Florida Realtors Mid-Winter Meetings - January 11 - 15, 2012

Florida Realtors meet in Orlando this week. There is an Appraisal Council meeting on Friday, January 13, 2012 at 1:00-2:30pm in the Captain room at the Buena Vista Palace. The agenda includes quite a bit of interesting topics for discussion.

If you are a Florida Realtor - Appraiser, it would be great to have you attend. You may register onsite. There is no registration fee for Realtor - Appraisers.

AMC Indemnification: Bill Introduced to Limit Use in Florida

Over the past six months, Appraiser Active has posted several times about the use of indemnification clauses in Appraisal Management Company agreements with their panel appraisers. NAR has called for a ban on such agreements, particularly those that indemnify and hold harmless the AMC against any suit, threat, or claim on any work product or service provided as part of the contract agreement.

The 2012 Florida Senate and House have stepped up to the plate with the introduction of SB 1252 and H 887. The bills are virtually identical. Both include this language: (proposed amended/added text is underlined)

475.6245 Discipline of appraisal management companies.—


(1) The board may deny an application for registration of an appraisal management company; may investigate the actions of any appraisal management company registered under this part; may  reprimand or impose an administrative fine not to exceed $5,000 for each count or separate offense against any such appraisal management company; and may revoke or suspend, for a period not to exceed 10 years, the registration of any such appraisal management company, or place any such appraisal management company on probation, if the board finds that the appraisal management company or any person listed in s. 475.6235(2)(f):


(v) Has required or attempted to require an appraiser to sign any indemnification agreement that would require the appraiser to hold harmless the appraisal management company or its owners, agents, employees, or independent contractors from any liability, damage, loss, or claim arising from the services performed by the appraisal management company or its owners, agents, employees, or independent contractors and not the services performed by the appraiser.

It's a start. Next on the list of things to do is propose some amendments to pare the size of the FREAB back down to 7 members, and limit the guaranteed AMC representation down to 1 member.

In the meantime, let Senator Dennis Jones and Representative Clay Ingram know you of your appreciation and support.

Happy New Year. Stay tuned.

Merry Christmas

Wishing you all the best for this Holiday Season from the Sunshine City in the Sunshine State.

Just in case you might believe all my time is spent at the beach, the clipboard has a list of 12 sales and listings in St. Pete Beach. After 5 minutes on the beach to take a few photos for my northern US friends, it was back to work.

Appraisal Management Companies - Background Checks

In the past week a reporter for my local paper, the St. Petersburg Times, wrote an  article about applicants for real estate licenses with criminal convictions. Marc Puente described how some folks with what appear to be convictions for serious crimes find that is not an impediment to getting a Florida Real Estate License.

As a former member of the Florida Real Estate Appraisal Board (FREAB), I found the article interesting and informative. Although the "character" requirements for real estate licensees and real estate appraisers are similar, on more than one occasion the FREAB denied an applicant the Florida Real Estate Commission found acceptable. After reading the article I took at look at the agenda for the December meeting of the Florida Real Estate Appraisal Board. Their meeting is December 8th and 9th, 2011.

An item on the agenda is labeled "Summary of Applicants". The individuals named fall in to one or both of two categories:

• Their application disclosed a criminal history record, or disciplinary action against a professional license.
• Their application did not disclose a criminal history record, but the check of fingerprints by the Florida Department of Law Enforcement and/or the Federal Bureau of Investigation revealed a conviction.

Florida appraiser and appraisal management company applicants are required to disclose any criminal history and actions against any professional license in Florida or any other state.

Do you all find it interesting that of 11 names on the list of Summary of Applicants, 8 are with Appraisal Management Companies?

Knowing that folks with dubious backgrounds have started Appraisal Management Companies, and that a well known AMC recently folded and left a reported $3,000,000 in unpaid appraisal invoices, I expect the members of the FREAB will give these folks the scrutiny the law demands

Florida Real Estate Appraisal Board - New Rule to Regulate Signatures

Effective as of December 20, 2011, there is a new Rule that updates signature requirements on an appraisal report and certification. This new rule, 61J1-7.0065 Signatures on Appraisal Report and Certification, was adopted by the Florida Real Estate Appraisal Board (FREAB) to comply with a recent amendment to Chapter 475, Part II. The amendment, adding 475.614(2) requires the FREAB to adopt to include requirements for protecting the security of an appraiser’s signature and prohibiting practices that may discredit the use of an appraiser’s signature to authenticate the work performed by the appraiser.

