This article is featured in the 2023 edition of the Appraisal Buzz Magazine. Some other features we have in our magazine include funny Buzztoon comics, as well as crazy stories from appraisers and readers like you! Read all these articles and more in the latest edition HERE. If you want to make sure you are receiving the print version of the Appraisal Buzz magazine in your mailbox, sign up HERE.
As every appraiser is painfully aware at this point, complaints alleging bias and discrimination have risen sharply over the past couple of years. As a part of my practice, I am engaged to represent and defend appraisers who face state license board complaints or fair housing discrimination claims before state agencies and/or HUD. More frequently, I am asked to comment on the claims generally. The most common question people ask is what words an appraiser should or should not use to prevent being accused of bias or discrimination.
To be sure, there is no silver bullet for which words to use to prevent a claim. It’s far easier to discuss what words to avoid. Fannie Mae has already published extensive commentary on word selection, so we don’t need to revisit that here. But the most simple answer is that appraisers should avoid using subjective language when objective descriptions will do an equal or better job to describe the subject property, its neighborhood, or how it differs from other sales.
Though seemingly overlooked, when looking to limit risk and mitigate exposure to claims of bias and discrimination, the appraiser’s workfile and its contents are at least as important as the words used in the report. Put simply, my ability to defend an appraiser is directly correlated to the thoroughness of his or her workfile. The records an appraiser maintains as a part of developing the appraisal — both data that was included in the report and data that was analyzed and considered but not used — supports the appraiser’s conclusions more precisely than any single paragraph of the report ever can.
This is even more pronounced when it comes to allegations of bias or discrimination. In these instances, data that the appraiser analyzed and chose not to rely upon will potentially determine the outcome of the investigation. And far too many appraisers omit that information entirely from their workfile, or mistakenly assume that the information will be available if and when they need it at some later date.
We all know that the Uniform Standards of Professional Appraisal Practice (USPAP) set the baseline for what must be included in a workfile. We’ve all also heard ad nauseum that USPAP is a minimum standard. Still, all too many appraisers seek only to meet that minimum standard and little more. That’s where the trouble begins. Particularly when speaking about the workfile, for my money, the most dangerous words in USPAP are “or references to the location(s) of such other data, information, and documentation.” There it is, right there in plain English: USPAP permits appraisers to maintain a reference to the data, information, and documentation considered as a part of the assignment, and the appraiser is NOT obligated to keep a contemporaneous copy of those items.
That minimum standard is all well and fine until one day many months later, when an enforcement agency demands that the appraiser produce that information, usually on a tight timeline, and the information is no longer available or the source now shows different information than what was available at the time of the assignment.
Believe me when I tell you that it is not a good feeling when a regulator asks you to explain why you didn’t consider a particular piece of information, and you cannot summon an answer. Similarly, there are few things more liberating than producing a document that shows the information you are being asked about was not available to you at the time you performed the assignment. I’ve seen this happen. Systems fail. MLS aggregators have software glitches. Public record updates at its own pace. And sometimes, that one crucial piece of information isn’t there anymore when you need it.
And still, those are somewhat extreme (though common) examples. Simply having the contemporaneous records available whenever one might need to refer back to them allows the appraiser to create an imprint memory. Such an imprint memory makes it easier to recall why the appraiser made the decisions he or she made during the course of the assignment. Those decisions will be investigated when claims of bias or discrimination arise. And the documentary evidence contained in the workfile will provide support for the appraiser’s responses.
You can go one step further in protecting yourself with a thorough workfile: organize it well. Whether at the state board or in an enforcement agency, the investigators tasked with processing these complaints are often swamped with work and given very little guidance on how to conduct their inquiries. A tidy, logically organized workfile that allows the investigator to quickly locate particular records makes their jobs infinitely easier and, as a byproduct, builds up a positive rapport with the appraiser.
And that brings us to bias itself.
Humans act with bias every day. Sometimes that bias is for something and other times that bias is against. Appraisers (and investigators) are not supposed to allow bias to impact their decisions. And yet, bias certainly plays a part. Appraisers are asked to place themselves into the shoes of a biased market participant to determine what factors influence decisions to buy and sell properties. The investigator is asked to review documents and take statements to infer the motives of particular individuals. In order to perform either role, people are expected to understand and identify biases while also being asked to steer clear of their own.
Typically, when a bias in favor of another develops, it is referred to as good will or affinity. In these investigations, appraisers will want as much good will as they can get. The ability to produce a complete, organized workfile quickly upon demand will curry immense favor in an investigation. That benefit of the doubt may pay tremendous dividends when that same investigator has to infer the motives of the appraiser at some point in the process.
With so much focus on avoiding bias and discrimination claims, not nearly enough care is given to how to best position oneself for success if the claim arises. A neat, orderly, and thorough workfile is the best defense against any claim. Now, more than ever, appraisers should make that extra effort to ensure the greatest likelihood of a positive outcome if a complaint becomes reality.
