Monday, 15 August 2022 | The Latest Buzz for the Appraisal Industry

Appraiser Geographic Competency

This article was first published here by the Department of Commerce, Real Estate Division by Jonathan Stewart.

The Utah Division of Real Estate frequently receives comments about appraisers and their geographic competency. The most common question and comment The Division receives is in regards to appraisers who appraise a property in an area they do not work or live in. However, it is important to note that appraisers can be geographically competent in many different areas of the state.

Although there is nothing in state statute that specifically refers to geographic competency, 61-2g does reference the Uniform Standards of Professional Appraisal Practice (USPAP) on several occasions. There is one citation in administrative rule:

R162-2g-502a.  Standards of Conduct and Practice.

(4)(g)  A supervisory appraiser shall comply with the competency rule of USPAP for the property type and geographic location for which the trainee appraiser is being supervised.

When geographic competency is discussed, what is really being referenced is the Competency Rule of USPAP which goes beyond just geographic competency. According to USPAP, an “appraiser must determine, prior to agreeing to perform an assignment, that he or she can perform the assignment competently.” How does USPAP define competency? Again, competency goes beyond geographic competency:

“Competency may apply to factors such as, but not limited to, an appraiser’s familiarity with a specific type of property or asset, a market, a geographic area, an intended use, specific laws and regulations, or an analytical method.”

Prior to accepting an assignment, it is up to the appraiser to determine if they are competent to perform the assignment. The competency rule does not limit an appraiser to only appraising properties within a certain number of miles from an appraiser’s home or office. The only requirement is that the appraiser determines competency prior to agreeing to perform the assignment. So what happens if an appraiser determines they are not competent to perform an assignment? One option is to turn down the assignment, but USPAP gives appraisers another option.

According to USPAP, an appraiser also has the option of acquiring competency after accepting an assignment. USPAP states:

“If an appraiser determines he or she is not competent prior to accepting an assignment, the appraiser must:

  1. Disclose the lack of knowledge and/or experience to the client before accepting the assignment;
  2. Take all steps necessary or appropriate to complete the assignment competently; and
  3. Describe, in the report, the lack of knowledge and/or experience and the steps taken to complete the assignment competently.

Competency can be acquired by personal study, working with another appraiser or individual that has the necessary knowledge and/or experience, or a combination.”

Dustin Harris, a Certified Residential Appraiser, wrote a blog post entitled: “Geographical Competency. There’s the Right Way, the Wrong Way…and Something in Between[i].” In his blog post, Harris points out that “[i]t is difficult to obtain geographic competency without the help of another appraiser and other appraisers are rarely willing to help you gain geographic competency (it’s an anti-competition thing).” He also describes what some appraisers do when they are offered an assignment in an area that is unfamiliar:

What does that mean for most appraisers who want or need to work in a new area? It is time for    a little honesty. Though they won’t admit it, some appraisers gain geographical competency by closing one eye and hoping to squeeze through. They do appraisals they are probably not competent to do and hope they don’t get caught until enough time has passed that they can rightfully claim geographical competency.

Clearly this is not a good idea, and The Division does not recommend appraisers “close one eye” while performing an assignment they are not competent to perform.  So what is the solution? There are several ways an appraiser can gain competency, but Harris provides one possible solution:

…do appraisals for the one person who is not going to sue you for incompetency…YOU! That is right. Do several (you decide how many) test appraisals in your new area for yourself. You are the client. Now, to help you become competent, hire a review appraisal done on your work from a variety of appraisers who are competent in the new coverage area. Isn’t the very purpose of a review appraisal to determine competency of the appraiser and to give feedback…?

Appraisers should follow the Competency Rule of USPAP to become geographically competent for the assignments they accept. If you are not an appraiser or questioning an appraiser’s geographic competency, it’s best not to assume that just because they don’t live or work regularly where you live or work that they are not competent.  We can all work together to provide value for the citizens of Utah. Have a safe and happy New Year!

[i] https://theappraisercoach.com/geographical-competency-theres-the-right-way-the-wrong-wayand-something-in-between/

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