Here's the way it reads:

61J1-7.0065 Signatures on Appraisal Report and Certification.



(1) Each appraiser signing a certification of an appraisal report must sign the certification with the name that the licensee has registered with the Department. A signature may be represented by a handwritten mark or a digitized image controlled by a personal identification number, password, or other security feature. A facsimile signature may be either affixed by hand or electronically by computer software. An appraiser shall at all times maintain direct control of the appraiser’s signature.

(2) An appraiser shall develop and maintain a written method by which his or her signature shall be affixed, for its security protection and the prohibition of practices that might discredit its use.

(3) An appraiser shall not grant blanket authority to another to affix the appraiser’s signature to an appraisal report or other work performed by the appraiser. Any grant of permission to another to affix an appraiser’s signature to an appraisal report or other work performed by the appraiser shall meet the following requirements:

(a) Be in writing;

(b) Extend only to one specific appraisal report; and

(c) Be maintained in the appraiser’s work file.

Rulemaking Authority 475.614 FS. Law Implemented 475.613(2), 475.614 FS. History–New 12-4-06, Amended 12-20-11.

It might be wise to keep this rule in mind and ready for quick reference when some folks (like those mentioned in THIS post) attempt to require you to upload a copy of your digital signature.

Appraisals: What You Absolutely Need to Know

This morning, November 12, 2011, along with several other speakers, I will be participating in a panel discussion as part of the National Association of REALTORS Annual Conference and Expo. Given the number of headlines, news stories and blog posts about appraisals in today's market, the topic and title is appropriate: Appraisals: What You Absolutely Need to Know.

If you're here in Anaheim attending the Conference, please stop by. The program starts at 9:00 A.M and runs until 10:30. We'll be in the Anaheim Convention Center, Ballroom A.

They're bound to put a hook on me if I talk too long, but I plan to reference the Continuing Education Course I wrote for the Bert Rodgers School to help folks get a better understanding of the appraisal process. Follow the link to he free pdf of the Bert Rodgers book, and take a look at the course starting on page 79. For you non-appraisers, I hope it helps you understand why things are the way they are. If you have a Florida real estate license, you just might like to use this course for your continuing education.

Note: I do not get a royalty on the number of courses taken; I just believe it might be informative.

Valuation Support Services (VSS) - Appraiser Panel Agreement

As long as we're talking about AMC Appraiser Indemnification, here is a copy of the Valuation Support Services (VSS) Standards & Approval Documentation Requirements and their Appraiser Panel Agreement. This gem has some interesting twists and language. The full copy is available after the jump, but here are a couple of clauses I find interesting:

Page 4:

The intent of this Agreement between Valuation Support Services (VSS) and Appraiser is to outline the roles, responsibilities, commitments and escalations of the parties.

Conviction of Crimes: VSS is unable to enter into associations with individuals, who have been convicted of or plead guilty to any crime involving dishonesty or breach of trust, or have been convicted of or plead guilty to any felony or misdemeanor. Appraiser warrants he/she has truthfully and accurately answered the "Additional Information" questions on the VSS Appraiser Application, has provided full disclosure through letter(s) of explanation for all questions answered affirmatively. Appraiser acknowledges and agrees he/she will be directly involved in providing services in accordance with this Agreement and has met this standard.

Fees: VSS Reserves the right to charge fees for appraisal panel services rendered to Appraiser, such as systems access, technology and website applications utilized by Appraiser, and/or allocate the cost of state or federal appraiser/panel registration and similar fees. Advance notice, as practical, shall be provided to Appraiser along with a description of the fees to be charged. Appraiser agrees to pay VSS promptly per the payment terms specified in the notice provided. (Red Added for Emphasis) (It's RED in their agreement)

Page 6:

3. Appraiser will not accept orders directly from VSS' clients. Appraiser agrees that all orders must be received from Valuation Support Services (VSS) electronically.

4. VSS clients Appraiser may service include, but are not limited to: CoreLogic Appraisal Services, Prime Valuation Services, and RelsValuation.

