May 13, 2025 • 26 mins
Navigating the maze of regulatory requirements while running a successful business demands more than just awareness—it requires strategic implementation and proactive engagement. Douglas Rives, president of Central Texas' largest residential real estate appraisal firm Appraisal Shop, pulls back the curtain on what it truly takes to maintain compliance in a highly regulated field where standards constantly evolve.
The regulatory landscape for appraisers presents unique challenges. With USPAP (Uniform Standards of Professional Appraisal Practice) being referred to as an "aspirational document" rather than providing concrete guidelines, professionals must interpret principles that change every two years while satisfying different interpretations from multiple regulatory bodies. As Rives candidly shares, this creates significant gray areas where even experienced professionals struggle to find solid footing.
For business owners and independent professionals alike, compliance isn't merely about avoiding penalties—it's about creating sustainable practices that protect their livelihood. Rives offers practical wisdom gained from decades of experience: establish clear communication protocols, invest in knowledgeable legal counsel early rather than after problems arise, and implement safeguards based on past mistakes. His approach of having leadership serve as a buffer between appraisers and clients demonstrates how organizational structure itself can become a compliance strategy, protecting professionals while maintaining client relationships.
Perhaps most compelling is Rives' insight into building bridges across the industry. Through initiatives like "Brokers and Appraisers Bridging the Gap," he shows how education and relationship-building between different stakeholders creates an ecosystem where compliance becomes collaborative rather than combative. When real estate agents understand appraisers' constraints and appraisers value agents' neighborhood expertise, both can navigate regulations more effectively while better serving clients.
Whether you're operating in real estate appraisal or another regulated field, this episode delivers actionable strategies to transform regulatory compliance from a burdensome obligation into a competitive advantage. Subscribe to Know Your Regulator as we continue exploring how engagement with regulatory bodies and strategic compliance planning serves as the foundation for sustainable business success.
Get more information, details and resources on Know Your Regulator - https://www.belolaw.com/know-your-regulator
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Episode Transcript
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Speaker 1 (00:01):
This podcast is for educational purposes only, does
not constitute legal advice anddoes not create an
attorney-client relationship.
If you need legal assistanceabout a legal problem contact an
attorney.
Welcome to another episode ofKnow your Regulator, the podcast
that inspires you to engage.
I am your host, Simone Murphree, and co-hosting with me today
(00:22):
is Troy Bullier, Director ofLegal Services at Bertolino Law
Firm.
Speaker 2 (00:27):
Thanks, simone.
Today we have a special episode.
We're going to be talking aboutregulatory compliance for
businesses and the importantimpact that has on smooth,
successful and efficientbusiness operations.
Whether it's owning your ownbusiness or managing a team,
(00:48):
that's part of the business, ormaybe perhaps you're just a
professional license holder andyou're operating your own
practice as a small business asole proprietorship you really
need to have an understanding ofand appreciation for, you know,
integrating regulatoryrequirements into your business
operations.
That's going to be essentialfor long-term success and risk
(01:11):
management.
Speaker 1 (01:13):
That is very right, troy, and to help us unpack
these critical issues, we'revery excited to welcome Douglas
Reeves, president of AppraisalShop.
Doug operates the largestresidential real estate
appraisal firm in Central Texasand, as a result, he's got
extensive experience navigatingregulatory compliance in the
(01:33):
world of real estate appraisal.
So he's here to share hisinsights into those best
practices and challengescompanies face when dealing with
state regulatory oversight.
Thank you for joining us today,doug.
Speaker 3 (01:45):
Thank you, ms Murphree, thank you, troy.
Speaker 1 (01:49):
Absolutely Well, we'll start off by defining
regulatory compliance.
Doug, from your experience,what does regulatory compliance
mean for a business operationlike Appraisal Shop?
Speaker 3 (02:09):
like appraisal shop.
Well, we being appraisers fallunder USPAP, the Uniform
Standards Practice forProfessional Appraisal.
So it's a little bit differentfor us.
That's our overarching thingthat we're always wanting to
comply with, but there's a lotof interpretations of that by
TREC and TLCB and Fannie Mae andother government entities, and
so you're always kind of havingto be on your toes and since
(02:29):
USPAP is something that changesevery two years or at least is
revisited, we have to be out infront of it.
So regulatory compliance to uspretty much starts with USPAP,
and USPAP kind of says that ifyour intended user has something
that they want you to do andyou know that, then you're going
(02:52):
to also have to comply withthat, as long as it's not in
opposition to USPAP.
So you kind of need to alsounderstand who your user is and
how they interpret it.
And so because we have toalways be sensitive to that and
all the different users anddifferent interpretations, it
can be very tricky forappraisers.
Speaker 2 (03:16):
Yeah, I completely agree, doug, and businesses that
fail to implement effective,solid oversights often face
legal challenges, including evenpotentially regulatory action
that can lead to legalconsequences that impacts the
business's employees or maybeeven a license that the business
(03:39):
entity itself holds.
Can you share with us some ofyour insight and experience and
knowledge in the appraisal andreal estate industries, where
you've seen maybe someinadequate attention to
regulatory compliance that hashad an impact on the business?
Speaker 3 (03:55):
somehow around for 20 , 30 years.
So we've baby stepped andstubbed our toes and each time
we do that we then implementsomething else to try to prevent
that from happening.
