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VA Issues Guidance on Bifurcated Appraisals
by Isaac Peck
The Department of Veteran Affairs (VA) recently issued guidance on VA bifurcated appraisals which further demonstrates the caution with which many regulators are taking when approaching this new form of “bifurcated” appraisals.
In June 2019, Congressional Bill H.R. 299, the Blue Water Navy Vietnam Veterans Act of 2019, included this provision: “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.”
To accommodate this requirement, the Department of Veterans Affairs (VA) published guidance outlining the rules for its Assisted Appraisal Processing Program (AAPP). The VA does not require its appraisers to participate in the AAPP process, but leaves it up to the appraiser instead. The VA makes it clear that the AAPP process will only be allowed in cases where assignments are non-complex, where the sales price is below one million dollars, and where the appraisal is not for new construction. Ultimately, the VA will have discretion on which assignments the appraiser may utilize the AAPP process.
Additionally, the outside “person” the appraiser contracts with to gather information must be “an individual who may perform appraisal-related work in compliance with VA policies, USPAP, state, and local laws,” such as “another VA fee panel appraiser licensed in that jurisdiction, a non-VA fee panel appraiser licensed in that jurisdiction, or an appraisal trainee/apprentice registered or otherwise authorized to provide valuations in that jurisdiction.”
This removes any doubt that the outside “person” must be another appraiser or trainee. The VA goes even further, writing “To be a person acting in the capacity as an agent of the assigned VA appraiser, the person must be otherwise permitted to sign an appraisal report as ‘Appraiser’ on any of the approved VA forms.”
The AAPP process also has the following stipulations:
• Any person the VA appraiser contracts with to gather information is acting as an agent for that appraiser.
• Upon request, the VA appraiser must provide the VA with all relevant information concerning the person they contracted with to gather information, including a copy of the agreement and all evidence relied upon in determining that such person met the ethical and moral character requirement.
• The VA appraiser must pay all fees charged by the person gathering information.
• The person gathering information must attest that they are knowledgeable in all VA requirements for Minimum Property Requirements (MPRs).
• The person gathering information is required to understand and follow guidance from USPAP and USPAP Advisory Opinions (AO), with particular attention to AO2, 21, and 31.
• The VA panel appraiser must communicate to the point of contact (i.e., real estate agent, Veteran, home owner, etc.) who is conducting the site visit and that such person is working on behalf of the VA panel appraiser.
• In any case where Tidewater is invoked, if the assigned VA appraiser did not conduct the site visit, the VA appraiser must make a site visit to the subject property at no additional fee to the lender or Veteran.
The VA also makes clear that its appraisers will remain fully responsible for all loss, damage, or other harm caused by the person whom they are in agreement with to gather information. The VA appraiser must include and sign a statement in each appraisal report that contains the following language: “I participated in VA’s Assisted Appraisal Processing Program to complete this appraisal report. The final opinion of value for the subject property is based upon my supervisory status and analysis of all available information. The person who provided information to me to assist in the opinion of value is: Full name (First/Middle/Last), license number, date of expiration, state of issuance of the person. I take full responsibility for any errors in and/or omissions from this appraisal report.”
Lastly, VA indicates that “to reduce risk of the program and to ensure quality, VA may limit the VA fee panel appraiser on quantity of weekly appraisal assignments or on geographical areas covered.” In other words, the volume of each individual VA appraiser will be monitored and limited per the VA’s discretion as well as based on VA need and “other issues that could adversely affect Veterans, the Government, or individuals who are indirectly affected by AAPP (e.g., a homeowner who is in a contract to sell a home to a Veteran).”
The VA’s AAPP guidelines have been heralded by many boots-on the-ground appraisers as a responsible and thoughtful approach to the increasing promotion of hybrid appraisals by Fannie Mae and Freddie Mac, as well as some appraisal management companies (AMC) and technology companies.
