My children loved The Lorax by Dr. Seuss, an environmentally friendly book in which a creature called the Lorax spoke “for the trees.” While real estate appraisers are not subject to the environmental difficulties that our flora and fauna face, I have seen an increase in the number of attacks on real estate appraisers over the past few years, including reports to state licensing authorities seeking censure or removal of appraisers’ licenses. The complainers often have their own economic interest in the transaction, including sellers when the appraisal price is too low, buyers when the appraisal price is too high or lenders after a default.
I cannot cite statistics, but I have been surprised at the nature of the challenges and their source.
- Complaints by real estate brokers or sellers who are unhappy with appraised values below the selling price they were able to negotiate with a buyer. Very often, the appraisal will scuttle the deal or result in a renegotiation of the sale price.
- Complaints by lenders unhappy with the content of an appraisal, often prompting a review by another appraiser many years after the original with the advantage of 20/20 hindsight subsequent to a significant and unforeseen change in the market.
- I was particularly troubled by a licensing complaint where the lender posed a question to the appraisal management company that retained the appraiser, and received no answer. The appraiser would have been able to answer the question easily, but it was never forwarded to him by the appraisal management company. While we were able to resolve that issue with the state without too much difficulty, it was certainly an unnerving experience for the innocent appraiser.
- I recently saw three complaints filed by a commercial appraisal company that reviews the original appraisal, happily ensconced in an office hundreds of miles from where the appraisal took place by an appraiser unfamiliar with the local area where the appraisal was performed. Based on this review, and rather than first providing the appraiser with an opportunity to respond, a licensing complaint was made that threatened the livelihood of the individual appraiser.
The motive behind these attacks is a mystery.
I’m not the first to say that real estate appraisal is an art rather than a science. True, all appraisers are required to follow the strict guidelines of the Uniform Standards of Professional Appraisal Practice (USPAP) and to perform his or her work in a professional and unbiased manner. However, there is always an element of opinion in an appraisal based on the visual inspection of the subject; familiarity with the neighborhood of the subject and comparables, including schools, parks, and other local positive and negative factors that affect marketability; knowledge of the broad geographic area of the subject; and other trends, factors and practices within the area where the appraiser lives and works.
I have tremendous respect for my real estate appraiser clients, who have substantial and significant knowledge of their area that they use to provide what, at the end of the day, is their opinion of the market value of a property. They are subject to criticism by third parties who are often far from neutral reviewers. I am often filled with righteous indignation when I see some of the complaints filed with state agencies against appraiser clients. Any challenge to an appraisal must be responded to quickly and forcefully with the hope that the state review process sees through any bias or enmity of the complainer.