But I think that a lot of realestate appraisers do not have
(04:15):
that opportunity as much, inthat they tend to want to
operate independently and thatdoesn't give them the resources
or the time often to dedicate tosomething like becoming a USPAP
instructor or spending timedoing teaching or, you know,
having the kind of volume andexpanse of work product to be
(04:38):
able to really see a lot of thedifferent places where we might
need to have something in place.
So while we've been very luckyover the years, we also and I'm
going to have to say thismultiple times today we rely
very much on legal counselBecause of the nature of our
(05:02):
business, of the nature of ourbusiness.
There's such a gray area of whatUSPAP is.
I've heard it referenced as aaspirational document and it
doesn't give exact guidelines.
It simply gives overarchingsort of ideas of how to comply,
and so I've seen many, manyappraisers and so I've seen many
(05:29):
, many appraisers that do notreally understand not only how
USPAP affects them but how itcan be used to actually it
really is there to protectappraisers in many, many ways as
much as the public.
It also is there to protectappraisers, but I do find that
the TALCB and AppraisalInstitute and most people are
very willing to forgive andrehabilitate appraisers.
So it's not the sticky stepthat it seems to be, as long as
(05:55):
the appraiser is knowledgeableand is working towards that
greater goal of credibility andthe public trust.
Speaker 1 (06:06):
Yeah, I would say that's really important, really
crucial, absolutely.
And you know, kind of, like yousaid earlier, compliance is not
always super straightforward.
What are the most commonchallenges that you're seeing
real estate appraisal businessesface when they're trying to
stay within those state andfederal requirements?
Speaker 3 (06:26):
We find, and I think it's probably common for a lot
of different professions.
But things are changing veryfast.
So right now we're strugglingwith short-term rental analysis
and of course the investors saywe can do this, it's not a
problem, just give it to us on a1007.
And I think the reason they say1007 is because that's the only
(06:48):
way they can communicate in away that says this is the format
we would like.
You're not just going to beable to give us a rental
analysis on STR and dream it upone way or another.
We need it like the 1007, butthey don't say it that way.
They say they need the 1007 andthe 1007 isn't built for
short-term rental.
And so we're faced with thatand all of our different
(07:11):
investors and people coming tous saying, hey, we'd like you to
do this for us.
And we say, well, we're goingto put it on something like a
1007, but that's better and theydon't understand that and they
don't want that.
So there's a lot of, you know,lack of understanding on the
other side as well, becauseanother thing about the way
appraisers have to operate is wehave to be very careful about
(07:35):
what we say because of thingslike predetermined value or a
predetermination of value orbias, and so it's very difficult
, and also how we're perceivedby the lenders in how they're
supposed to not allow people totalk to us.
So the people most knowledgeableabout the actual appraisal or
(07:57):
the purpose are often the peoplethat are furthest from us, and
so there's in-between people allalong the way that potentially
are giving us bad direction.
And so with a company like mineand with my experience and the
people that we hire behind us interms of attorneys and
(08:19):
compliance people, I can berather forward on saying I want
to talk to somebody Independentappraiser, young guy, maybe, an
independent guy.
They're not going to be able todo that, and so they could be
given direction saying put thison a 1007,.
They could be given directionsaying put this on a 1007,
that's okay.
And they put it on a 1007 andsomewhere else down the line,
(08:41):
somebody's gonna maybe not likeit, I don't know, but we at
least have um the wherewithal toquestion and maybe create a
situation where we think, okay,this is okay, we've talked to
our counsel, this is the best wecan do.
We put in some verbiage andmaybe we can move forward with
this because we're gettingpressured.
(09:01):
We're getting pressured to dothese and I think right now the
data is pretty suspect.
Speaker 2 (09:11):
And that's a great point, doug.
I've seen regulatory caseswhere businesses, like you said,
things are so busy and somoving so fast and especially if
you're a small shop, you maynot have the bandwidth to step
back and realize maybe there's acompliance gap here and you
know not being able to addressit, so you just kind of go
(09:33):
through it and then later on,like you said, maybe somebody in
the regulatory world has issueswith it, maybe Fannie Mae, that
kind of thing.
You know they might evenmisunderstand or misinterpret
the law or believe what they'redoing is acceptable.
Then they just don't realizeit's not.
Sometimes it's just theycompletely are unaware of the
(09:53):
requirement altogether.
So what advice would you giveto businesses owners, you know,
to kind of minimize and reallyreduce that risk profile?
Speaker 3 (10:06):
Well, I know that there's a lot of different chats
out there and forums, appraisalbuzz and different ways that
you can and you can read, youknow, appraisal Institute
valuation magazines.
They're very intense andsometimes don't speak to exactly
what we're talking about.
So you can spend a lot of yourtime trying to figure it out.
(10:28):
Or you can get a good counseland spend a little bit of money
and save yourself a lot of time.
In my experience, a little bitof money on the front end has
saved us thousands and thousandson the back end, because the
back end deals are what getexpensive and they also put you
(10:49):
in a spot where you're nowhaving to the next time.
They're saying, well, has thisever happened before?
So you're, you're having todisclose.
It's just a much, much morepainful situation and it has to
do with what Troy's talkingabout, about putting things in
place ahead of time.
But I think, putting you knowcounsel, I think I would spend a
(11:09):
whole lot less time speakingwith with a really good attorney
who knows it than I'll spendtrying to study it up.
You know my time could be.
I could be writing appraisalsduring that period.
So it's a cost.
It's a.
You know you don't want to stepover a dollar to pick up a dime
.
I really save a lot of time bygoing straight to my counsel.
