Why do we have scope creep?
Possible answers include:
- The reviewer or clerk has to justify their existence;
- There is genuine concern about something;
- The work should’ve been there in the first place;
It’s important to remember that our entire system of appraisal production and review is belief-based. It must be “worthy of belief.” We have no objective standards. Your work must be subjectively “credible” in the mind of the reader.
If an administrative reviewer clerk is to appear necessary – the clerk has to at least keep the appearance of reading and judging the report. (Remember our belief-based “credibility” system.) To look good, the reviewer clerk must hit a “quota” of appraisals for more explanation, or more comps, or other “why didn’t ya?”
The second possibility is that although you wrote a good report, the reader feels the need for explanation (again, based on belief and some competence in traditional appraisal). This could be because: you inadvertently didn’t cover something, the reader lacks understanding of the particular area, the reader simply missed it, or failed to read what you wrote.
Genuine concern is closer to the ideal professional relationship. You do the work and communicate what you have done. The client may need additional explanation or understanding of the subject, or market dynamics, or — the original scope of work somehow did not have a meeting of the minds, or the client miss-stated what they needed, or (darn), you may have not picked up on something the client should have become aware of right in the beginning.
The third possibility of scope creep is that the work should have been there in the first place. An example is where the client asks for a “CMA” (data list) of your search. If we note that USPAP (Uniform Standards of Professional Appraisal Practice) require (SR 1-4) that an appraiser “must collect, verify, and analyze all information necessary.” For the sales comparison approach “an appraiser must analyze such comparable sales data as are available.”
It does not say discard all but the best 4 or 5 comps. It does say analyze all available. While the practice of not providing a complete listing of all directly competitive sales is common, and accepted by peers, it is not what the standards say. We can easily “head them off at the pass!” by simply following standards.
Our peers, our education, and our habits seem to disregard this simple fact. More information provides better results. More sureness (precision), and more trueness (accuracy).
The better model follows this USPAP requirement. The better model follows core data science principles. The better model (use all the relevant data), is technologically straightforward. The software is available to implement the better model.
The better model provides a competent professional service. The better model helps “promote and maintain a high level of public trust.”
Someone must take the lead: state regulators, The ASA, the Appraisal Foundation, the AI, or perhaps a major bank, GSE, or loan aggregator. Unsure scope creep can be replaced with a simple, but effective “new valuation modeling paradigm.” Evidence Based Valuation.©
At Valuemetrics.info, we regularly train appraisers in these methods, leading to an auditable, reproducible work product. The test is reproducibility, not belief.
January 17, 2018 @ 4:06 am
I really enjoyed your article and whole heartedly agree with you analysis and views in this article. Thanks for a great article!
January 17, 2018 @ 8:01 am
So are you saying just simply give them all MLS information that were our results that we chose comps from? How is that helpful? How is a list of comps that some desk jockey in florida reads and sees statistics/data going to be an accurate picture of the true market and/or local market competence?
A property might look AWESOME on paper but a list of comps is NEVER going to say nothing of condition, neighbor appeal, location that might look waterfront but in fact has no water frontage(easements etc).
There is no way I see giving a list of data to the desk jockey who has NEVER been to my local area and is not competent in my area is going to help anyone.
It is going to waste time with the game of “why not this one” and I have to take time out of my day either in initially in the report with a paragraph per each one of the 30xx comps explaining that the crack house while the data says its a match-its not….
Why not cut out us and just dredge MLS for a list and send them the list so they can do the report?
oh-desktop anyone?
January 18, 2018 @ 5:37 am
You are correct about the USPAP std 1-4. However, USPAP Standard 2 is where the scope creep takes place. Standard 2 states that the appraiser must disclose the research and analysis performed and disclosure of research not preformed. A list of properties is a not used or used in your analysis is only a result and does not rise to the level of logic used to develop a data set. A summary of parameters used along with why they are used is sufficient for the reader to understand the data pool used for analysis. When the reviewer does not understand or neglects to read the report for comprehension and a logical flow for conclusion, that’s where scope creep develops. Std 2 was not intended for the appraiser to replicate their work file in the report. If the appraisal report states a summary according to STD 2-2 (a)(vii) and (viii) you should be good to go. Development of “farm list” is the reviewers taking short cuts and if subject to USPAP they are violating Std 3.
January 18, 2018 @ 6:28 am
I wish Valuemetrics would come to the Midwest to teach some classes.
January 18, 2018 @ 7:19 am
TP-Too often, in these discussions the Appraisal Process (the subject of the article) is confused with the Appraisal Report. Doesn’t the agreed upon ‘Scope Of Work’ include the Report Format? (I realize that USPAP might require expansion). I include a multi-page addendum which covers those ‘essentials’,
Quote-“The third possibility of scope creep is that the work should have been there in the first place. An example is where the client asks for a “CMA” (data list) of your search. If we note that USPAP (Uniform Standards of Professional Appraisal Practice) require (SR 1-4) that an appraiser “must collect, verify, and analyze all information necessary.” For the sales comparison approach “an appraiser must analyze such comparable sales data as are available.It does not say discard all but the best 4 or 5 comps. It does say analyze all available. While the practice of not providing a complete listing of all directly competitive sales is common, and accepted by peers, it is not what the standards say.”
