraisal Board and I am involved in handling these complaints; I can assure you that the state of Illinois is receiving them. I can’t tell you which lenders or AMCs are filing these complaints.

It’s getting pretty scary out there folks. We don’t have to make it harder on ourselves by being overly accommodating every time an angry client calls. We are appraisers not pacifiers!

About the Author
TJ McCarthy, SRA, IFA is a member of the Illinois Appraisal Board. The story, reprinted from an Illinois Coalition of Appraisal Professionals (ICAP) alert, was found on AppraisalScoop.

Limit Liability, Maintain Independence, and Fight Influence
In Working RE’s upcoming Webinar Series, Limit Liability, Maintain Independence, and Fight Influence, nationally renowned instructor and expert Richard Hagar, SRA will detail how appraisers can protect themselves and their independence in the face of AMC requests, questions, and unethical attempts at influencing and distorting your report. Hagar will help appraisers understand the new regulations that require lenders and AMCs to report USPAP violations, and how appraisers are exposed to the risk of penalties, complaints, and fines if they aren’t careful and aware of their rights as appraisers. Learn to protect your independence as an appraiser with Hagar’s Three Part Series.

By Isaac Peck, Assistant Editor

Editor’s Note: Hundreds, possibly thousands of appraisers are left with unpaid invoices as a result of AppraiserLoft shutting its doors; now one major lender is stepping up and paying up.

The argument is unsettled to what degree lenders are responsible for the agents they hire to administrate valuation services- appraisal management companies (AMCs). The case of the AMC AppraiserLoft kicked off the debate when it closed its doors leaving an estimated three million dollars or more in unpaid appraiser fees.

In the meantime, one major lender, Metlife Bank, is saying it will make good on the bad debt created when its agent, AppraiserLoft, shut its doors.

In the wake of the shutdown, Working RE reported that many appraisers believe lenders are responsible under federal law for bad debt left by their agents. (see story in Working RE: AMC Bad Debt-Lenders Responsible?)

A follow-up story reported some appraisers actively pursuing the banks that hired AppraiserLoft in an effort to recover their lost fees.

Now, a major lender, MetLife Bank, is stepping up to pay appraisers for unpaid work completed for AppraiserLoft. Specifically, any appraiser who completed work for AppraiserLoft on behalf of MetLife and was left with an unpaid invoice can contact MetLife Bank for the fees that they earned but were not paid for.

Sue Potteiger, Chief Appraiser at MetLife Bank, told Working RE, “We’re doing this because we made the decision to work with AppraiserLoft. We did our due diligence on this vendor and engaged them to provide appraisal reports to mortgage brokers that we directed to them.”

According to Potteiger, “It’s not the appraiser’s fault that AppraiserLoft didn’t pay them. If an appraiser did the work and we made a decision based on the appraisal provided - the appraiser should be paid. We did pay AppraiserLoft all monies we were billed for. We are paying the appraisers the money they would have been paid. These same appraisers are vendors that we might be working directly with on our fee panel. It’s important to us to maintain an open and respectful relationship with our appraisers,” Potteiger said.

Potteiger explained that MetLife’s stance is a product of “a pretty straight forward philosophy - treat people with respect and keep your word.”

If you are an appraiser who did work for AppraiserLoft on behalf of MetLife, you can contact MetLife Bank to recover your unpaid fees through March 30, 2012. Provide them with a copy of your engagement letter, an invoice or record of your payment relationship, and any other documentation you have that shows you did work on behalf of MetLife, such as copies of the appraisal reports, emails between you and the broker, and any other communication that shows the client was MetLife. Send inquiries to mlhl_appraiser@metlife.com.

How other lenders handle this issue, only time will tell.

By Dustin Harris

Appraisers who are truly ‘mobile’ are using laser measurers, tablet PCs or smartphones, and software to upload reports remotely to the office to be more competitive- to save time and money.

As I travel the country mentoring various appraisal business owners, I am intrigued by the fact that so many appraisers are still using a tape measure and a clipboard to gather onsite data. When I show them the mobile technology that is available to us, they are typically hesitant to embrace it. Here are the “big three” justifications I hear for not moving forward and some food for thought about streamlining your business to be more competitive.

