Virginia Regulatory Town Hall View Comments

Department of Professional and Occupational Regulation

Real Estate Appraiser Board

Real Estate Appraiser Board Rules and Regulations [18 VAC 130 ‑ 20]

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4/20/08 1:43 pm

Commenter: George W Dodd, SRA

(Part 1 of 2) Tampering with appraisal reports during the communication via electronic portals

There are entities that have positioned themselves between the appraiser and the end user – client, which have created electronic “portals” that appraisers are being required to use when transmitting, or communicating, the appraisal report. It has become common knowledge that by using these “portals” the content of the appraisal report is being alter, photographs and attachments are omitted, and the Appraiser’s signature is either removed and re-applied; or required to be sent as a separate attachment.

(REFER TO Attachment #1 and #2)

As you can see in Attachments #1 and #2, which are “disclosures” that alerts the Appraiser to the fact that the report is being altered in the delivery process. Please note, this disclosure is not provided by the intermediaries but by the appraisal report software company. The intermediaries do not and will not disclose to the Appraiser what is being changed. These attachments are just examples of what is commonly being done:

· Unlocking reports sent in Adobe PDF format for change prior to reaching client.

· The Appraiser’s Digital Signature being removed and re-applied or sent as a separate file.

· Appraisal reports being re-formatted and/or altered in manner that the Client does not receive what the Appraiser Created.

· The removal of forms and/or custom fonts not compatible with the portal’s software.

· That images, sketches, maps, etc that exceed the number and/or size of attachments imposed by the electronic portal are omitted from the file received by the Client.

It must be clearly stated and understood, that these types of changes are occurring during the transmission process which is distinctly different from, a client who, after receiving an appraisal report, either manually or automatically extracts information or data on their own.

The client would, after all, have received the complete report in the format as created by the Appraiser. And, the Appraiser would have no control over what the client does with the report.

This type of activity not only causes problems for Appraisers, BUT undermines the public’s trust. I am asking the Board to consider some of these issues today.

First: is the Appraiser retaining exclusive control over their signature when they are reasonable aware that their signature will be removed and re-applied prior to the Client receiving the report; and/or by attaching the digital signature as a separate file and not actually on the report?

And second, is whether the Appraiser by being an active participant in this type of electronic transmission process, in which they are reasonably aware that alterations and/or omission of data from the report will occur during the transmission process, violating the USPAP and the Rules and Regulations of this Board.

I believe the answers to these questions are already contained in the Code of Virginia, the Boards Rules & Regulations and USPAP, but we need the Board to provide clear guidance and direction to protect both the “public interest” and appraisers.

Signature Issue (Attachment #3)

The act of applying a signature to an appraisal report is probably the single most significant act for the Appraiser. It provides authentication and acceptance of the document and value opinion. And that is why it is listed in USPAP, the Board’s Rules & Regulations, and the Code of Virginia:

I USPAP: (in definitions) Defines Signature as:

(137-141)The Appraiser’s Signature is personalized evidence indicating authentication of the work performed by the Appraiser and the acceptance of the responsibility for content, analysis, and the conclusions in the report.

Comment: A signature can be represented by a handwritten mark, a digitized image controlled by a personal identification number, or other media, where the appraiser has sole personal control of affixing the signature.

II CODE OF VIRGINIA:

§ 54.1-2017. Use of terms "Licensed Residential Real Estate Appraiser," "Certified Residential Real Estate Appraiser," and "Certified General Real Estate Appraiser"; authentication of reports.

(paragraph 2)

Each licensed residential real estate appraiser, certified residential real estate appraiser, and certified general real estate appraiser shall comply with the standards of professional appraisal practice and code of ethics adopted by the Board and shall authenticate all written appraisal reports with his signature, license designation and license number.

III Appraiser Board’s Rules & Regulations:

18VAC130-20-180. Standards of professional practice.

C. Use of signature and electronic transmission of report.

1. The signing of an appraisal report or the transmittal of a report electronically shall indicate that the licensee has exercised complete direction and control over the appraisal. Therefore, no licensee shall sign or electronically transmit an appraisal which has been prepared by an unlicensed person unless such work was performed under the direction and supervision of the licensee in accordance with §54.1-2011 C of the Code of Virginia.

2. All original appraisal reports shall be signed by the licensed appraiser. For narrative and letter appraisals, the signature and final value conclusion shall appear on the letter of transmittal and certification page. For form appraisals, the signature shall appear on the page designated for the appraiser's signature and final estimate of value. All temporary licensed real estate appraisers shall

sign and affix their temporary license to the appraisal report or letter for which they obtained the license to authenticate such report or letter. Appraisal reports may be transmitted electronically .Reports prepared without the use of a seal shall contain the license number of the appraiser.

b. Application of the seal and signature or electronic transmission of the report indicates acceptance of responsibility for work shown thereon.