TP-Fact is that USPAP requires that the appraiser “must collect, verify, and analyze all information necessary.”
TP-But the agreed Scope of Work did not include a CMA in the report.
TP-The report format and additions are agreed upon as the intended Scope Of Work. Anything else is an uncompensated expansion of the Scope of Work..
January 18, 2018 @ 7:35 am
I agree with Mike, more data is not necessarily better, good data is more important. A local appraisers reviewing the data and selecting that data which is relevant to the analysis is the most important part of the process. Collecting tons of data, much of it which is not relevant to the subject or the neighborhood is only confusing to the reader of the report. If the report contains a list of 20-25 properties that the appraiser reviewed prior to selecting the best ones to include in the report, the AMC/Lender is going to come back to the appraiser and want him/her to comment on each of them and why they were not included in the report. Then will want a copy of the MLS listing and the tax/assessors records for each of them. I just reviewed a report on a SFR in the city that was 58 pages. I completed a report on that same property and it was only 33 pages and I received NO requests for revisions or additions or questions. MOre is not always better.
January 18, 2018 @ 11:39 am
I agree with most of your points. But all this leads to is more support for why we should be paid by the hour. There is to much personal interpretation, varying levels of knowledge and motivation as to why someone wants more information for an appraisal. This huge variable does not allow the appraiser, as an independent business person and owner to offset these additional expenses! I love appraising, not enough to do it for free! Attorneys, accountants, psychiatrist are all subjected to request for further information or explanation, but they’re not obligated to respond for free! It is left up to the professional to determine if it is something they will provide as a gratuity or if there needs to be additional charges. My complaints are mainly directed to other appraisers, because the only way these additional expenses can be offset is to charge higher appraisal fees.Standard fees that will cover all of the unknown extras ($800 – $1,000). On the occasions where no additional expense is incurred, the lenders should be the ones who accept this loss. Why, because appraisers know what USPAP guidelines are and overwhelmingly adhere to them. Just like all the other professions have their guidelines and are given the benefit of the doubt that they are adhering to them. Along with this, comes the freedom to allow the appraiser enough time to do a competent job without punishing him if he needs more time.
January 18, 2018 @ 2:43 pm
I read responses with great interest and with tongue in cheek. Here’s my take on the obvious….. if a review just wants “a couple of more comps” to support value, or “why didn’t you use these properties? after all, they are all in the same zip code” ( or something equally uninformed), my standard comment… right there in the scope of work where it belongs…. informs the client/reviewer that if THEY believe there are alternative, better, or more comparable properties available then THEY must provide some basic reasoning for believing that about each additional consideration requested if I am going to take the time to show them why additional or alternative comps were NOT used in my report. My statement clearly says that if we have considered and previously rejected a property from being “comparable” in our analysis, then the client must explain what motivated them to ask for the additional work to explain why a property was not included in our analysis. And, no, it ain’t free.
I also now have a blurb on the review process in each and every report. If the concern is over something that involves appraiser error or omission the concern takes top priority and is mitigated at the earliest possible convenience at no charge. If the concern has already been addressed in the originally submitted report and simply overlooked by the reviewer not doing their job properly (like just doing a word search instead of reading the report) then our charge for ‘review assistance’ to show them where to find the information is billed at $225 / hour with client confirmation and approval required in advance. BE CAREFUL, though, because many lenders and AMC’s’ don’t like this scenario and have indeed modified their guidelines to require that the original agreed upon appraisal fee must now INCLUDE any and all client requested changes, clarifications, and replacement comps analysis, regardless of how uninformed or incompetent the request might be.
Have some fun with this. My Scope of Work is now 13 pages long and fully addresses most of the left field assignment requirements formed in the imagination of those who believe they understand the process…. to the extent that I am not aware of one single reviewer, anywhere, that has read my entire Scope of Work on their own…. thus setting themselves up for blatant failure to read and understand the appraisal. I once had a reviewer, when I forced them to read my Scope, call me screaming that they where not about to accept a Scope of Work with the use of so many “IF” circumstance sentences in it. My calm and steady toned response 20 minutes later was that their guidelines used the word “IF” thirty-two (32) different times, and if I am to be held accountable for understanding and complying with their guidelines, then at least reading through the report to assure compliance should be a pre-requisite to review and rejection for any reason. The threat to send my report to FANNIE-Mae is also met with a smile and a very warm….”well, I sincerely hope you do just that, because if you don’t, I will, along with the name and the reviewer rejecting the report, and we’ll see where the dust settles”. Usually ends the conversation and saves the client. Never respond from a position of weakness.
As you can see, writing the Great American Novel gets very few interested readers.
January 18, 2018 @ 11:56 pm
Douglas-my favorite so far is the comp that was “only 2 miles away” but if they paid attention and used google, it was a 45 minute drive to get there and NOT in the same market. (down one mountain, over a bridge, around another mountain, then back up a third ridge to get to a town of retired people when the subject was in a rural pot-growing hippie area.
or the better one-not making it up;
zillow shows this property is real close-why didnt you include it?
well mr reviewer-it expired off MLS 9 months ago AND wasnt even in the same GLA or bed/bath class to boot.
‘sheesh!’