ILLINOIS DEPARTMENT OF FINANCIAL & PROFESSIONAL REGULATION
Volume 3, Issue 7
July 2011
IllinoisAppraiser
Top 10 Worst Things to Say
INSIDE THIS ISSUE:
Dog Days of CE
3
Comps Within 90 Days
5
Reliers Too?
8
Every month the Illinois Real Estate Appraisal Administration and Disci‐
plinary Board participates in settle‐
ment conferences. These are opportunities for cases in‐
volving licensees to be discussed in an informal setting without the presence of an administrative law judge or a court reporter. It’s just you (and maybe your own legal counsel), one or more board members, and a department at‐
torney. This article is a peek inside the mindset of your board by way of the worst things that have been uttered at settle‐
ment conferences in the past. 10. I wasn’t paid enough to do all of that. The fact that you accepted a chump‐change fee to ap‐
praise that 6,000 square foot cornfield castle on 15 acres, and screwed it up badly, isn’t an excuse to screw it up at all. The bar is already set at the mini‐
mum through USPAP. If you can’t satisfy the mini‐
mum then you need to adjust your compensation at the front end; not dial back your efforts at the back end. 9. That’s my secretary’s fault. The blame game never works and only serves to rankle board members. Secre‐
taries, spouses, trainees, the weather, http://www.idfpr.com/dpr/re/Appraisal.asp
the man‐in‐the‐moon, are all routinely thrown under the bus at conferences. If you want to see who is to blame for your appearance at a settlement con‐
ference; check the mirror. 8. The MLS photographer uploaded the wrong picture. You may be correct about that but you’re the one who took the lazy way out by not driving the sale. Puff all you want about how you really and truly did drive the comps. The fact is, you’ve already proven that you didn’t. That’s why you’re here. 7. I didn’t know that they changed the law. Aside from USPAP, state law is the very next thing you need to understand. Guidelines, assign‐
ment conditions, and under‐
writer stips all pale in impor‐
tance to USPAP and state law. Clueless is no excuse. 6. It was in my scope of work. Incompetence, short‐cuts, lazy habits, and boilerplating are not conditions a client hands you as a shield. You’re hired to make informed judgments based upon your knowl‐
edge and experience. Still, time and time again we get licensees who be‐
lieve that bad appraisals are ordered that way. (Continued on page 2)
1
ILLINOIS DEPARTMENT OF FINANCIAL & PROFESSIONAL REGULATION
IllinoisAppraiser
Top 10 Worst Things to Say
(Continued from page 1)
Pat Quinn, Governor
Brent E. Adams,
Secretary
Jay Stewart
Division Director
Division of
Professional Regulation
Illinois Department of
Financial and
Professional Regulation
Division of
Professional Regulation
100 West Randolph Street
9th Floor
Appraisal Unit
Chicago, Illinois 60601
Phone: 312/793-6608
Fax: 312/793-8720
Appraisal Board
David L. DuBois, Chairman
Jim Blaydes, Vice-Chair
Robert Gorman
LeeAnn Moss
T.J. McCarthy
Lee Lansford
Gary Harvey
Thomas Gooding
Maureen Sweeney
Retired Hon. Marsha D. Hayes
Brian Weaver, Coordinator
Editor of IllinoisAppraiser
Luisa Rivera, Admin Assistant
Mary Bates, Board Liaison
5. I went with what the assessor had. That’s fine if what the assessor has re‐
ported seems credible. Believe it or not, some taxing districts have lazy and feckless staff...just like every other pro‐
fession. The assessor’s GLA and lot size is not the default setting for any and all reports. Also, assessors can be a source for property classifications but never for zoning. 4. I can’t afford to do a good report. Appraising isn’t a cheap profession. Aside from keeping the lights on there are some inescapable ex‐
penses. Computers, E&O policies, licens‐
ing, automobiles, edu‐
cation, portal charges, software, MLS fees, memberships, plat maps, phones, etc. Don’t cry poor as a reason for doing substandard work. The truth is, you can’t afford to do any‐
thing less than your best. 3. So the report has mistakes, the value’s right on target. Using the broken clock is right, twice a day defense isn’t helpful. If your report is a hot mess from the borrower’s name down through the location map, you’re going to have a problem in a conference. Everyone makes mistakes but at some point the accumulation of mistakes will add up to a discipline… even if the blind squirrel somehow found a nut. http://www.idfpr.com/dpr/re/Appraisal.asp
2. USPAP says I can do that. If the last version of USPAP you actu‐
ally read was the 1998 edition...and that was back in 2004...don’t start spouting standards in front of the board. Trust me, you’re not in a settle‐
ment conference over the board’s mis‐
understanding of the applicable stan‐
dards or law. 1. I don’t think that I did anything wrong. At the end of a settle‐
ment conference you may be asked to re‐
view the events and procedures that led you before the depart‐
ment attorney and a board member. If, at the end of a conference you wouldn’t change a thing that landed you here, then everyone’s time has been wasted. This last remark could spell the difference between be‐
ing offered some education or paying a hefty fine...or worse. Be smart. Don’t turn an educational opportunity into a serious punitive action against your license just to make some feeble point. Settlement conferences are not for the squeamish. There’s a lot at stake. The worst thing you can do is to say some‐
