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Since we hold the lender responsible for the quality of the appraisals it uses to support the value of a security property, the lender should take appropriate action to assure that the appraisers it uses do not engage in unacceptable practices.
The following are examples of appraisal practices that we consider as unacceptable:
| • | Development of and/or reporting an opinion of value that is not supportable by market data or that is misleading; |
| • | Development of a valuation conclusion that is based -- either partially or completely -- on the sex, race, color, religion, handicap, national origin, or familial status of either the prospective owners or occupants of the subject property or the present owners or occupants of the properties in the vicinity of the subject property; or that is based on any other factor that local, state, or federal law designates as being discriminatory, and thus, prohibited; |
| • | Inclusion of inaccurate factual data about the subject neighborhood, site, improvements, or comparable sales; |
| • | Failure to comment on negative factors with respect to the subject neighborhood, subject property, or proximity of the subject property to adverse influences; |
| • | Failure to analyze and report any current agreement of sale, option, or listing of the subject property and the prior sales of the subject property and the comparable sales; |
| • | Selection and use of inappropriate comparable sales or the failure to use comparable sales that are locationally and physically the most similar to the subject property; |
| • | Creation of comparable sales by combining vacant land sales with the contract purchase price of a home that has been built or will be built on the land; |
| • | Use of comparable sales in the valuation process even though the appraiser has not personally inspected the exterior of the comparable properties by, at least, driving by them; |
| • | Use of adjustments to the comparable sales that do not reflect the market's reaction to the differences between the subject property and the comparable sales, or the failure to make adjustments when they are clearly indicated; |
| • | Use of data -- particularly comparable sales data -- that was provided by parties who have a financial interest in the sale or financing of the subject property without the appraiser's verification of the information from a disinterested source. For example, it would be inappropriate for an appraiser to use comparable sales provided by the real estate broker who is handling the sale of the subject property, unless the appraiser verifies the accuracy of the data provided with another source and makes an independent investigation to determine that the comparable sales provided were the best ones available; |
| • | Development of and/or reporting an appraisal in a manner or direction that favors either the cause of the client or any related party, the amount of the opinion of value, the attainment of a specific result, or the occurrence of a subsequent event in order to receive compensation and/or employment for performing the appraisal and/or in anticipation of receiving future assignments; and |
| • | Development of and/or reporting an appraisal in a manner that is inconsistent with the requirements of the Uniform Standards of Professional Appraisal Practice that were in place as of the effective date of the appraisal. |
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