(11:31):
But off of that, we do putthings in place.
As we stub our toe, we'll say,okay, well, that's never going
to happen again.
So we're going to put this inplace, because it is kind of
tough.
When I talk to people, I haveto be very, very good about how
I use my language, and so one ofthe things we do is we
(11:52):
typically will not have ourappraisers talking to anybody.
They'll talk to me and I'lltalk to whoever, which works out
really well, because often thenthe ire of whoever I'm talking
to if they're unreasonable willthen be focused on me rather
than my appraiser, and I'musually able to handle it, which
is, I think, one of the thingsabout an appraisal firm that's
(12:15):
very helpful to the appraisers.
But, again, the lure of goingout on your own and making 100%
is very strong for especiallyyoung appraisers and also if
you've been with a firm whereyou're not really getting much
from them.
Speaker 1 (12:32):
Yeah, I was going to say it sounds like you've got to
be pretty tenacious when itcomes to, you know, being an
appraiser.
But you know, I really likethat.
You've got kind of thosesafeguards in place that you've
implemented to protect yourappraisers and to protect your
livelihood as well.
I mean, I would imagine ifsomething would happen.
(12:54):
That's you got to run it up thechain and that's another thing
that you yourself would have todeal with.
So, yeah, it's good, goodprotection for your appraisers.
Speaker 3 (13:03):
Appraisers have to be tough, there's no doubt about
it.
But your best appraisers and Itell my guys this all the time
you just have to be cool, calmand competent.
It's tough because it comes atyou from a lot of directions.
I can give you an example ofwhere we, or I as a firm, made a
mistake in an assignment whereit was a overpriced property
(13:29):
during the pandemic and ofcourse our client was telling us
we need you to do this and myguys were all telling me this is
severely overpriced and ofcourse we have plenty of work
and it just looks like a problem.
So we don't want to do it.
We kick it down the road but noone else will get it.
So the client comes back andsays we need you to do it, we
need you to do it and everybodyknows it's too high, it's not a
(13:51):
problem, we just need theappraisal.
So I let them go ahead.
But I think in retrospect we allknow not everybody knew it was
too high.
Who didn't know it was too highwas the seller.
And unfortunately in ourbusiness, the appraisal even
(14:15):
though it's for the lender andit's written to the lender,
anyone can take that appraisaland march it down to the TALCB
and say they were hurt by it,and so I neglected to call the
seller and I should have calledthem.
But these are conversations youdon't want to have because the
seller is not going to bereasonable and they're going to
start asking me questions that Idon't want to talk about, like
what's it going to appraise forthem?
So it's very touchy.
(14:35):
When I'm talking to them I haveto say things like well, the
highest sale in the subdivisionis a hundred thousand dollars
less than your house.
So that might be a challenge.
That's how I have to speak andtry to be USPAP compliant.
But if I had made that phonecall, I probably would have
realized that the seller was notrational and was not on board
(14:57):
with the fact that maybe and soit ended up being a complaint
that we won.
But that's a lot of time andstress for the appraiser.
In this case, most of her irewas the seller.
I'm sorry.
The ire was directed towards mebecause I was the one who had
reached out and was explainingthings, and so most of the
(15:18):
complaint was things that werebetween myself and the seller
via email, and so that made itprobably a lot better than if my
appraiser had been right.
They go back and forth.
Speaker 2 (15:33):
To piggyback off of what Doug's saying is that
situation he had there.
I think another importantaspect to keep in mind is making
sure you're getting engaged inthe industry and with your
regulator.
You know, really know yourbusiness, not only just other
(15:58):
people in your industry who arelicense holders and run
businesses, but also with someof the regulatory folks.
Sometimes they really had theinside track and I can say from
personal experience being aformer regulator, they really
don't bite, you know their barkmight be worse than their, than
their bite, and they're usuallypretty friendly and you'd be
surprised at how eager they areto talk to people that are just
trying to figure out how to doit the right way and how to
(16:20):
avoid issues, and so, whetherit's going to board meetings or
getting involved in committeesor working groups, I've found
that that's a really goodadjunct to what you do while
you're running your businesstraining your employees, that
kind of thing.
Speaker 1 (16:36):
That's fantastic for our viewers to know.
Absolutely, are there any otherimportant things that
businesses can implement now tomaintain compliance that you can
think of, doug, anything thatcomes to mind when you're
thinking about immediate changesthat a business can make.
Speaker 3 (16:58):
Well, in the appraisal industry we have a lot
of issues with.
I don't think that we getreasonable engagement letters,
especially at the residentiallevel, so that oftentimes the
appraisers put in a spot laterwhere and what they end up doing
(17:19):
is working for free but withouta really good engagement or
also asking upfront thequestions that you need to know.
Oftentimes the attitude isyou're the appraiser, go to the
house and find out and let usknow, which always puts the
appraiser in a bad spot becausehe doesn't know what he's
getting into and so it's just.
It'd be a lot easier and betterfor him to be prepared.
(17:41):
But again, the appraisers don'tfeel comfortable doing a lot of
this because there is blowbackIn the Austin area, where we've
been for a long time, ourprocedures are welcomed by the
agents.
We've done it for so long thatthey actually demand some of our
procedures which are asking forcomps up front, kind of using
(18:03):
the VA tidewater type process,and these agents in the Austin
area will look forward to thisand answer.
We've noticed as we go into newareas Houston, san Antonio
they're not.
They're back to the old way.
