There’s no simple and 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.
When you are faced with appraisal pressure, here are some strategies to manage the situation and still maintain your reputation as an ethical, unbiased appraiser.
1. Educate your appraisal clients
A lot of what appraisers consider pressure from clients is merely a result of the client’s 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.
Avoid this by explaining 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.
2. Get to know your current clients
Be aware of who your appraisal 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.
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3. Check out potential new clients
When you’re 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?
4. Fire clients who ask you to do something unethical
Your ethical reputation as an appraiser is worth infinitely more than any client or appraisal fee, so protect it accordingly. 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.
5. Diversify your client base to reduce appraisal pressure
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. 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.
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6. Require payment in advance when possible
Getting paid in advance removes a major source of appraisal pressure, and it helps put the appraiser in the driver’s seat. A client’s threat of nonpayment if you don’t write an appraisal the way they want it will not affect you if you got paid 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. But for non-lending assignments, such as divorces, estates, and bankruptcies, you are still permitted to collect your fee at the time of the inspection.
7. Contact your state enforcement agency for backup when faced with appraisal pressure
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. Other states, however, 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.
8. Become an expert on mortgage fraud
If you are educated on the different ways that fraud is perpetrated, you have a better chance of recognizing a scheme if 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.
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9. Know you’re not alone out there
Remember, 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. For additional moral support, you may wish to join an appraisal organization, or become a member of an online community. There are a number of forums and message boards that provide appraisers the opportunity to seek advice, swap war stories, and receive moral support from other appraisers.
For an in-depth look at mortgage and valuation fraud in the U.S., enroll in our CE course, Avoiding Mortgage Fraud for Appraisers.
Editor’s Note: This post was originally published on April 10, 2020 and updated August 30, 2022.