Too Expensive
Many say the “gadgets” are just too darn expensive. Is gas for your vehicle too expensive? Well, yes it is but we need it to do our work. From MLS subscription fees to form-filling software, we invest heavily in many aspects of our businesses that are necessary. Investing in technology should be seen as a cost of doing business required to stay competitive, rather than a choice that you can’t afford.

When I first started using a laser measurer, I had the thing paid for in the first three months of ownership. My first Disto cost me $650. Sound expensive? It was but it cut my inspection time by an average of five minutes. No big deal you say? With the volume I was doing at the time, that meant one more appraisal per month that I could fit into my schedule. After overhead, 90 days was all it took to return my investment, with the time savings it provided. My most recent toy, an iPAD II, was paid for in even less time by speeding up the time it takes me to do reports. It saves me twice the time the laser did and cost me about half as much. Though there was a short transition period- I was used to using a smartphone with about 20 percent of the screen size as compared to the tablet, I quickly caught on. I find the iPad saves me twice the time but with a similar price tag to the laser. The fact is that the purpose of technology is to make our lives easier and more efficient. Efficiency in business equals increased productivity and higher profit. Not moving forward results in no progress.

Don’t Save Time
There is an argument to be made that inputting all the data on a tablet is actually more time consuming. I will concede that is true when discussing the time spent onsite. Where mobile tools really shine is not at the inspection but when you get back to the office. Most appraisers are inspecting every home twice- once onsite and a second time on their desktop. When you use mobile tools, you input all of the data at the inspection and there is no need to reenter it back at the office. This includes the front page of the URAR, the sketch and even inputting the pictures!

Without mobile tools, I spend an average of 20 minutes at each inspection (when inspecting a vacant house and have no pressure to talk to the home owner). I then spend another 20 minutes at the office redrawing the sketch, inputting photos and entering the data from the field into the subject sections of the major form. With these helpful gadgets, my time at the inspection may increase to 25 minutes but there is no re-entry at the office. In other words, I save an average of 15 minutes per appraisal using mobile tools versus doing it the old way. Not a big enough time savings for you? If you average one or two appraisals per day, you are saving up to 30 minutes a day. How many more appraisals can you do per week by switching to mobile technology? You know you want an iPAD anyway and I just solved the question: “how do I convince my spouse?” You can thank me later.

Old Dog New Tricks
I’ll admit that when I attend appraiser conferences most of the heads are either grey or balding. Like I can talk! But, as a happy client I was mentoring recently told me, “You can teach old appraisers new tricks.” Here’s the deal- most appraisers make the common mistake of not giving new technology enough of a fair shake. I sent my first laser measurer back to the distributor after only two days of use complaining that it was just too complicated and it was easier for me to use my wheel. They sent it back to me with a note that read, “Please try our product for a full two weeks. If you are not convinced after that period of time, send it back for a full-refund.” I did and I will never go back to a 100-foot tape or measuring wheel again. With a little instruction and a lot of patience, you too can learn new things that will dramatically enhance your effectiveness and your business. How hard is it? If my four year-old can teach himself to play Angry Birds, you can surely learn how to sketch a house on a tablet. You must remember that the first few days of using almost any new technology will slow down your productivity until you get through the learning curve. But once you get the hang of it, watch out!

Warm Body Element
Even with all of this great technology, there is still one aspect that is often overlooked by most appraisers. It is not an absolutely necessary ingredient to mobile success but its absence will often be the aspect that will break the resolve of a new mobile appraiser. Here is a direct quote from one of my new coaching clients, “I get what you are telling me about the benefits of using my iPad to assist me but I am not finding it as beneficial as I had hoped. Sure, it probably saves me time overall but I find I am doing so much back at the office to pull it out of the mobile format and prepare it for comparables that it does not really seem worth it.” This viewpoint is actually quite common. What’s missing is what I refer to as “the warm body” element. The frustration, as expressed above, always comes from one of two places: either they are a one-person appraisal office or they are appraisers who are under-utilizing their office assistants. Either one will lead to frustration and inefficiency with the effectiveness of mobile tools.

Here is the dirty little secret: the real time-saver with mobile tools is what happens between the inspection and the appraiser arriving back at the office. The mobile appraisal software programs that I am familiar with all include the ability to send your reports back to the office remotely from the field. At my appraisal office, that is where the magic happens. While I travel from the inspection to the office, my staff is busily tweaking and strategically preparing the report for my technical expertise. By the time I sit down at my desktop PC, the report is ready for comp input and adjustments. This is where the power of mobile tools shines brightest!