thing that you’ll want to take back, but can’t. Come prepared. Be punctual. Dress appropriately. Failure to get through this process is a launch pad to a formal hearing where everything is on the line. 2
ILLINOIS DEPARTMENT OF FINANCIAL & PROFESSIONAL REGULATION
IllinoisAppraiser
Dog Days of CE
July of an odd year typically kicks off the rush to CE for Illinois appraisers. While this CE cycle runs from October 1, 2009 through September 30, 2011, most appraisers put it off until the last three months. IllinoisAppraiser
Provided as a service to licensed and
registered Illinois appraisal professionals as well as Illinois course providers
and users of appraisals. This publication promotes a greater understanding
of USPAP, the Act, and the Administrative Rules of the State of Illinois.
Articles found in this publication may
not be reprinted or reproduced in any
other media without specific reference
to this publication and the State of
Illinois.
Fully 75% of all of the courses taken in a cycle are taken from July 1 through September 30. With that in mind, here are some im‐
portant things to keep in mind. On‐line Tools ‐ There’s a fair chance that if you’re reading this newsletter, you’ve down‐
loaded it from our website (unless somebody forwarded you a copy). You need to bookmark our website and check it out every month. No other state grinds out a monthly newsletter. The notice to the left ex‐
plains why we do it. Take advantage of the cutting‐edge topics that give you a unique perspective into how the de‐
partment thinks and how your board approaches a variety of increasingly complex appraisal issues. While everyone knows that September 30th is the end of the renewal cycle, its helpful to know how much time is left. http://www.idfpr.com/dpr/re/Appraisal.asp
Our CE countdown clock is the first thing you’ll see on our home page. All of our course providers are listed in a handy‐dandy table. If they have a web address, just rest your cursor over the web address and you’ll be linked to the provider’s website. How cool is that? We lost a third of our providers on December 31, 2010 (their renewal date). The economy hit them just as hard as it hit the profession. However, I was able to secure a few new providers who have stepped in to fill some of that void. Approved courses are updated as they come in and posted on our website at least twice per month. Your board has approved scads of new courses since the last renewal. CE Look‐up is a great tool to check to see how many hours you’ve accumu‐
lated in a cycle. Type in your license number and you’ll see exactly what courses were banked. Just remember, providers experience lag times when uploading their rosters to the state sys‐
tem. Our system isn’t built for real time uploads. This is why holding on to your certificates is vital. (Continued on page 4)
3
ILLINOIS DEPARTMENT OF FINANCIAL & PROFESSIONAL REGULATION
IllinoisAppraiser
Dog Days of CE
(Continued from page 3)
Formal Hearings
Chicago—10AM
Tentative Schedule
IDFPR v Houlihan
August 15, 2011
IDFPR v Keeley
August 19, 2011
When all else fails, consult the 2011 CE Fact Sheet that’s also on‐line. On‐line versus Classroom ‐ In Illinois, you’re permitted to take all of your CE on‐line. Even the National USPAP Update. IDFPR has no position on the delivery mechanism. Both are acceptable and have inherent strengths and weak‐
nesses. On‐line offerings are fully accessible to anyone with a computer and an inter‐
net connection. The material is consis‐
tent and you can take the course at any time that you’re free. Classroom offerings feature live in‐
structors and provide the students with the ability to interact and network with others as well as to learn from each other. Whether you want to take some or all of your courses on‐line or in a classroom doesn’t matter. What matters is that you get it done on time. CE Audit ‐ We are federally mandated to begin the audit within 60 days of the end of a renewal cycle. That puts us smack in the middle of December. Happy holidays! http://www.idfpr.com/dpr/re/Appraisal.asp
Licensing begins the unpopular but necessary task of mailing deficiency letters during November and Decem‐
ber. I spend the next month or two sorting through angry, panicky, or excuse‐
laden e‐mails and phone calls. After we’ve sorted through all of the “my dog ate my CE” stories, prosecution arranges a cattle‐call date whereby ap‐
praisers who may be short on CE can plead their case to on‐hand board mem‐
bers before they (or instead of) appear before an administrative law judge. The board and prosecution will inter‐
act with anywhere between 80‐100 ap‐
praisers. Being short on CE is primarily an issue if you lie to the department about hav‐
ing completed it all. Prosecution’s advice is don’t lie. No‐
body wants to be here on cattle‐call day, least of all...you. 4
ILLINOIS DEPARTMENT OF FINANCIAL & PROFESSIONAL REGULATION
IllinoisAppraiser
Comps Within 90 Days by Lee Lansford
to the appraiser as a requirement of the If you are an appraiser who assignment. works for an AMC or lender, you may be familiar with a For the appraiser who accepts an as‐
client request that your ap‐
