When using the Uniform Residential Appraisal Report (URAR) to report the results of an appraisal, the appraiser’s signature on the report is not merely a formality, it is a certification. By affixing his or her signature, the appraiser is certifying to (among other things) having personally made an interior and exterior inspection of the subject property.
Clients, AMCs, and state regulatory agencies are reporting that appraisers are increasingly delegating their inspection responsibilities to others yet are signing the URAR certifying they made a personal inspection.
What are the risks if an appraiser signs a URAR report certifying an interior and exterior inspection that was actually conducted by someone else?
What the URAR Certification Means
In the legacy (2005) URAR form, there is pre-printed language stating that the signing appraiser has personally inspected both the interior and exterior of the property.
It states:
2. I performed a complete visual inspection of the interior and exterior areas of the subject property.
When another person performs the inspection but the appraiser signs as if they themselves did, this creates serious misrepresentation and potential liability.
The GSEs and HUD
Fannie Mae and Freddie Mac (the GSEs) do not permit appraisers to make changes or deletions to the existing certifications on the URAR. As such, if an appraiser signs a URAR report as “Appraiser” (on the left side of the signature page) the appraiser is certifying that he or she performed a “complete visual inspection of the interior and exterior areas of the subject property.”
It is not permissible for an appraiser to delegate the inspection to another appraiser (or third party) and then sign the report as “Appraiser,” as this would be misleading. Inserting a statement in the report that countermands this certification is not permitted by the GSEs.
In an FHA appraisal assignment, HUD does not permit the assigned FHA roster appraiser to delegate the subject property inspection to a third party.
HUD Handbook 4000.1 states:
“A trainee or licensee may accompany the FHA Roster Appraiser on the observation but may not perform the observation in place of the FHA Roster Appraiser. The FHA Roster Appraiser must select the comparable properties and perform all the critical analyses contained in the appraisal report. The FHA Roster Appraiser must also inspect the subject Property and at least the exterior of the comparable properties.”
Hence, it is not permissible for the assigned FHA roster appraiser to delegate the observation (inspection) of the subject property to another appraiser, even if the other appraiser is on the FHA Roster.
Professional and Legal Consequences
The Uniform Standards of Professional Appraisal Practice (USPAP) does not require an appraiser to make an interior inspection the subject property. USPAP does, however, require a signing appraiser to disclose, in a certification, whether or not they made a personal inspection of the subject property.
If an appraiser signs a report certifying that they inspected the property, when instead a trainee, associate, or third party did, the report is misleading and therefore violates USPAP.
- Disciplinary Action: State licensing boards can impose disciplinary sanctions, including fines, license suspension, or even revocation for knowingly making false certifications.
- Legal Liability: If an error or omission by the person who actually performed the inspection leads to a faulty valuation or financial loss, the appraiser may be held legally responsible for damages. Signing off on someone else’s work without proper disclosure can be viewed as negligence or even fraud in court.
- Loss of Insurance Coverage: Professional liability (E&O) insurance policies often include exclusions for fraudulent acts or material misstatements. Falsely certifying an inspection could void coverage, leaving the appraiser personally liable for defense costs and damages.
- Reputation Damage: Beyond legal and financial consequences, being found guilty of misrepresentation can severely damage an appraiser’s reputation and future career prospects.
Conclusion
Signing a URAR appraisal report that states the appraiser personally inspected the property, when in fact another party performed the inspection, is a serious liability risk. USPAP permits an appraiser to value a property that they did not make an interior and exterior inspection.
However, USPAP does not allow an appraiser to communicate a misleading report. A report that falsely indicates that an individual made an inspection of a property when in fact they did not is misleading, and could result in disciplinary action, civil liability, or other negative consequences.
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