I often hear from real estate professionals that a sale has fallen through because the lender-ordered appraisal did not support the contract price. In many cases, the appraiser assigned to the file has traveled from outside our market area and may not meet the requirements of “geographical competency” as required by the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie Mae. Lack of competence in any market typically leads to erroneous and unreliable value estimates.
The Competency Rule of USPAP is very clear on this issue:
Prior to accepting an assignment or entering into an agreement to perform any assignment, an appraiser must properly identify the problem to be addressed and have the knowledge and experience to complete the assignment competently; or alternatively, must:
1. disclose the lack of knowledge and/or experience to the client before accepting the assignment;
2. take all steps necessary or appropriate to complete the assignment competently; and
3. describe the lack of knowledge and/or experience and the steps taken to complete the assignment competently in the report.
Fannie Mae guidelines state that Lenders must use appraisers that:
Have the requisite knowledge required to perform a professional quality appraisal for the specific geographic location and particular property type; and have the requisite knowledge about, and access to, the necessary and appropriate data sources for the area in which the appraisal assignment is located.
Appraisers that are not familiar with specific real estate markets may not have adequate information available to perform a reliable appraisal. Although the Uniform Standards of Professional Appraisal Practice (USPAP) allows an appraiser that does not have the appropriate knowledge and experience to accept an appraisal assignment by providing procedures with which the appraiser can complete the assignment, Fannie Mae does not allow the USPAP flexibility.
To insure the lender receives an appraisal report that complies with USPAP and Fannie Mae guidelines, I suggest that when a real estate professional is contacted by an appraiser to schedule an inspection of the property, first determine that the appraiser has local knowledge and experience and has access to the MLS data systems for the market area in which the subject property is located. If the answers to these questions are unsatisfactory, do not schedule the inspection, have the buyer instruct their lender to send a “geographically competent” appraiser. Better perhaps to “nip it in the bud” rather than find yourself appealing the appraisal results at the eleventh hour.
Cindy Carroll, SRA
State-Certified Residential Real Estate Appraiser RD615
2805 Horseshoe Drive S., Ste 1
Naples, FL 34104-6161