signment containing such a request, praisal include one or more understanding the distinction between comps that closed within 90 guideline and requirement is important. days of the effective date of your appraisal. What’s the difference? For the appraiser who, no For a lengthier and more detailed re‐
matter what, adheres to this request, there are certain challenges sponse to this question, see the No‐
and potential problems specific to ad‐
vember 2010 edition (page 1, Unaccept‐
herence to USPAP—and, not to forget, able Adherence) of this publication. Illinois license law and Administrative Code (Rules). In brief, a guideline is synonymous with preference; when the appraiser complies First, refer back to the June 2010 issue with good appraisal practice and can‐
of this publication; specifically, see not adhere to a guideline (e.g., comps w/
pages 6‐7 for more information and in 1 mile of the subject when appraising in advice specific to this topic. a rural area), the lack of adherence can be explained away. What’s wrong with me providing comps Of late, it seems as though every ap‐
that closed within 90‐days of the effective praisal that I complete has at least date of my appraisal? some violations of client guidelines. Perhaps nothing is wrong with this practice if it is the competent appraiser On the flip‐side, when it comes to a requirement of an assignment, the ap‐
exercising good judgment and adher‐
ing to professional standards, who is praiser must comply. the one who decides what is, and, what is not, an appropriate comp. “What should I do if the client requires that I include comps that closed within 90 days of the effective date of the appraisal?” Remember, it is you who is ultimately responsible for what you develop and Such a requirement constitutes an un‐
communicate. acceptable assignment condition and the appraiser must refuse the assignment. “But, my client requests that I include one or more comps that closed within the 90‐
days prior to the effective date.” Period. Understand that such a request may “OK, but how might I comply with a come to the appraiser as a client guide‐
guideline specific to including one or more comps within the past 90 days?” line. It is rare when the request comes (Continued on page 6)
http://www.idfpr.com/dpr/re/Appraisal.asp
5
ILLINOIS DEPARTMENT OF FINANCIAL & PROFESSIONAL REGULATION
IllinoisAppraiser
Comps Within 90 Days by Lee Lansford
(Continued from page 5)
Obviously, if in your best professional judgment the data which you select and analyze are the most reasonable available and allows you to communi‐
cate a credible appraisal, and some of these just so happen to have closed within the 90 days prior to the effective date, carry on. A real danger is that in an effort to meet a guideline, some ap‐
praisers will identify just about any sale as a comp. These appraisers should stop and ask themselves: Is this sale one that in my best professional judgment, and that of my peers (appraisers peers as defined in the USPAP), one that is a rea‐
sonable comp for the subject? If the answer is no, re‐think what you are doing. You do not want to leave the client and other intended users with the impression that something which is actually incredible is some‐
thing that you are asserting as being credible. But what if there is a sale (not what I would consider as a reasonable comp) available that occurred within the 90‐
day time‐frame; might I be able to in‐
clude it? At this point, the thinking should be: Why bother? If the sale that you would include is not reasonable as a comp...what purpose would it serve? Remember—you, the appraiser, are the pro‐
fessional and you must develop and communi‐
cate a credible ap‐
praisal. But, there is a sale that, though far less than perfect for comparison to the sub‐
ject and not what I would consider as a comp, is one that I could include in my appraisal. I would not rely upon this sale as support for my opinion of value. Is there any way in which I might include such a sale in my ap‐
praisal in light of the client’s guide‐
line? Again, why bother? There is an alternative available to the appraiser: See FAQ #264 (next page): Developing an unnecessary valuation Approach; here the ASB responds to an appraiser asking whether a certain approach to value can be included in the appraisal although the appraiser has concluded that the approach does not yield mean‐
ingful results. (Continued on page 7)
http://www.idfpr.com/dpr/re/Appraisal.asp
6
ILLINOIS DEPARTMENT OF FINANCIAL & PROFESSIONAL REGULATION
IllinoisAppraiser
Comps Within 90 Days by Lee Lansford
(Continued from page 6)
result in a misleading appraisal report if the
Let’s tailor the actual FAQ to fit our discussion: appraiser properly addresses the applica-
I have a client requesting that I add what I
consider to be an irrelevant sale that falls
within their 90-day sale date guideline. I am
264. DEVELOPING AN UNNECESSARY VALUATION APPROACH
Question: I have a client requesting
that the cost approach be included in
every appraisal assignment, including
those where I feel the cost approach
may not yield meaningful results. I am
concerned that by complying with the
client ’ s request I may be providing a
misleading appraisal report. How can
I comply with USPAP and satisfy the
client at the same time?