Page 7:

17. Revisions to Sales Contracts: Appraiser acknowledges that in connection with his/her appraisals, he/she may receive revised sales contracts that change the purchase price due to alterations of the improvements. Upon receipt of a revised sales contract that modifies the purchase price due to alterations of the improvements, Appraiser will analyze the change(s) and make appropriate revisions to the appraisal report. The revisions to the report include changing the terms of the contract for sale in the contract section, adjusting the comparable sales as needed, and if the opinion of value is changed, providing a detailed explanation for the change in value.

(Hmmm. I wonder what a state regulatory board would have to say about this provision?)

Of course, on Page 9:

Indemnification: Appraiser will indemnify and hold harmless VSS, a division of RELS, LLC, and each VSS entity for any liability arising out of Appraiser's work product or for the release of any appraisals without VSS' permission. Appraiser is liable for payment of any legal fees, claims, damages, losses and liabilities resulting from Appraiser's work product or non-performance of the duties and obligations identified herein.

One of the best, however, is the requirement on Page 2:

Appraiser (signature)(Requires Digital Signature to be uploaded.):

All very interesting. Also interesting is the number of Florida Appraisers asked to send in a copy of a digital signature to OK this agreement, given the fact that VSS is NOT currently registered as an Appraisal Management Company with the Division of Real Estate or the Florida Real Estate Appraisal Board. The MyFloridaLicense site does not show an application in process either. Does this outfit look like a Management Company for Appraisal Management Companies?

Agreement in full is after the jump.

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AMC Indemnification Clauses - Comments From Peter Christensen

Back in August, Appraiser Active posted about NAR President, Ron Phipps'  letter to the heads of the Department of Housing and Urban Development, Federal Financial Institutions Examination Council, Veteran's Administration and the Federal Housing Finance Agency encouraging the bar of indemnification clauses used by Appraisal Management Companies (AMCs).  Robert  Freedman provided some context in a later post on the Speaking of Real Estate blog.

Needless to say, the issue is has not yet been resolved. In the November issue of REALTOR Magazine, there is a piece written by Peter Christensen about indemnification clauses. Follow this link to his post on the Appraiser Law Blog. Peter links to the REALTOR Magazine article too.

Among many other things, indemnification clauses and appraiser independence are on the agenda for the NAR Appraisal Committee meeting next week during the NAR Annual Conference in Anaheim, California. The NAR Appraisal Committee meets Friday, November 11, 2011 from 2:00 - 4:00 P.M. at the Anaheim Marriott Hotel in Grand Ballroom F. See you there!

REALTOR®, Appraiser, or Both?

If I was paid a nickel for every time someone asks if they "can be frank with me", I would have a better computer. If a nickel was paid every time someone tells me, "you're not a REALTOR®, you're an appraiser", my house would be paid off.

Clearly, there is some confusion about the term "REALTOR®" and what it means. The common misconception is to equate the term REALTOR® with home seller, agent, or broker. The fact of the matter is the term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION of REALTORS® and subscribes to its strict Code of Ethics.

Membership in the NATIONAL ASSOCIATION of  REALTORS® is available to individuals engaged in the "real estate business." "Real estate business" as defined in the bylaws of the NATIONAL ASSOCIATION of REALTORS® includes real estate brokerage, management, appraising, land development or building. An Official Interpretation of the bylaws of the NATIONAL ASSOCIATION of REALTORS® states:

"It is not an inequitable limitation on membership for a Board of REALTORS® to require that applicants for REALTOR® Membership who are principals in a real estate firm must maintain a real estate broker's or salesperson's license or must be licensed or certified by an appropriate state regulatory agency to engage in the appraisal of real property."

To be clear, the term REALTOR® may include individuals involved in real estate brokerage, but does not eliminate individuals involved in other specialties included in the definition of "real estate business."

