This is a reprint from the McKissock Learning Blog and can be found here.
When it comes to appraisal violations, certain minor violations are very common. In this article, I outline several examples of less serious breaches of development Standard 1 and reporting Standard 2 — and a few other types of violations, too. I have compiled these based on many years of personal experience in appraisal regulation, as well as feedback I have received from other states’ enforcement agencies. Once you’re aware of these common mishaps, you should be able to avoid them more easily.
1. Use of inappropriate sales
One of the big problems is use of inappropriate sales in a sales comparison approach. I review some of these in a lot more depth in my CE course: That’s a Violation.
2. Use of unsupported site value
Another common violation is use of unsupported site value in the cost approach. That’s something that a lot of boards have cited as a prevalent deficiency or shortcoming in appraisal reports.
3. Failure to analyze sales history
Failure to analyze the three-year sales history of the subject property is also common. This is surprising to me because it is so easy for someone else to check if you omit or don’t analyze the sales history. A reviewer or an underwriter can check that from their desk in about 3 seconds. So if you fail to do it, chances are someone is going to find out about it.
4. Failure to analyze the purchase agreement
Next on my list of common violations is the failure to analyze the current pending purchase agreement on the subject property. This sometimes goes along with failure to analyze three-year prior sales history.
5. Failure to include number and title with signature
Failure to include your certification number or license number and title with your signature is not a USPAP violation, as you well know. But it would be a violation of state law or regulation, depending on who set forth the requirement that you have to include your certification or license number and title with your signature.
6. Failure to disclose appraisal assistance
Failure to disclose significant real property appraisal assistance is another common violation. This is one of those violations that can be a violation of USPAP and a violation of state law or regulation.
States often see this when a trainee or assistant applies to become a licensed or certified appraiser, and they submit their appraisal log to be reviewed by the state agency. The state agency will pick out random entries from the log and require the applicant to send in copies of those appraisal reports so they can be looked at. Believe it or not, sometimes trainees/applicants will send in the appraisal reports, and the trainee is not mentioned in the reports as having providing significant real property appraisal assistance.
This is a really unfortunate circumstance because in many cases: 1) The trainee doesn’t get experience credit for those assignments when he or she was not properly acknowledged; 2) It often results in a disciplinary case being opened up against the supervisor for failure to disclose real property appraisal assistance.
7. Mischaracterization of the subject property
Another (unfortunately) common violation is mischaracterization or misrepresentation of the subject property. My CE course contains a few examples where a mixed-use property or a commercial property is appraised as a residential property in order to obtain a residential mortgage; this can sometimes be considered the improper use and/or disclosure of a hypothetical condition.
8. Appraisal report does not meet USPAP requirements
Finally, the last common violation is when the appraisal report content does not meet USPAP requirements. Standards Rule 2-2 (a) sets forth the content requirements for an Appraisal Report. Standards Rule 2-2 (b) sets forth the requirements for a Restricted Appraisal Report. These requirements are minimums, but sometimes appraisers do not meet these minimum requirements, and that becomes a USPAP violation.
Not all of the items on this list are USPAP violations, but they are violations nonetheless. For further discussion of all types and degrees of appraisal violations, including more severe breaches of the Ethics Rule and Competency Rule, don’t miss my course.
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