Which is why am I doing this?
This is your job.
I'm not responding to this.
(18:24):
It's almost like the agentsthink they're trapped, a little
bit Like if they respond withthe wrong comps, maybe they have
liability or something.
I'm not sure what they think.
So we like to reach out andkind of make them aware hey,
what comps are you using here?
And sometimes that's notappreciated and that's a
business decision thatappraisers have to make as to
(18:46):
how far they want to go to askfor things that they think will
be more transparent, so thateverybody understands where
we're at.
Speaker 2 (18:56):
Yeah, I couldn't agree with you more, doug, about
the communication, theconversation that goes on
between the different players inthe industry, whether it's real
estate agents, loan officersand appraisal management
companies and that's really truein any regulated industry.
You've got more than onelicense holder, you know in that
(19:19):
industry landscape, and tryingto work together and understand
where everybody's coming fromand being able to do that in a
professional and effectivemanner so that it's efficient
for the business, is reallycrucial.
And that, I think, extends alsoto, like we were saying earlier
, the relationship and thedialogue with the governing
(19:43):
regulatory body, because theyhave a role in those dynamics
and those conversations and itjust makes a huge difference.
When you're staying connected,communicative and informed with
all the players that areinvolved in the work your
business is doing, then you'rebeing proactive and you're
staying ahead of regulatorychanges that can have a, you
(20:05):
know, a real big impact on yourbusiness.
Speaker 3 (20:09):
I teach some CE and one of the classes we developed
is just a short two-hour classthat can be given for lunch.
It's called Brokers andAppraisers Bridging the Gap
where we go into USPAP versusthe brokers' canons of ethics
and how they're different.
And also we show them how we doa few of our techniques.
(20:31):
We talk about price per squarefoot and how that can be.
We talk about differentvaluation and these agents will
come out of that class sayingthat it's the most that they've
learned in years.
It's very practical.
We actually go up and do someadjustments on how to market,
extract the contributory valueof a pool Very simple things and
answer a lot of their questionsabout just what's behind the
(20:56):
cloak you know, so that theyknow how the appraisers are
operating and why, and just godown a few of the simple things
like UAD definitions and things,so that they can watch for
these critical things that leadto value and teaching those
classes.
I tell you, if you do a favorfor an agent, they remember it
(21:18):
forever.
It's not like the loan officerwhat have you done for me?
Lately they will remember itand they'll remember you and
they'll say you helped me withthis deal 10 years ago and
you're our favorite firm and wealways refer that.
It's very gratifying.
We don't get a lot of that inthis business.
But the realtors when you helpthem and they understand what
you're doing and they've helpedus before get over the hump on a
(21:41):
.
Why can I go over here and usethis comp?
Why should I?
Well, it's in the same schooldistrict and that's what the big
deal is here.
And those agents even though Ican go do a $20 million
waterfront Lake Austin, I can goto Saginaw and do a double wide
, but I don't know that littleneighborhood better than them.
That's just the nature ofappraising.
We don't, we can't just be inone neighborhood.
(22:02):
There would never be enoughvolume.
So we have to be, you knowTexas wide and be able to do
anything, but we don't knowtheir neighborhood better.
So appraisers that rely on theagents and that the agents are
really open to try to explain.
We also teach agents that whenthey're giving comp selection to
appraisers it's not just theirbest ones Because of Collateral
(22:23):
Underwriter and Fannie Mae's AI.
They need to explain why thebad one sold Because it's not
going to say in the MLS.
So if they know that it had aterrible floor plan or there
very hard to, or or the therewas a atypical motivation.
They can help the appraiser nothave to use that bad comp
because the appraiser will notknow about that stuff, it is not
(22:45):
going to be recorded in the MLS.
So you got to ask and they they,they should be there telling
you hey, that house next door Ineed you to know that was a
divorce and it was ugly and theinside was very difficult to get
in.
Whatever they want to tell us,it'll help us to then take that
comp, weight it to the back.
Collateral underwriter stillsees it, so it's fine.
(23:09):
But we can say we've weightedthis less and we don't have to
value the property based on aninappropriate comp, which is
what would normally happen ifthe appraisers or the realtors
are not willing to share that.
Speaker 1 (23:24):
That's good to know.
Just again, great informationfor our Texas appraisers to know
.
And it sounds likecommunication is really so big.
It sounds like that is reallyjust a crucial point to
maintaining that compliance withyour state regulatory agency.
I know that we've kind ofharped on it a few times but I
(23:49):
want to go back to some of thosekey takeaways that, again, you
know regulatory compliance isabsolutely essential for helping
regulated businesses runefficiently, reduce their legal
risks.
We talked about having legalcounsel help you out if you
don't understand.
Again going back to thatcommunication, asking those
(24:11):
questions if you don't knowwhat's expected of you, if you
are running a business, makingsure your employees know what's
expected of them, and again toTroy's point, engage with your
regulatory agency.
You may be surprised at theinformation and how willing they
are to divulge that to you.
(24:32):
So, yeah, it's been.
This has been a fantasticdiscussion and just really full
of some great takeaways for ourviewers and good things they can
implement to maintain theircompliance.
Speaker 3 (24:45):
Well, appraisals are very different because the
communication is what is somisunderstood.
So the appraisers don't knowwhat they can say.
Appraisers don't know what theycan say and I would personally
lean more on a counsel thantrying to go to a board.
I would much rather have areally good, good counsel.