Coolness Factor
There is another less obvious but very important benefit to showing up to an appointment with all these fancy-pants gadgets….you just look cool! Now, I say this tongue-in-cheek of course but there is a positive aspect to this: an appraiser with a laser measurer and a computer simply looks more professional to a homeowner than one with a tape and a piece of graph paper. It says something about your professionalism. The fact that it keeps you in the home a few more minutes is not a bad thing either. How many times have you had a borrower complain about how little time you spent inspecting the property? As if the amount of time you spend walking through a home somehow affects the value. Be prepared for the following question, though, once you begin using mobile tools. It is sure to come. “So, do you love your iPAD too?” Now, that is cool.

Final Thoughts
Let me share one or two more items that may be helpful to those of you who may already be using mobile technology. First of all, by inputting all of my data onsite, I never leave the property having forgotten an important component. My pictures are always there. If I forget to take the front photo (hey, it happens), I know before I leave. If the west side of the home does not match the east, I do not have to wait till I get all the way back to the office to find that out. On a mobile device, you know in real time as you measure.

For those who have an assistant back at the office, the ability to upload reports from the field is priceless. Once I am done with a report and have inserted the comp photos, I send the report directly to my office through the magic of the Internet. My assistant gets that report in a matter of minutes and begins working on tidying it up for me as I am driving back to the office. By the time I hit my desk, the pictures are all labeled, the sketch is perfected, the subject information has been transferred from page one to the grid and I am ready to begin making adjustments. You cannot put a price on that!

I have been using mobile tools in the field for almost 15 years now. Some are surprised at that statement as most appraisers did not even know that these technologies existed in the late 1990s. They did and I increased my productivity and therefore my income by hundreds of thousands of dollars in these years just by employing them. As I look back on the antiquated instruments I used to use, they seem like relics akin to eight-track tape machines and rotary-dial phones. Isn’t it time you look into mobile appraising for yourself?

Now, go create some value!

**Working RE Webinar Series: Dustin is the lead presenter of Working RE’s upcoming webinar: Mobile Appraising: Saving Both Time and Money. In this webinar, Dustin will share the technology and techniques that you need to ramp up your volume, while simultaneously increasing the quality of your reports. This webinar will allow any participant to walk away knowing why mobile tools are essential for the competitive appraiser going into the future and how to actually use them!

About the Author
Dustin Harris is a multi-business owner, but he has found most of his success as a self-employed, residential real estate appraiser. He has been appraising for nearly two decades. He is the owner and President of Appraisal Precision and Consulting Group, Inc., and is a popular author, speaker and consultant. He owns and operates The Appraiser Coach (www.theappraisercoach.com) where he personally advises and mentors other appraisers helping them to also run successful appraisal companies and increase their net worth. He is also the Founder and President of Your Appraisal Office (www.yourappraisaloffice.com) which implements some of the systems he has developed to help lower costs and free up time for real estate business owners. He and his wife reside in Idaho with their four children.

By David Brauner, Editor

Dear Mortgage Field Professionals-

The last edition of our newsletter set off a bit of a firestorm nationwide as abuses by large vendor management companies begin to surface. In response, Working RE/OREP.org established a blog page as an information exchange for contractors. You may leave your comments here.

Two interesting resources sent to us are a law firm who is involved in a class action suit against a large vendor management company for treating Independent Contractors like employees. You can visit their website here: http://www.kpalawyers.com/index.html

The other is a link to all the state Attorney Generals where you can submit an inquiry. It is recommended that you submit an inquiry in your own state and in the state where the vendor management company is located: http://www.consumerfraudreporting.org/stateattorneygenerallist.php

Finally, here’s an email sent to us with the name of the large vendor management company removed. It lays out what tactics to look for so you can avoid a lot of prolonged pain when dealing with at least one large vendor management company. If you’d like to connect and exchange information with others who have had similar experiences, you can do so on our blog page: Mortgage Field Chatter.

