A Pennsylvania state appellate court recently held that a taxing authority could not present an appraisal prepared by a non-testifying expert for the taxpayer. In Millcreek County School District v. Erie County Board of Assessment Appeals v. Wegmans Food Markets Inc., 39 C.D. 2015, the Court of Common Pleas of Erie County allowed the Millcreek Township School District to present certified appraiser Barry Polayes’ appraisal submitted by the taxpayer during a 1998 valuation. The Commonwealth Court of Pennsylvania reversed the decision. It ruled that Polayes was not an agent of the taxpayer and his earlier opinions should not have been used against the taxpayer in court. They held that the appraiser was not a representative of the taxpayer and, therefore, the appraisal violated the hearsay rule.
The Appraisal Institute has reported that it will lobby Congress for the modernization of the appraisal regulatory process. The issues the Appraisal Institute want to see addressed include the relationship of Federal and state regulations, the ability of appraisers to work in multiple states, more flexibility in the appraisal process and better processes for sharing information.
The Appraisal Institute has been advocating the use of alternatives to the Uniform Standards of Professional Appraisal Practice (“USPAP”). USPAP is provided by the Appraisal Foundation and is described as “the generally accepted standards for professional appraisal practice in North America. USPAP contains standards for all types of appraisal services.” The Institute’s Florida government relations leaders and staff met with the Florida Real Estate Appraisal Board in October and December to discuss the possibility of the FREAB allowing state-licensed and state-certified appraisers to utilize standards of valuation practice other than the Uniform Standards of Professional Appraisal Practice when performing non-mortgage lending, non-federally related appraisal assignments. A similar meeting was held with the Montana Board of Real Estate Appraisers on Dec. 9.
According to the Institute, a rulemaking proceeding will commence in Florida in early 2016, and all stakeholders will have input into the development of rules allowing for the use of alternate valuation standards. In Montana, the next steps have not yet been finalized.
The impact “green” aspects of a property has on its value continues to be a subject of study and debate. The Appraisal Institute recently reported that a study by a member specializing in the valuation of green homes found that homes with host-owned solar photovoltaic energy systems are sold at a premium compared to homes without PV systems.
Sandra K. Adomatis, SRA, of Punta Gorda, Florida, served as the lead author of the study, which engaged a team of seven appraisers, with the support of the U.S. Dept. of energy, across six states to determine the value added to homes with host-owned PV systems. The study – “Appraising Into The Sun: Six-State Solar Home Paired-Sales Analysis” – compared comparable sales of 43 homes in six states: California, Florida, Maryland, North Carolina, Oregon and Pennsylvania. The study can be found at: https://emp.lbl.gov/sites/all/files/lbnl-1002778.pdf
There has been an ongoing feud between perhaps the 2 most important appraisal organizations – the Appraisal Institute and the Appraisal Foundation. The Institute has been publicly critical of the Foundation and resigned from the Foundation about 5 years ago. Now, the Foundation has responded very forcefully.
In an open letter to valuation professionals, the Foundation stated that “[r]ecent communications by the Appraisal Institute (the Institute) are calculated attempts to fracture the whole. This month marks the fifth anniversary of the Appraisal Institute’s decision to resign from The Appraisal Foundation, rather than face a suspension for violating the Foundation’s Code of Conduct for Sponsoring Organizations. Instead of coming together with their peers, working collaboratively, and respecting the opinions of others to further a common purpose, leaders of the Appraisal Institute aim to splinter the profession. This divide and conquer approach is short-sighted, damages the profession, and must stop.”
The Foundation then told its side of the story regarding efforts “to repair the relationship and solidify what has been collaboratively built over the last 28 years.” This included what it described as “Offering Olive Branches” including “three face-to-face meetings between the leadership of the Appraisal Institute and The Appraisal Foundation, none of which were initiated by the Institute.” The Foundation also accused the Institute of creating “a false narrative” and was critical of the Institute’s new “Standards of Valuation Practice.”