Response:
Performing a cost approach that may
not yield a meaningful indication of
value does not result in a misleading
appraisal report if the appraiser properly addresses the applicability and
concerned that by complying with the client ’ s request I may be providing a misleading appraisal report. How can I comply
with USPAP and satisfy the client at the
same time?
Adding an irrelevant sale that may not yield
bility and suitability of the sale in the report.
Many appraisers address this in the reconciliation by including statements such as,
“ T he additional sale was included solely at
the request of the client; it has been given
no weight in arriving at the final opinion of
value because …. ”
Remember above all: It is you, the ap‐
praiser, who is responsible for devel‐
oping and communicating a credible (worthy of belief) appraisal. a meaningful indication of value does not
Illinois Real Estate Appraisal
Administration
and Disciplinary Board
Tuesday, July 12, 2011 @ 10AM
James R. Thompson Center
100 West Randolph Street – 9th Floor
Chicago, IL 60601
Open to the public
suitability of the approach in the report. Many appraisers address this in
the reconciliation by including statements such as, “ The cost approach
was included solely at the request of
the client; it has been given no weight
in arriving at the final opinion of value
because …. ”
http://www.idfpr.com/dpr/re/Appraisal.asp
7
ILLINOIS DEPARTMENT OF FINANCIAL & PROFESSIONAL REGULATION
IllinoisAppraiser
Reliers Too?
22. I am aware that any disclosure or
distribution of this appraisal report by
me or the lender/client may be subject
to certain laws and regulations. Further, I am also subject to the provisions
of the Uniform Standards of Professional Appraisal Practice that pertain to
disclosure or distribution by me.
Laws and regulations. Not may be… you most definitely are. As for USPAP, you’re subject to it...all of it. The next certification is a gift from Fannie that keeps on giving: 23. The borrower, another lender at the
request of the borrower, the mortgagee
or its successors and assigns, mortgage, government sponsored enterprises, and other secondary market
participants may rely on this appraisal
report as part of any mortgage finance
transaction that involves any one or
more of these parties.
UAD‐Day is coming. This is Fannie & Freddie’s anticipated, game‐changing, data mining endeavor disguised as a partial plug for their $259 billion (and counting) bottomless money pit. If you complete resi‐
dential form reports or plan to after Septem‐
ber, run, do not walk to your favorite course provider and take their UAD course. If not, you will be lost and there is no learn‐
ing curve being of‐
fered by your Board. There’s been a lot of discussion as to how the UAD codes will be received. For one, the public doesn’t know what’s going to hit them. Neither Fan‐
nie nor Freddie have bothered to showcase this to any consumer or housing groups. Why should they? After all, they aren’t the intended users, right? INTENDED USER: The intended
user of this appraisal report is the
lender/client.
True enough. Mr. and Mrs. Borrower are not the intended users. What does it matter if the borrowers don’t under‐
stand what “LtdSght” means? Let’s turn our attention to the baked‐in certifications in these forms: In order to rely on something, you need to understand it. Fannie drop‐
kicked this little detail over to the ap‐
praiser back in 2005. As a state regulator, if we only ac‐
cepted complaints from intended users, I’d have 10 complaints in my lateral instead of 300+. IDFPR’s primary function is to protect the public. As of this writing, the UAD is still 60‐
days away. Go take the course from a provider that you trust. But keep in mind that your responsibilities do not end at page 36 of Appendix D. Your reports need to be crystal clear to the reliers, whomever they are. http://www.idfpr.com/dpr/re/Appraisal.asp
8