Dear David:

The article that you wrote about the restraint of trade and asset management contractor abuse is spot on but just the tip of the iceberg. I suspect you may know this, I sensed quite a bit of restraint in your article. You see, our company has very fresh wounds from our dealings with (ABC Company). We are currently out thousands of dollars after working for them from July through October. We are in the process of filing liens on homes, contacting attorneys and politicians etc.. at the moment. It is a struggle, trying to go after these thugs but still try to make a living at the same time. I am wondering if anyone you have been in contact with has gotten any further in initiating a class action lawsuit. If so.. we definitely have LOTS of documentation and experiences to offer the case.. and if not, then we may just be interested in networking with others in finding an attorney to take this on.

The tactics that this company uses are downright unbelievable like CHARGING you MORE in reassignment fees then what you would have gotten to do a job if you dare refuse the order or can’t abide by their unrealistic due dates, popping orders on your worklist that are already late and with no notice then charging you for re-assignment if you can’t get to them immediately that day, demanding that you do free work and then charging you the next contractor’s fee if you refuse, telling you that YOU are responsible to pay for their field QA reviewer’s fee if ANYTHING is found wrong at a property, and telling the QA person they will not be paid if they do not find anything wrong.

This results in contractors being denied payment and charged for things like newspapers left on front steps or dead flies on a windowsill seen by the QA person days or weeks after a service is performed. It’s a big shell game basically; very little money is paid out of their pocket to the contractors. Instead, they are shuffling earned fees from one contractor to pay the next one. They purposely set up a contractor for failure, by many different means - from outrageously cumbersome updating and billing procedures (12 hours online answering hundreds of questions and uploading 300+ photos to clear a $75 job that only took three hours to do in the field), to changing the instructions and terms of work with no notice, to downright lying and refusing to pay even when plentiful evidence is presented to them that work was completed to their instruction.

We even have email proof from a broker that she was threatened and forced to submit a review of our work on a property before the work was completed or she would face financial penalty herself. When she entered it as incomplete - we were refused payment for the $800 work even though it WAS finished by the time the report hit the system, charged $100 for her 0-$30 review fee and were charged more than $900 to “pay for someone else to do the job” even though we provided over 300 photos showing that the work is already complete.

This means that on top of not paying for the work done to the home, they “extracted” another $1,000 from our fees earned on other jobs. That money did not go to any other contractor - because there was no work left to be done. It went straight to their pockets. They are doing this to thousands of contractors all over the country. We have other instances in which they extracted money on our earned fees to (supposedly) pay someone else for work that we refused to do for free. (Example: we completed a trash-out, securing and exterior handrail installation on a home and billed them only for those items. Weeks went by and the broker asked for a handrail to be installed inside the home that was not on the initial work order. We were demanded to return to the property and do it for free. Since we did not charge them for this on the first billing, we asked to be paid to complete it and refused to do it for free. They canceled the order, then charged us to pay someone else to go out and do it).

It sounds unbelievable but it is true. And just one of many, many similar events. It takes about three months to really start to realize what they are doing. Once you start working for them it takes 45 days to get your first check then they pay weekly from there, about 30 days out. It wasn’t until the second 30 day cycle that the “chargebacks” started coming but then you try to be reasonable and give them the shadow of the doubt and submit your “proofs” and rebuttals to the chargebacks and try to figure out how to work with them to avoid the chargebacks in the first place. By the time you are 90 days in you start to realize that your proofs don’t matter and you will NEVER know exactly what can avoid chargebacks because there are no set or uniform procedures in place- they change the rules on a whim or just plain take what they want when they want and you really have no say in the matter.

It is at this point that you start developing an exit strategy to stop the bleeding. You can’t just quit them cold turkey because at this point they owe you thousands and will issue chargebacks on any work that you decline which will erode away anything they might still pay you. You have to sneak away, slowly and when they aren’t looking, just like any other abusive relationship I have ever heard of.

Please share our contact information with anyone else that wishes to network on this issue, and especially if there is anyone that you are aware of that has made progress with pursuing legal actions.

Thanks!!

-Name left off for fear of reprisal.

For the best package of price and coverage for you E&O and General Liability needs, visit or call OREP.org (888) 347-5273.

About the Author
David Brauner is Editor of Working RE magazine and Senior Broker at OREP.org, a leading provider of E&O Insurance for mortgage field inspectors, appraisers, home inspectors and other real estate professionals in 49 states. He has covered the appraisal profession for over 16 years. He can be contacted at dbrauner@orep.org or (888) 347-5273. Calif. Insurance Lic. #0C89873.