(25:09):
Tell me you can say this If I'mgoing to send out something
ahead of time for my appraisersand have it standardized, I
would just run it by my legalcounsel as long as they are
extremely adept at thatparticular thing.
USPAP, compliance appraiser,tlcb that's where I would go
with it, just to make it fastand efficient, and I would feel
much more comfortable with thatmyself.
Speaker 1 (25:31):
That makes sense.
Yeah, I'll tell you, that'skind of been the board's
consensus.
When we do our podcast with theboard, they say, hey, we like
talking to legal counsel.
They're able to understand thelegal jargon, they're able to
understand the process that youknow someone representing
themselves pro se would notunderstand, and so, yeah, I
(25:55):
again think that that's afantastic point and I feel like
the board would agree.
Speaker 3 (26:00):
Yeah, 100%.
Somebody who can understand thelanguage, just like an
appraiser trying to explainsomething.
Speaker 1 (26:08):
Exactly.
Speaker 3 (26:09):
That's very important .
Speaker 2 (26:11):
Yep.
Doug, thank you so much forsharing your expertise and your
experiences with us here today.
I think this is going to bereally expertise and your
experiences with us here today.
I think this is going to bereally insightful and great
information for our viewingaudience.
Speaker 1 (26:23):
Well, thank you again , doug, for your time this
afternoon and thank you to ourlisteners.
You can learn more aboutAppraisal Shop and the work Doug
does by clicking on the link inour description below, and for
more information on this topic,you can visit our website, also
linked in the description below.
And for more information onthis topic, you can visit our
website, also linked in thedescription below.
Be sure to follow and subscribeto Know your Regulator for more
(26:43):
episodes like this.
Until next time, stay inspiredand continue engaging with your
regulatory agency.
Speaker 2 (26:50):
Know your Regulator the podcast that inspires you to
engage.
This podcast is for educational purposes only, does
not constitute legal advice anddoes not create an
attorney-client relationship.
If you need legal assistanceabout a legal problem contact an
attorney.
Welcome to another episode ofKnow your Regulator, the podcast
that inspires you to engage.
I am your host, Simone Murphree, and co-hosting with me today
(00:22):
is Troy Bullier, Director ofLegal Services at Bertolino Law
Firm.
Speaker 2 (00:27):
Thanks, simone.
Today we have a special episode.
We're going to be talking aboutregulatory compliance for
businesses and the importantimpact that has on smooth,
successful and efficientbusiness operations.
Whether it's owning your ownbusiness or managing a team,
(00:48):
that's part of the business, ormaybe perhaps you're just a
professional license holder andyou're operating your own
practice as a small business asole proprietorship you really
need to have an understanding ofand appreciation for, you know,
integrating regulatoryrequirements into your business
operations.
That's going to be essentialfor long-term success and risk
(01:11):
management.
Speaker 1 (01:13):
That is very right, troy, and to help us unpack
these critical issues, we'revery excited to welcome Douglas
Reeves, president of AppraisalShop.
Doug operates the largestresidential real estate
appraisal firm in Central Texasand, as a result, he's got
extensive experience navigatingregulatory compliance in the
(01:33):
world of real estate appraisal.
So he's here to share hisinsights into those best
practices and challengescompanies face when dealing with
state regulatory oversight.
Thank you for joining us today,doug.
Speaker 3 (01:45):
Thank you, ms Murphree, thank you, troy.
Speaker 1 (01:49):
Absolutely Well, we'll start off by defining
regulatory compliance.
Doug, from your experience,what does regulatory compliance
mean for a business operationlike Appraisal Shop?
Speaker 3 (02:09):
like appraisal shop.
Well, we being appraisers fallunder USPAP, the Uniform
Standards Practice forProfessional Appraisal.
So it's a little bit differentfor us.
That's our overarching thingthat we're always wanting to
comply with, but there's a lotof interpretations of that by
TREC and TLCB and Fannie Mae andother government entities, and
so you're always kind of havingto be on your toes and since
(02:29):
USPAP is something that changesevery two years or at least is
revisited, we have to be out infront of it.
So regulatory compliance to uspretty much starts with USPAP,
and USPAP kind of says that ifyour intended user has something
that they want you to do andyou know that, then you're going
(02:52):
to also have to comply withthat, as long as it's not in
opposition to USPAP.
So you kind of need to alsounderstand who your user is and
how they interpret it.
And so because we have toalways be sensitive to that and
all the different users anddifferent interpretations, it
can be very tricky forappraisers.
Speaker 2 (03:16):
Yeah, I completely agree, doug, and businesses that
fail to implement effective,solid oversights often face
legal challenges, including evenpotentially regulatory action
that can lead to legalconsequences that impacts the
business's employees or maybeeven a license that the business
(03:39):
entity itself holds.
Can you share with us some ofyour insight and experience and
knowledge in the appraisal andreal estate industries, where
you've seen maybe someinadequate attention to
regulatory compliance that hashad an impact on the business?
Speaker 3 (03:55):
somehow around for 20 , 30 years.
So we've baby stepped andstubbed our toes and each time
we do that we then implementsomething else to try to prevent
that from happening.
But I think that a lot of realestate appraisers do not have
(04:15):
that opportunity as much, inthat they tend to want to
operate independently and thatdoesn't give them the resources
or the time often to dedicate tosomething like becoming a USPAP
instructor or spending timedoing teaching or, you know,
having the kind of volume andexpanse of work product to be
(04:38):
able to really see a lot of thedifferent places where we might
need to have something in place.
