On
Vacation?
August 2, 2001
Are
you and I the only ones not on vacation? If the markets are slow, why is
everyone busy? What really is happening out there? Is anyone capable of
knowing? Is it really true that we only know what is happening until after
it happens? These and many
other questions have no good answers. I'll talk about some things which
can be answered.
Privacy.
By now, we have all received various notices and disclosures from vendors
and clients regarding changes in consumer privacy. The Federal Trade
Commission has published its final privacy regulations (the "Final
Rule"), as required by the Gramm-Leach-Bliley ("GLB") Act,
regarding notice requirements and restrictions on disclosure of nonpublic
personal information about individuals to third parties.
Nonpublic personal information includes personally identifiable
financial information such as credit card data, salary and bank account
information, and any information collected through an Internet
"cookie".
Any
information derived from public sources such as property tax records,
deeds, easements or other encumbrances that are recorded on land records
or from previous comparable sales is not covered by the Final Rule.
However, what is covered by the Act may have an effect on the flow of
previously unimpeded data regarding property-specific information. This
development bears extremely careful monitoring on its effect on real
estate data.
Appraisal
Consulting. The Standards Board has created a "new" category,
Appraisal Consulting. This is defined as the "act of process of
developing an analysis, recommendation, or opinion to solve a problem,
where an opinion of value is a component of the analysis leading the
assignment results." Further, it is noted that an "appraisal
consulting assignment involves an opinion of value but does not have an
appraisal or an appraisal review as its primary purpose."
Additionally of note, "real property appraisal consulting assignments
encompass a wide variety of problems to be solved." However, the
purpose of an assignment under Standards 4 & 5 is always to develop
without advocacy, an analysis, recommendation, or opinion where at least
one opinion of value is a component of the analysis leading to the
assignment results.
In
some assignments, the opinion of value may originate from a source other
than the consulting appraiser. In other assignments, the consulting
appraiser may have to develop the opinion of value as a step in the
analysis leading to the assignment results.
The
change is intended to differentiate from those consulting assignments
where appraisers are not providing a value but nonetheless using their
appraisal expertise to arrive at a solution to a client's problem and
those assignments where a value conclusion is necessary in order to solve
the client's problem. While the change appears to clear up gray area where
appraisal and consulting overlap, it seems to raise other issues in terms
of what level of due diligence, care, and disclosure an appraiser acting
as a consultant can be held? The
final discussion on this issue has not yet taken place.
Review
Appraising. The recent changes in the review standard are still being
absorbed. However, it's not clear that the industry and many practitioners
have digested earlier changes.
A
brief overview may be helpful. "Appraisal review is the act or
process of developing and communicating an opinion about the quality of
all or part of a completed work or service performed by another appraiser
in a real property or personal property appraisal assignment."
However,
there are instances where a client may require reviewers to "develop
and report" their own value opinions within an appraisal review
assignment. When this occurs, the assignment becomes a two-stage
assignment: i.e., an appraisal review plus a value opinion by the
reviewer.
Some
of the biggest problems seem to exist where a./ clients hire reviewers for
a "cheap" second appraisal; b/ reviewers change or are asked to
change values without providing sufficient documented support for changes;
c/ reviews contain unjustified criticisms of appraisers work due mostly to
value disagreements; d/ reviews are misused to discredit appraisals and
appraisers; and, e/ reviewers fail to meet competency requirements.
Board
of Registration Issues. The Board has been busy dealing with various
changes in internal workings and with regulatory and market changes. As
this market digests several years of frenetic activity and as appraisal
users look over appraisal work performed, particularly on properties that
become "problems," several trends are likely to emerge. The
first is the occurrence of appraisals which were done to meet sales prices
or preordained values: these analyses will stick out like sore thumbs. The
second is appraisals done by appraisers who lack the competency or the
license category to have done this type of work. The third will be work
done by appraisers honestly where all the information was not conveyed.
Review appraising will be a major issue over the next few years:
appraisers who have been unfairly reviewed will react against incompetent,
unethical reviews and reviewers.
Now
I can join everyone else who is on vacation. Or maybe they're just calling
me on their cell phone. I would never admit that I was writing articles on
the laptop on the deck overlooking the beach. Would I?
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