Question 1: Can the Appraiser’s signature be attached as a separate file to the report without it being applied directly to the Appraiser’s Certification, Limiting Conditions, and Value Conclusion?

Question 2: If an intermediary removes, alters the document but does not disclose the alterations to the Appraiser, and then reapplies the Appraiser’s Signature, and the Appraiser is aware this process; has the Appraiser retained necessary control of their signature?

I respectfully submit that the answer to these questions is NO.

Second Question (See Attachments 1, 2, 4, and 5)

It has become common knowledge that appraisal reports transmitted through electronic portals are being altered prior to reaching the end user Client.

This effectively makes the Appraiser an active participant in a transmission process, in which they are reasonably aware, that alterations and/or omission of data from the report will occur prior to the report reaching the end user –Client.

I USPAP: (Attachment #6)

1. Ethics Rule:

a. (224-226) An Appraiser must not communicate assignment results in a misleading or fraudulent manner. An Appraiser must not use or communicate a misleading or fraudulent report or knowingly permit an employee or other person to communicate a misleading or fraudulent report.

2. Scope of Work Rule:

a. (410-411) An Appraiser must not allow assignment conditions to limit the scope of work to such a degree that the assignments results are not credible in the context of the intended use.

b. (419-420) An Appraiser must not allow the intended use of an assignment or a client’s objectives to cause the assignment results to be biased.

3. Disclosure Obligations:

a. (422-423) The report must contain sufficient information to allow intended users to understand the scope of work performed.

4. Standards Rule 1-1:

a. (472-473) not commit a substantial error of omission or commission that significantly affects an appraisal;

5. Standards Rule 2: Real Property Appraisal, Reporting: (612-613). In reporting the results of a real property appraisal, an Appraiser must communicate each analysis, opinion, and conclusion in a manner that is not misleading.

Standards Rule 2-1: (620-625)

(a) clearly and accurately set forth the appraisal in a manner that will not be misleading;

(b) contain sufficient information to enable the intended users of the appraisal to understand the report propertly; and

(c) clearly and accurately disclose all assumptions, extraordinary assumptions, hypothetical conditions, and limiting conditions used in the assignment.

II Appraiser Board’s Rules & Regulations (still Attachment 6)

18VAC130-20-180. Standards of professional practice.

C. Use of signature and electronic transmission of report.

K. Unworthiness.

1. A licensee shall act as a certified general real estate appraiser, certified residential real estate appraiser or licensed residential real estate appraiser in such a manner as to safeguard the interests of the public, and shall not engage in improper, fraudulent, or dishonest conduct.

Conclusion

This Board was created to protect the public trust. And at the same time to provide guidance to those it regulates. I believe the Board has an obligation to both to provide a clear and definitive statement that any Virginia Appraiser using such a transmission “portal” would be in violation of the Board and subject to fine, suspension, and/or revocation of licensure.

The Board has this authority under: (see Attachment #7)

18VAC130-20-160. Grounds for disciplinary action.

The board has the power to fine any licensee, registrant or certificate holder, to place any licensee, registrant or certificate holder on probation, and to suspend or revoke any license, registration or certification issued under the provisions of Chapter 20.1 of Title 54.1 of the Code of Virginia and the regulations of the board, in accordance with §§54.1-201(7), 54.1-202 and the provisions of the Administrative Process Act,

Chapter 1.1:1 of Title 9 of the Code of Virginia:

when any licensee, registrant or certificate holder has been found to have violated or cooperated with others in violating any provision of Chapter 20.1 of Title 54.1 of the Code of Virginia, any relevant provision of the Uniform Standards of Professional Appraisal Practice as developed by the Appraisal Standards Board of the Appraisal Foundation, or any regulation of the board.

List of Portal type Providers (See Attachment 8)

There are readily available alternatives to these “portals” that allow for the safe and secure transmission of the unaltered appraisal report. One such method is Adobe Document Center. Most, if not all, appraisers are already using some form of Adobe PDF and transition to the Document Center is simple and inexpensive.

The Adobe Document Center Protects and control access to the documents and if the recipients can copy, print, or make comments.

The Adobe Document Center Controls the document by “turning off” access to the document, including copies on anyone’s desktop.

The Adobe Document Center Tracks specifically who has done what to your document in real time.

The Cost for this is $19.99/month or $199/year.

It provides unlimited number of files and unlimited file size.

See Attachment #9: Adobe Document Center.

CommentID: 1410