So while we've been very luckyover the years, we also and I'm
going to have to say thismultiple times today we rely
very much on legal counselBecause of the nature of our
(05:02):
business, of the nature of ourbusiness.
There's such a gray area of whatUSPAP is.
I've heard it referenced as aaspirational document and it
doesn't give exact guidelines.
It simply gives overarchingsort of ideas of how to comply,
and so I've seen many, manyappraisers and so I've seen many
(05:29):
, many appraisers that do notreally understand not only how
USPAP affects them but how itcan be used to actually it
really is there to protectappraisers in many, many ways as
much as the public.
It also is there to protectappraisers, but I do find that
the TALCB and AppraisalInstitute and most people are
very willing to forgive andrehabilitate appraisers.
So it's not the sticky stepthat it seems to be, as long as
(05:55):
the appraiser is knowledgeableand is working towards that
greater goal of credibility andthe public trust.
Speaker 1 (06:06):
Yeah, I would say that's really important, really
crucial, absolutely.
And you know, kind of, like yousaid earlier, compliance is not
always super straightforward.
What are the most commonchallenges that you're seeing
real estate appraisal businessesface when they're trying to
stay within those state andfederal requirements?
Speaker 3 (06:26):
We find, and I think it's probably common for a lot
of different professions.
But things are changing veryfast.
So right now we're strugglingwith short-term rental analysis
and of course the investors saywe can do this, it's not a
problem, just give it to us on a1007.
And I think the reason they say1007 is because that's the only
(06:48):
way they can communicate in away that says this is the format
we would like.
You're not just going to beable to give us a rental
analysis on STR and dream it upone way or another.
We need it like the 1007, butthey don't say it that way.
They say they need the 1007 andthe 1007 isn't built for
short-term rental.
And so we're faced with thatand all of our different
(07:11):
investors and people coming tous saying, hey, we'd like you to
do this for us.
And we say, well, we're goingto put it on something like a
1007, but that's better and theydon't understand that and they
don't want that.
So there's a lot of, you know,lack of understanding on the
other side as well, becauseanother thing about the way
appraisers have to operate is wehave to be very careful about
(07:35):
what we say because of thingslike predetermined value or a
predetermination of value orbias, and so it's very difficult
, and also how we're perceivedby the lenders in how they're
supposed to not allow people totalk to us.
So the people most knowledgeableabout the actual appraisal or
(07:57):
the purpose are often the peoplethat are furthest from us, and
so there's in-between people allalong the way that potentially
are giving us bad direction.
And so with a company like mineand with my experience and the
people that we hire behind us interms of attorneys and
(08:19):
compliance people, I can berather forward on saying I want
to talk to somebody Independentappraiser, young guy, maybe, an
independent guy.
They're not going to be able todo that, and so they could be
given direction saying put thison a 1007,.
They could be given directionsaying put this on a 1007,
that's okay.
And they put it on a 1007 andsomewhere else down the line,
(08:41):
somebody's gonna maybe not likeit, I don't know, but we at
least have um the wherewithal toquestion and maybe create a
situation where we think, okay,this is okay, we've talked to
our counsel, this is the best wecan do.
We put in some verbiage andmaybe we can move forward with
this because we're gettingpressured.
(09:01):
We're getting pressured to dothese and I think right now the
data is pretty suspect.
Speaker 2 (09:11):
And that's a great point, doug.
I've seen regulatory caseswhere businesses, like you said,
things are so busy and somoving so fast and especially if
you're a small shop, you maynot have the bandwidth to step
back and realize maybe there's acompliance gap here and you
know not being able to addressit, so you just kind of go
(09:33):
through it and then later on,like you said, maybe somebody in
the regulatory world has issueswith it, maybe Fannie Mae, that
kind of thing.
You know they might evenmisunderstand or misinterpret
the law or believe what they'redoing is acceptable.
Then they just don't realizeit's not.
Sometimes it's just theycompletely are unaware of the
(09:53):
requirement altogether.
So what advice would you giveto businesses owners, you know,
to kind of minimize and reallyreduce that risk profile?
Speaker 3 (10:06):
Well, I know that there's a lot of different chats
out there and forums, appraisalbuzz and different ways that
you can and you can read, youknow, appraisal Institute
valuation magazines.
They're very intense andsometimes don't speak to exactly
what we're talking about.
So you can spend a lot of yourtime trying to figure it out.
(10:28):
Or you can get a good counseland spend a little bit of money
and save yourself a lot of time.
In my experience, a little bitof money on the front end has
saved us thousands and thousandson the back end, because the
back end deals are what getexpensive and they also put you
(10:49):
in a spot where you're nowhaving to the next time.
They're saying, well, has thisever happened before?
So you're, you're having todisclose.
It's just a much, much morepainful situation and it has to
do with what Troy's talkingabout, about putting things in
place ahead of time.
But I think, putting you knowcounsel, I think I would spend a
(11:09):
whole lot less time speakingwith with a really good attorney
who knows it than I'll spendtrying to study it up.
You know my time could be.
I could be writing appraisalsduring that period.
So it's a cost.
It's a.
You know you don't want to stepover a dollar to pick up a dime
.
I really save a lot of time bygoing straight to my counsel.
(11:31):
But off of that, we do putthings in place.
As we stub our toe, we'll say,okay, well, that's never going
to happen again.
So we're going to put this inplace, because it is kind of
tough.