As an appraiser, and member of the NATIONAL ASSOCIATION of REALTORS®, all the benefits of membership are available, including some of particular interest to my Appraisal specialty. These include:

• The NAR Appraisal Designation Program and Fast Track Program to Designation
• NAR involvement and participation in The Appraisal Foundation
• Representation on The Appraisal Foundation Board of Trustees (sponsor)
• Representation on The Appraisal Foundation Advisory Council (TAFAC)
• The NAR Library and Information Central
• Access to the Multiple Listing Service
• Networking opportunities with other real estate professionals
• Increased business (over half my assignments are referred to me by real estate brokers)
• Using brokerage contacts as source for market information, transaction specifics and confirmation
• Legislative and advocacy efforts

There are many reasons I belong to the NATIONAL ASSOCIATION of REALTORS®. Being confused with the good folks involved in real estate brokerage is not one of them.

Mayhem - Protect Yourself - UPDATED

NOTE: LiveValuation Magazine went south, and the links below no longer lead to the article. Use this link, or read the full article after the jump below.

In addition to being entertaining, the "Mayhem" series of commercials offer a message important to any of us in business; protect yourself. My recent article in LiveValuation Magazine, "Maintaining Your Workfile" was intended to convey the idea an appraiser's best protection from Mayhem is their workfile.

The article was prompted by examination of hundreds of workfiles from appraisers of all stripes from every corner of the State of Florida. Workfiles were provided with nearly every case considered by the Florida Real Estate Appraisal Board during my eight years of service. After completing my two terms as a member of the Florida Real Estate Appraisal Board, another hundred or so workfiles have been examined as part of my continuing responsibility as a member of the FREAB Probable Cause Panel, and as an expert engaged by the Department of Business and Professional Regulation and lawyers representing appraisers.

Unfortunately, many, if not most of the workfiles maintained by appraisers fall short of the bare minimum requirements outlined in the Record Keeping Section of the Ethics Rule of Uniform Standards of Professional Appraisal Practice. Even if  USPAP did not require the appraiser to keep a record of their work, data, information, and documentation to support their opinions and conclusions, it appears many appraisers fail to grasp the concept that maintenance of the workfile is for THEIR benefit and will protect them from MAYHEM.

The real prompt for the article was an appraisal review assignment accepted from an attorney representing an appraiser who was the subject of an Administrative Complaint filed against him by the Florida Real Estate Appraisal Board. The complainant, made by a well known national lender, included allegations that  the opinion of value was inflated, the selection of comparable sales was poor, comparable sales were not similar to the subject property, some of the comparable sales were from outside the immediate competitive market area, and the appraiser failed to recognize and report declining prices and values.

The appraiser responded to the complaint and cooperated with the investigation. Part of the process was providing the investigator with a copy of his workfile, or what he thought was his workfile. At the time of my engagement, the attorney provided me with a copy of the complaint, the state's investigative report (including the appraiser provided workfile), and correspondence between the parties. My engagement included a review of the subject appraisal. In the process of developing my Scope of Work for the assignment, it became clear an interview of the subject appraiser was necessary, along with an examination of his actual, original workfile.

Expanding the Scope of Work to include the interview and examination of original documents was clearly the right decision. When the subject appraiser put the workfile in my hands, it was clear relevant information had not been included in the "workfile" he submitted to the state investigator. The file folder holding the loose pages was filled with notes, all related to the assignment. Within the folder were handwritten memos of conversations with the loan originator. Among these was a request that additional comparable sales be included in the appraisal report to support the appraiser's opinion of value.

My interview with the appraiser revealed that as of the effective date of the appraisal, the lender had strict guidelines for the selection of comparable sales. Highest in the lender's priority was proximity to the subject property and date of sale. Of secondary importance to the lender was similarity to the subject in physical features and size. Unfortunately, there was no reference to the lender guidelines or instructions in the appraisal report or the workfile.

To make a long story short, by reconstructing the subject appraiser's actions and thought process in developing the appraisal and writing the report, it was clear the selection of comparable sales was limited by the lender's own guidelines and instructions. As a result the most recent and proximate sales were included in the report, rather than more similar sales that happened to be distant (the subject property is a waterfront residence in a barrier island community).

Although the original appraisal report was not pretty, a review revealed the opinion of value was credible and not overstated, and the market as of the effective date was stable, rather than declining. It's too bad the appraiser failed to recognize the importance of the ALL of the information in his file, and neglected to provide the state investigator with the lender guidelines he attempted to follow. This complaint hung over his head for about 3 years and cost thousands to defend.

Proper creation and maintenance of his workfile could protect him from MAYHEM!

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