By Chuck Mureddu, EVP Business Development
There has been much debate regarding Geographic Competency lately and after talking to many lenders, appraisers, underwriters, and end users of valuation products, I still feel that there is still a mis-understanding of what “Competency” is all about. Back in the 90s, you almost never heard the word “Geographic” in the definition of “Competency”. We know that for anyone to demonstrate successful job performance no matter what they do in life they need to have core competencies within that field. This includes a practical and theoretical understanding of the subject matter including basic principles, theory, standards, and rules, they need to have knowledge and understanding of the tools available to them such as software and data sites and of course know how to use them effectively. We must develop our skill sets and in our case requires the need for quality education and as appraisers work under a supervisor for several years so we can master complex tasks. We need to be able to identify the problem to be solved, determine the scope of work, and apply the work necessary to develop a credible assignment. Other elements could be discussed including customer service, communication, leadership, personal effectiveness such as organizational skills, time management, ethics, and continually leaning and improving with help from our colleagues. This might be a good topic in the future. So, let’s get back to “Competency” as it relates to the appraiser. The 2010-2011 Edition of the Uniform Standards of Professional Appraisal Practice or USPAP) has a clearly defined COMPETENCY RULE that states: An appraiser must: (1) be competent to perform the assignment; (2) acquire the necessary competency to perform the assignment; or (3) decline or withdraw from the assignment. The appraiser must determine, prior to the assignment, that he or she can perform the assignment competently which requires the ability to properly identify the problem to be addressed, have the knowledge and experience to complete the assignment competently and recognition of, and compliance with, laws and regulation that apply to the appraiser or the assignment. So, where does geographic fit in? Under this section the Appraisal Standards Board provides us with a comment that states, 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. If such factor is necessary for an appraiser to develop credible assignment results, the appraiser is responsible for having the competency to address that factor or for following the steps outlined in Acquiring Competency to satisfy this COMETENCY RULE. So is “Geographic Competency” relatively a new concept, not at all. After all, we are providing analysis that is geographically centric in most cases right? Out of curiosity I went back to my “2003” USPAP book and there it was. “Geographic” was there under comments within the COMPETENCY RULE. Thinking back to my days of 101 and 102 we discussed how important it was to know the market we are appraising. This is not a new concept. It is a practical one. What is new is that the word “Geographic” has become somewhat a “buzz” word kind of like when underwriters would quote USPAP when they never even glanced at a copy of it. The other day we received a rebuttal or (request for reconsideration of value) from a lender and prepared by the borrower. The borrower stated in the first sentence, “I do not feel that the appraiser was Geographically Competent”. This became a new weapon in the lender’s, borrower’s, broker’s arsenal to contest the appraisal with the hopes to get the “deal” done. In this case, the appraiser lived less than 5 miles from the subject and has been appraising there for over ten years. However, does the appraiser’s physical address automatically deem him or her Geographically Competent? Here lies the misconception of what Competence is all about. Just because you live close to the subject property does not mean you are a great appraiser and the opposite holds true if you live 50 miles away certainly does not make you a bad one either. I see policies written by lenders that require the appraiser to live in the same county or even town. WHAT? Others dictate the appraiser must be within 10 miles of the subject. Living in Rhode Island, a state that is only 1214 square miles (48 miles north to south and 37 miles east to west) We have only one Multiple Listing Service that not only covers the entire State of Rhode Island but parts of Southeastern Massachusetts as well. We have 39 municipalities each having its own form of local government. That is 39 school districts and 39 tax rates. Oh, I do have to boast that as small as our state is, we have over 400 miles of shoreline on the Atlantic Ocean and Narragansett Bay. Can you imagine requiring an appraiser to live within the town that he/she appraises here in RI? As for distance, Rhode Island appraisers not only specialize in specific communities that may or may not be located near where they live but for the type of property being appraised such as historic or ocean-front homes. We have appraisers that live in Bristol County, Rhode Island that specialize in areas like Bristol County, Massachusetts rather than an appraiser that might live in Bristol County Massachusetts that will go anywhere to get an assignment. Who would you use? Who is more competent? You see, “Geographic” Competency is not as simple as you think. What I do know is that most appraisers would rather stay close to home whenever possible. At QVS, proximity is heavily weighted and monitored throughout the process. We can also report average distance of each assignment to the client. However, proximity is not the only criterion that ensures geographic competence. The appraiser’s historical performance for that specific region is also monitored and utilized. In addition, QVS identifies niches (i.e. appraisers who specialize in 2-4 family properties, historical properties, water-front, reviews, or retrospective assignments) through on-going surveys to determine the most appropriate appraiser is chosen for the assignment. This is important because at the end of the day we are confident we are using the best appraiser for the particular assignment.
Does Geographic Competency matter? Of course, it does but what we should spend more emphasis on is if the appraiser is “COMPETENT” period!