When I talk to people, I haveto be very, very good about how
I use my language, and so one ofthe things we do is we
(11:52):
typically will not have ourappraisers talking to anybody.
They'll talk to me and I'lltalk to whoever, which works out
really well, because often thenthe ire of whoever I'm talking
to if they're unreasonable willthen be focused on me rather
than my appraiser, and I'musually able to handle it, which
is, I think, one of the thingsabout an appraisal firm that's
(12:15):
very helpful to the appraisers.
But, again, the lure of goingout on your own and making 100%
is very strong for especiallyyoung appraisers and also if
you've been with a firm whereyou're not really getting much
from them.
Speaker 1 (12:32):
Yeah, I was going to say it sounds like you've got to
be pretty tenacious when itcomes to, you know, being an
appraiser.
But you know, I really likethat.
You've got kind of thosesafeguards in place that you've
implemented to protect yourappraisers and to protect your
livelihood as well.
I mean, I would imagine ifsomething would happen.
(12:54):
That's you got to run it up thechain and that's another thing
that you yourself would have todeal with.
So, yeah, it's good, goodprotection for your appraisers.
Speaker 3 (13:03):
Appraisers have to be tough, there's no doubt about
it.
But your best appraisers and Itell my guys this all the time
you just have to be cool, calmand competent.
It's tough because it comes atyou from a lot of directions.
I can give you an example ofwhere we, or I as a firm, made a
mistake in an assignment whereit was a overpriced property
(13:29):
during the pandemic and ofcourse our client was telling us
we need you to do this and myguys were all telling me this is
severely overpriced and ofcourse we have plenty of work
and it just looks like a problem.
So we don't want to do it.
We kick it down the road but noone else will get it.
So the client comes back andsays we need you to do it, we
need you to do it and everybodyknows it's too high, it's not a
(13:51):
problem, we just need theappraisal.
So I let them go ahead.
But I think in retrospect we allknow not everybody knew it was
too high.
Who didn't know it was too highwas the seller.
And unfortunately in ourbusiness, the appraisal even
(14:15):
though it's for the lender andit's written to the lender,
anyone can take that appraisaland march it down to the TALCB
and say they were hurt by it,and so I neglected to call the
seller and I should have calledthem.
But these are conversations youdon't want to have because the
seller is not going to bereasonable and they're going to
start asking me questions that Idon't want to talk about, like
what's it going to appraise forthem?
So it's very touchy.
(14:35):
When I'm talking to them I haveto say things like well, the
highest sale in the subdivisionis a hundred thousand dollars
less than your house.
So that might be a challenge.
That's how I have to speak andtry to be USPAP compliant.
But if I had made that phonecall, I probably would have
realized that the seller was notrational and was not on board
(14:57):
with the fact that maybe and soit ended up being a complaint
that we won.
But that's a lot of time andstress for the appraiser.
In this case, most of her irewas the seller.
I'm sorry.
The ire was directed towards mebecause I was the one who had
reached out and was explainingthings, and so most of the
(15:18):
complaint was things that werebetween myself and the seller
via email, and so that made itprobably a lot better than if my
appraiser had been right.
They go back and forth.
Speaker 2 (15:33):
To piggyback off of what Doug's saying is that
situation he had there.
I think another importantaspect to keep in mind is making
sure you're getting engaged inthe industry and with your
regulator.
You know, really know yourbusiness, not only just other
(15:58):
people in your industry who arelicense holders and run
businesses, but also with someof the regulatory folks.
Sometimes they really had theinside track and I can say from
personal experience being aformer regulator, they really
don't bite, you know their barkmight be worse than their, than
their bite, and they're usuallypretty friendly and you'd be
surprised at how eager they areto talk to people that are just
trying to figure out how to doit the right way and how to
(16:20):
avoid issues, and so, whetherit's going to board meetings or
getting involved in committeesor working groups, I've found
that that's a really goodadjunct to what you do while
you're running your businesstraining your employees, that
kind of thing.
Speaker 1 (16:36):
That's fantastic for our viewers to know.
Absolutely, are there any otherimportant things that
businesses can implement now tomaintain compliance that you can
think of, doug, anything thatcomes to mind when you're
thinking about immediate changesthat a business can make.
Speaker 3 (16:58):
Well, in the appraisal industry we have a lot
of issues with.
I don't think that we getreasonable engagement letters,
especially at the residentiallevel, so that oftentimes the
appraisers put in a spot laterwhere and what they end up doing
(17:19):
is working for free but withouta really good engagement or
also asking upfront thequestions that you need to know.
Oftentimes the attitude isyou're the appraiser, go to the
house and find out and let usknow, which always puts the
appraiser in a bad spot becausehe doesn't know what he's
getting into and so it's just.
It'd be a lot easier and betterfor him to be prepared.
(17:41):
But again, the appraisers don'tfeel comfortable doing a lot of
this because there is blowbackIn the Austin area, where we've
been for a long time, ourprocedures are welcomed by the
agents.
We've done it for so long thatthey actually demand some of our
procedures which are asking forcomps up front, kind of using
(18:03):
the VA tidewater type process,and these agents in the Austin
area will look forward to thisand answer.
We've noticed as we go into newareas Houston, san Antonio
they're not.
They're back to the old way.
Which is why am I doing this?
This is your job.
I'm not responding to this.
(18:24):
It's almost like the agentsthink they're trapped, a little
bit Like if they respond withthe wrong comps, maybe they have
liability or something.
