It goes without saying that there’s no simple, easy way to deal with appraisal pressure. A major source of frustration for appraisers is the realization that clients do not have to follow USPAP. The ethical and performance requirements of USPAP apply only to appraisers, not to clients. In other words, USPAP doesn’t prohibit a mortgage broker from calling and asking you to develop an appraisal based on a predetermined value, but USPAP does prohibit you from accepting that assignment.
Here, we put together a list of some possible ways to deal with appraisal pressure from unethical clients.
A lot of what we consider appraisal pressure from clients is merely a result of their lack of knowledge about appraisal standards and ethics. A lender might ask an appraiser to guarantee values beforehand simply because he or she is unaware that it is unethical for an appraiser to do so. Explain why you cannot guarantee a value or remove that deferred maintenance photo from your report. You might be surprised at your client’s response if you take the time to educate him or her.
Know your clients
Be aware of who your clients are, and be familiar with their business practices. If they are a local company, what is their reputation in the community? If they are not local, check up on them with the Better Business Bureau or an organization like the Mortgage Bankers Association.
When contacted by a new client, ask for references. If you’re uncomfortable about asking for references, research them yourself. Or, you can simply converse with them on the phone for a few minutes. Do they start off the conversation asking about the quality of your work and your experience, or do they ask right away if you can get a particular value on a property?
Diversify your client base
This goes not only for the number of clients you have, but the types of clients as well. Doing 100% of your work for mortgage lenders makes you dependent on that type of work, and makes you more susceptible to pressure from lenders. And if you are getting more than 30% of your appraisal work from any one client, you may be in the dangerous position of having a client that you can’t afford to fire.
Require advance payment
Getting paid in advance removes a major source of appraisal pressure, and helps put you in the driver’s seat. A client’s threat of “We’re not going to pay you unless you change that appraisal” will not affect you if you already received payment up front. Of course, for most residential mortgage lending assignments, appraisers are not permitted to accept payment from the borrower at the time of inspection. However, for non-lending assignments, such as divorces, estates, and bankruptcies, you are still permitted to collect your fee at the time of the inspection.
It’s OK to move on
So you were told by a client that they’re not going to give you any more business unless you raise the value on that appraisal by $20,000. That’s OK. There are other clients out there. Realize that your ethical reputation is worth infinitely more than any client or appraisal fee, and protect it accordingly.
Contact your state enforcement agency
Enforcement efforts against mortgage lenders and brokers at the state level are uneven throughout the country. Some states take appraisal pressure seriously, and will prosecute mortgage lenders and brokers who pressure appraisers. However, other states do not have the resources or the motivation to investigate incidences of appraisal pressure. Check with your state agency that regulates banking or lending to find out how to file a complaint. If the pressure originates from an AMC, know that most states now regulate AMCs.
Become an expert on mortgage fraud
If you are educated on the different ways that mortgage fraud is perpetrated, you have a better chance of recognizing a scheme when someone asks you to become involved. For example, if you find out that the property you are appraising for a lender client was originally offered at $120,000 for eight months, and now is under agreement for $200,000—with a corresponding change in list price in the MLS—you would recognize this as a possible “silent second” or “cash back” scheme. In either case, you don’t want to be involved.
Know when to say goodbye
Don’t ever lie at the request of a client, and don’t ever keep a client who asks you to lie. If a client ever requests that you misrepresent the property, omit factual information from a report, or conceal the truth, you should waste no time in “firing” that client.
Know you’re not alone
Even though sometimes it may not seem like it, you are not the only ethical appraiser out there. Take comfort in the fact that other appraisers are dealing with the same problems you are.
Have any stories, insights, or examples of your own experiences with appraisal pressure or unethical situations? We’d love to hear your take. Please share your experiences in the comments section below.
Interested in learning more? McKissock is the provider of The Appraisal Foundation’s official 2016-2017 online USPAP course, and the only one to offer interactive case studies and downloadable aids. Plus, check out our highly-rated course on Avoiding Mortgage Fraud for Appraisers.