The AMC Clear Capital has been lobbying Congress for the last several years to begin accepting bifurcated/hybrid appraisals. In April 2017, the House Committee on Veterans Affairs held a hearing on “Assessing VA Approved Appraisers and How to Improve the Program for the 21st Century,” where Russell Johnson, Chief Revenue Officer at Clear Capital, argued that the VA should consider “the use of a desktop appraisal, based on the physical inspection of a subject property by an industry professional…such as a real estate broker or agent, performing a visual inspection of the subject property and providing other market insight and analytics.” Clear Capital has taken heat in the press and on Appraisal Blogs in the past for low appraisal fees, with one hybrid report being posted to AppraiserBlogs.com showing a $25 fee paid to the appraiser for the valuation analyst portion of the assignment.
As it stands now, the current AAPP guidelines that will take effect January 1, 2020 will make it very difficult for promoters of bifurcated appraisal products to inject themselves into the VA appraisal process, as the appraiser remains wholly responsible for (1) contracting with the person, (2) all loss damage and harm caused by the person, (3) paying the person, (4) re-inspecting the property at no additional fee if Tidewater is invoked, and much more. Additionally, the person must also be an appraiser or a trainee.
The guidelines discussed here will be rescinded December 31, 2021, presumably because the VA will revisit the issue and assess the appropriateness of these requirements. Whether the VA decides to implement more flexible guidelines at that time remains to be seen. This is a developing story; please visit WorkingRE.com for the latest news and information.
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About the Author
Isaac Peck is the Editor of Working RE magazine and the Vice President of Marketing and Operations at OREP.org, a leading provider of E&O insurance for appraisers, inspectors and other real estate professionals in 50 states. He received his master’s degree in accounting at San Diego State University. He can be contacted at isaac@orep.org or (888) 347-5273.
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by Michael Ford, American Guild of Appraisers (AGA ™)
Lost in the clutter is the fact that what is described are NOT bifurcated HYBRID appraisals which is where the real controversy lies.
The VA proposes a return to ordinary training procedures practiced by almost all appraisers prior to HVCC. We applaud them for that.
The only thing bifurcated is the inspection. It is still NOT a desktop appraisal (hybrid) based on someone elses unqualified field inspection. The conditions imposed by VA makes it an ordinary appraisal-inspected by a qualified trainee or assistant appraiser who will also be signing AS AN APPRAISER. They have skin in hte game.
Whats described also shows no reason for discounted fees since the supervising appraiser must still review all the work and BOTH must sign the final appraisal report.
Let’s not conflate the VAs sensible proposal with the proliferation of fraudulent bifurcated HYBRIDS being pawned off as real ‘appraisals’.
-by LaydeeTee
So perhaps you need to bring this to the attention of your David Brauner, Senior Broker at OREP.org as his article in September titled “Appraising Bifurcated” specifically told us all it was a “done deal” and we needed to “move our cheese.” (which personally offended me as an appraiser)
He stated and I quote –
“Be that as it may, and regardless of what you may think about “bifurcated” appraising, everyone agrees that it looks like a done deal. And if the financial collapse of 2008 and Fannie Mae’s forced conservatorship didn’t humble those folks, nothing will. Change is here, and change is never easy: you can choose to try it or you can choose to defy it, but it’s happening. Personally, I wish I was more receptive to change but not everyone is calibrated that way. It’s hard for me and maybe you, too, to move our own cheese, especially when everything is working pretty well.”
Read his article here…https://www.workingre.com/appraising-bifurcated/
(and since my previous comments were not “approved” by the moderator, this one most likely won’t be either)
-by LaydeeTee
Ditto what Candy said. ↑
-by Joe M Quinteros
Why bother with all this? Doesn’t make sense to me. Why would I hire another person to do my inspection. Here’s an idea. I’ll just do the inspection myself and then follow up with the report… Let’s leave well enough alone and not submit to the pressure of completing bifurcated appraisals. Also, what about the fee. Is it staying the same or are we now going to have to do them for way less and still have to pay the inspecting person? This more work and more expense having to now pay someone. Why? Why? Why?
-by Candy
At least the VA sees that only your trainee should do the inspection. Why would any appraiser worth his salt accept the inspection findings of a stranger ? Your developing adjustments to the comps from the inspection of the subject. This correlates into a value conclusion. I don’t care how many waivers are issued for the quality of the outside inspection, your number is your number. You better read USPAP,cover-to-cover and like having reasonable E & O premiums before you start doing these bi-fos.
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