In conclusion the Foundation stated, “[t]he rift between The Appraisal Foundation, the Congressionally-authorized source of valuation standards and qualifications, and the Appraisal Institute, one of the nation’s largest appraiser trade associations, is a detriment to the profession and needs to be resolved.” Regardless of fault, that last statement is undeniably true and this “rift” needs to be resolved.
The Appraisal Institute Board of Directors at its July 30-31 meeting in Dallas adopted the proposed Valuers Code of Professional Ethics as a model code and approved making the VCPE available for use by non-AI professionals as a companion document to the Appraisal Institute Standards of Valuation Practice. The Institute describes the VCPE as containing “high quality, straightforward, principles-based and strict canons and rules of ethical conduct that valuers can follow when national or international ethical codes do not apply or are not required.” AI explained, “To develop the proposed VCPE, the Professional Standards and Guidance Committee (PSGC) started with the Appraisal Institute Code of Professional Ethics (CPE), removed obligations and terminology unique to Appraisal Institute professionals (e.g., cooperating with an Appraisal Institute peer review committee) and adjusted remaining language to ensure universality.”
The gap between homeowner and appraiser opinions of home values has nearly doubled since May, according to mortgage lender Quicken Loans. Quicken Loans publishes a “Home Price Perception Index” which it states represents the difference between appraisers’ and homeowners’ opinions of home values. The index compares the estimate that the homeowner supplies on the mortgage application to the appraisal that is performed later in the mortgage process. “Many homeowners around the country are seeing the national headlines about home value increases and they are optimistic about their equity increasing,” said Quicken Loans Chief Economist Bob Walters. “While some areas are seeing the same level of home appreciation, or even more, there are also some areas that have slower home value increases. This can lead to homeowners and appraisers not quite seeing eye-to-eye.”
The Appraisal Practices Board (APB) of The Appraisal Foundation has announced the adoption of the first of three Valuation Advisories related to the valuation of green buildings. The Appraisal Foundation provides guidance to appraisers and is best known for its “USPAP” publication.
The Advisory, entitled “Valuation of Green and High Performance Property: Background and Core Competency,” offers voluntary guidance to appraisers on the background and competency necessary to credibly value green buildings and/or energy-efficient features. According to the Appraisal Foundation, these Advisories are part of an ongoing joint project with the United States Department of Energy (DOE) to develop guidance and educational materials for appraisers on green valuation. Representatives from the DOE are actively participating in the development of these Valuation Advisories as Subject Matter Experts (SMEs).
To view the Advisory, please visit: https://appraisalfoundation.sharefile.com/d-s5f8aa66a58a41f09
The Institute has been harshly critical of the Appraisal Foundation. Most recently, the Appraisal Institute, in a Dec. 12 comment letter, reiterated its concern to the Appraisal Foundation’s Appraisal Practices Board regarding an exposure draft that the Institute alleges contains numerous errors. It alleges that it could damage the appraisal process and impose additional burdens on appraisers. AI noted in its letter that the APB has no statutory authority and is strongly opposed to the Appraisal Foundation encouraging regulators to consider utilizing information in the materials for enforcement purposes. It ends the letter by stating, “As you know, the Appraisal Institute has many objections to the existence of the Appraisal Practices Board and its functions. Should The Appraisal Foundation continue with this effort we certainly hope that it will ensure, at a minimum, that appraisers receive accurate, proper and competent guidance.”
It is truly amazing that these two important bodies can’t get along.
One issue that continues to be litigated around the country is the extent to which an appraiser is liable to a borrower for a negligent appraisal prepared for a lender. This issue was recently addressed by the Georgia Court of Appeals.
In Adams v. DeWitt, 2014 WL 2609974, a purchaser of a property allegedly relied upon an appraisal in deciding to purchase the property. However, the appraisal expressly stated that the appraisal was intended solely for the use of the lender. This is generally standard language in appraisals for lenders. The Court of Appeals held that the appraiser owed no duty of care to the borrower and that it was proper for the appraisal to contain limitations such as those contained in the appraisal.
The law on this subject varies by state and should be consulted if this is an issue.