Maintain that workfile and prepare for the inevitable complaint
Real property appraisers have had quite a bit dumped on them in the past couple of years. Weendured the destruction of long-standing business relationships as a result of the imposition ofthe Home Valuation Code of Conduct. We’re in the middle of the implementation of the UniformAppraisal Dataset, not the most intuitive solution to comprehension ever devised. Although therewas a surge of optimism among some appraisers with language in the Dodd-Frank Act ensuringappraiser independence and customary and reasonable fees, hopes were dashed with therelease of the Interim Final Rule by the Federal Reserve. Increasingly, large, well known lendersand their more obscure contemporaries are actively forwarding allegations of non-compliance tostate regulatory agencies. In some instances, those same lenders, along with mortgage insurers,are initiating civil action against appraisers and their firms. The Federal Deposit InsuranceCorporation (FDIC) has sent hundreds of demand letters to appraisers demanding money foralleged inflation of appraisals in connection with loans held by failed banks and has followed upsome of them with lawsuits. Borrowers, sellers and real estate agents are seeking to lay blamefor failed real estate transactions and often target the appraiser as the villain. Being on thereceiving end of complaint seems to be more likely, regardless of how long you have been in theappraisal profession.There is a bright spot, however. Within the standards of practice used by plaintiffs and stateregulatory agencies to craft allegations of improper conduct and lawsuits of doom againstappraisers is a requirement that the appraiser maintain evidence to defend their actions, opinionsand conclusions. Specifically, the obligation is the Record Keeping section of the Ethics Rule inthe Uniform Standards of Professional Appraisal Practice (USPAP), and the stated requirement toprepare and maintain a workfile. In addition to demonstrating compliance with record keepingrequirements, the workfile forms the basis for your defense.After receipt of a consumer or lender complaint against an appraiser licensee, among the firstitems requested by the regulatory agency or investigator is the appraiser’s workfile. If thecomplaint is a lawsuit, in most cases, a copy of the work
fi
le must be turned over to the plaintiff ortheir counsel as part of the discovery process. When that complaint or lawsuit is filed against you,are you able to reconstruct what you did, how you did it, based on the contents of the work
fi
le? Allthe appraisal experience in the world and assertions your opinions and conclusions are correctand accurate can’t help if you did not prepare and did not maintain that workfile.Unfortunately, for many appraisers, preparation and maintenance of the workfile is viewed as aninconvenient burden rather than a means of protection. Some mistakenly believe a copy of theappraisal report or review, along with a single data sheet for each of the comparable salesincluded in the report will fill the bill. Please examine the full text of the Record Keeping Section ofthe Ethics Rule for the minimum requirements. For certain, the attorneys handling the licensecomplaint or civil suit against you have a copy and know what they expect. Wouldn’t it makesense to throw them off their game by maintaining a workfile with much more information, data,and support than they expect to see?For your protection, and to be useful in your defense, the workfile must have enough informationto support and justify the work completed as well as your opinions and conclusions. You shouldalso have enough additional information to revive your memory about the assignment, particularlyif trainees or contract appraisers provided assistance and are no longer in your employ. If youhave taken steps towards maintaining paperless workfiles, make sure your hand-written notes,phone notes and call slips have been scanned and available. It is imperative the entire file issaved and maintained in a format certain to be reproducible and readable for as much as 5 – 10years from the date of the assignment. This is particularly important in the case of photographs.The extra photographs you included in the workfile to document the good condition andexceptional craftsmanship of the improvements, recent repairs, or placement of custom, built inappliances don’t provide much help if the file is corrupted. Computers, hard drives, and compactdisks do not last forever. Your high tech, electronic workfile is of no use in your defense if it was
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Live Valuation Workfile Retention
This article written for the now defunct LiveValuation Magazine back in October, 2011
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