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VA as a Model for the Industry
by Isaac Peck, Editor 

At the national Appraisal Summit conference in November 2021, there was an exchange between a number of appraisers, Rick Langdon, Chief Residential Appraiser, and Jarrett Scarpiello, Executive Director of Valuation at Chase.

In the exchange, one of the appraisers Gerald (Jerry) Rocha, commented that it seemed that the Department of Veteran Affairs (VA) had solved every one of the major pain points in appraisal and questioned these two industry giants why more lenders and AMCs weren’t following the VA’s lead.

This suggestion undeniably piqued the interest of many other appraisers in the room and consequently, seems worth exploring.

Working RE sat down with Rocha, a Certified Residential appraiser from Humboldt County in California, to hear more about what he thinks the VA gets right—and what following their lead might do for the industry.

Step Above the Rest
It’s not a secret that being on the VA appraiser roster is a coveted position for most residential appraisers. So, what exactly makes the VA so special?

Rocha says the VA is a step above the rest primarily because of the following criteria.

1. VA wants a good quality panel
2. VA pays higher appraisal fees
3. VA delivers fast turn times to veterans
4. VA doesn’t use Appraisal Management Companies (AMCs)
5. VA has a program that encourages the use of trainees
6. VA’s Tidewater Program is fair to all sides

Fees, Turn Time, and Quality
The first four criteria are certainly related and are worth examining together. For starters, the fact that the VA does not use AMCs allows them to pay more directly to the appraiser, according to Rocha. “Instead of AMCs, the VA has a Portal which is really streamlined and easy for stakeholders to use. We can communicate in that Portal and it sends it out to all parties and keeps everyone in close communication,” says Rocha.

Rocha says he works almost exclusively for the VA and local lenders. The good news is that his local lenders have already taken a page from the VA’s playbook by not using AMCs as well. “My local lender clients also use different options instead of AMCs in order to meet Dodd-Frank’s rules. Industry programs like Mercury are a good solution. One of my credit union clients has their accounting department order appraisals. This makes a big difference as the VA and local lenders can pay higher appraisal fees, and consequently get better appraisers to work for them,” argues Rocha.

It goes without saying that if the VA (or a local or national lender) can order appraisals directly from appraisers, either with the use of an online Portal, or by having the orders placed by a different department, then ultimately a higher fee can be passed on to the appraiser.

Rocha is quick to point out that AMCs are starting to pay more than in the past and notes that “there are some good AMC’s out there.”

The result of paying higher fees translates into three clear net benefits for appraisers, for consumers, and for lenders themselves.

Higher fees:

• Allow the lender to find the best appraisers that produce higher quality work
• Allow the lender to get faster turn times from appraisers
• Give appraisers a cushion to bring on trainees and grow their businesses

The result is a win-win-win for appraisers, consumers, and banks. In Rocha’s area, for example, the VA is paying $850 for a standard 1004 in Humboldt county and $950 per appraisal in Del Norte county.

“The VA wants a good quality appraiser panel and they have raised the fees to where it’s a sweet spot. Any time a county’s turn times start creeping up, VA will look at it and may raise fees. This is a different model than what you see in any other part of country. The borrower is actually the one paying for the appraisal and the VA passes the entire fee charged to the borrower on to the appraiser,” says Rocha.

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Trainees
Another big advantage of working for the VA is that the VA is very trainee friendly. Rocha reports that he has three (yes, three!) trainees and says that is only possible because (1) the VA pays healthy fees that leave him room to compensate his trainees, and (2) the VA’s own Assisted Appraisal Processing Program that make it easier for a supervising appraiser to integrate trainees into their business.

The AAPP program actually dates back to the passage of the Blue Water Navy Vietnam Veterans Act of 2019 which mandated that the VA allow a bifurcated appraisal process. The Bill read: “The Secretary shall permit an appraiser on a list developed and maintained under subsection (a)(3) to make an appraisal for the purposes of this chapter based solely on information gathered by a person with whom the appraiser has entered into an agreement for such services.”

The VA responded to this buy implementing guidelines that mandated the following:

• The VA panel appraiser must contract directly with the individual performing the property inspection, as part of any bifurcated appraisal.
• Any person the VA appraiser contracts with to gather information is considered to be acting as an agent for that VA appraiser, with the VA appraiser responsible for paying that individual’s fees.
• The outside individual contracted by the VA panel appraiser to gather information be another licensed appraiser or appraiser trainee.

The result is more flexibility for the VA’s appraisal panel as well as more flexibility for appraisers to work with other appraisers and to bring on trainees, according to Heaslet. “Working within the Congressional mandate, we’ve made it much easier for VA appraisers to bring on trainees and integrate them into their business model. We are allowing trainees to actually inspect the properties and sign on the report, with the VA supervisor accepting the responsibility,” Heaslet says.

Lenders do have the option to opt out of the AAPP process, so it is still up to each lender whether they want to allow trainees or not. However, Rocha says that at least half of his clients will accept trainees, which is enough for him to bring on the trainees that he has. “How are we supposed to add new appraisers to our ranks and keep the profession healthy if banks do not allow trainees to inspect or sign on the left side of the report?” asks Rocha.

One of the reasons the lender might be more comfortable allowing trainees on the VA loans is because the VA is backing the loan, Rocha wonders. “Maybe investors are not willing to accept the risk. Behind the scenes there are more dynamics than we are aware of. The VA insures these loans and maybe that gives lenders more confidence,” says Rocha.

Tidewater
Lastly, the VA’s Tidewater procedures allow for all parties to be heard when an appraisal is coming in under the contract price, which makes the process better, according to Rocha.

The way that Tidewater works is if the appraiser believes the appraisal is going to come in below the contract price, they are to alert the VA that they need more information to support the purchase price. “This gives all parties involved are given the opportunity to look at market data and produce additional comparable sales that maybe the appraiser isn’t seeing. This reduces Reconsiderations of Value (ROVs) incredibly and it leaves all parties pretty comfortable that whatever happens after Tidewater is going to be fine. Other clients don’t necessarily allow that or have a program in place to allow that,” says Rocha.

Conclusion
One thing is for certain, Rocha is a big fan of the VA, believing that they have solved a lot of the largest problems in the appraisal industry—at least so far. “That’s why I’m bragging about the VA. I’ve never seen an organization try to solve most major problems in the appraisal industry. It is a big deal when you get one organization really trying to help appraisers, it also helps homebuyers, sellers, agents. Etc. The appraisal industry faces a number of challenges: turn-times, quality, fees, and the number of appraisers in the industry—I think stakeholders that are interested in finding solutions in this industry should look to the VA,” Rocha argues.

Editor’s Note: Free Webinar, TOMORROW, Avoiding Discrimination Claims and Protecting your Business. Come learn the latest from one of the nation’s leading appraiser attorneys, Craig Capilla, on what is happening across the appraisal industry, and how to protect yourself. Register Here.

About the Author
Isaac Peck is the Editor of Working RE magazine and the President of OREP, a leading provider of E&O insurance for real estate professionals. OREP serves over 10,000 appraisers with comprehensive E&O coverage, competitive rates, and 14 hours of CE at no charge for OREP Members (CE not approved in IL, MN, GA). Visit OREP.org to learn more. Reach Isaac at isaac@orep.org or (888) 347-5273. Calif Lic. #4116465.

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