I'm not sure what they think.
So we like to reach out andkind of make them aware hey,
what comps are you using here?
And sometimes that's notappreciated and that's a
business decision thatappraisers have to make as to
(18:46):
how far they want to go to askfor things that they think will
be more transparent, so thateverybody understands where
we're at.
Speaker 2 (18:56):
Yeah, I couldn't agree with you more, doug, about
the communication, theconversation that goes on
between the different players inthe industry, whether it's real
estate agents, loan officersand appraisal management
companies and that's really truein any regulated industry.
You've got more than onelicense holder, you know in that
(19:19):
industry landscape, and tryingto work together and understand
where everybody's coming fromand being able to do that in a
professional and effectivemanner so that it's efficient
for the business, is reallycrucial.
And that, I think, extends alsoto, like we were saying earlier
, the relationship and thedialogue with the governing
(19:43):
regulatory body, because theyhave a role in those dynamics
and those conversations and itjust makes a huge difference.
When you're staying connected,communicative and informed with
all the players that areinvolved in the work your
business is doing, then you'rebeing proactive and you're
staying ahead of regulatorychanges that can have a, you
(20:05):
know, a real big impact on yourbusiness.
Speaker 3 (20:09):
I teach some CE and one of the classes we developed
is just a short two-hour classthat can be given for lunch.
It's called Brokers andAppraisers Bridging the Gap
where we go into USPAP versusthe brokers' canons of ethics
and how they're different.
And also we show them how we doa few of our techniques.
(20:31):
We talk about price per squarefoot and how that can be.
We talk about differentvaluation and these agents will
come out of that class sayingthat it's the most that they've
learned in years.
It's very practical.
We actually go up and do someadjustments on how to market,
extract the contributory valueof a pool Very simple things and
answer a lot of their questionsabout just what's behind the
(20:56):
cloak you know, so that theyknow how the appraisers are
operating and why, and just godown a few of the simple things
like UAD definitions and things,so that they can watch for
these critical things that leadto value and teaching those
classes.
I tell you, if you do a favorfor an agent, they remember it
(21:18):
forever.
It's not like the loan officerwhat have you done for me?
Lately they will remember itand they'll remember you and
they'll say you helped me withthis deal 10 years ago and
you're our favorite firm and wealways refer that.
It's very gratifying.
We don't get a lot of that inthis business.
But the realtors when you helpthem and they understand what
you're doing and they've helpedus before get over the hump on a
(21:41):
.
Why can I go over here and usethis comp?
Why should I?
Well, it's in the same schooldistrict and that's what the big
deal is here.
And those agents even though Ican go do a $20 million
waterfront Lake Austin, I can goto Saginaw and do a double wide
, but I don't know that littleneighborhood better than them.
That's just the nature ofappraising.
We don't, we can't just be inone neighborhood.
(22:02):
There would never be enoughvolume.
So we have to be, you knowTexas wide and be able to do
anything, but we don't knowtheir neighborhood better.
So appraisers that rely on theagents and that the agents are
really open to try to explain.
We also teach agents that whenthey're giving comp selection to
appraisers it's not just theirbest ones Because of Collateral
(22:23):
Underwriter and Fannie Mae's AI.
They need to explain why thebad one sold Because it's not
going to say in the MLS.
So if they know that it had aterrible floor plan or there
very hard to, or or the therewas a atypical motivation.
They can help the appraiser nothave to use that bad comp
because the appraiser will notknow about that stuff, it is not
(22:45):
going to be recorded in the MLS.
So you got to ask and they they,they should be there telling
you hey, that house next door Ineed you to know that was a
divorce and it was ugly and theinside was very difficult to get
in.
Whatever they want to tell us,it'll help us to then take that
comp, weight it to the back.
Collateral underwriter stillsees it, so it's fine.
(23:09):
But we can say we've weightedthis less and we don't have to
value the property based on aninappropriate comp, which is
what would normally happen ifthe appraisers or the realtors
are not willing to share that.
Speaker 1 (23:24):
That's good to know.
Just again, great informationfor our Texas appraisers to know
.
And it sounds likecommunication is really so big.
It sounds like that is reallyjust a crucial point to
maintaining that compliance withyour state regulatory agency.
I know that we've kind ofharped on it a few times but I
(23:49):
want to go back to some of thosekey takeaways that, again, you
know regulatory compliance isabsolutely essential for helping
regulated businesses runefficiently, reduce their legal
risks.
We talked about having legalcounsel help you out if you
don't understand.
Again going back to thatcommunication, asking those
(24:11):
questions if you don't knowwhat's expected of you, if you
are running a business, makingsure your employees know what's
expected of them, and again toTroy's point, engage with your
regulatory agency.
You may be surprised at theinformation and how willing they
are to divulge that to you.
(24:32):
So, yeah, it's been.
This has been a fantasticdiscussion and just really full
of some great takeaways for ourviewers and good things they can
implement to maintain theircompliance.
Speaker 3 (24:45):
Well, appraisals are very different because the
communication is what is somisunderstood.
So the appraisers don't knowwhat they can say.
Appraisers don't know what theycan say and I would personally
lean more on a counsel thantrying to go to a board.
I would much rather have areally good, good counsel.
(25:09):
Tell me you can say this If I'mgoing to send out something
ahead of time for my appraisersand have it standardized, I
would just run it by my legalcounsel as long as they are
extremely adept at thatparticular thing.
USPAP, compliance appraiser,tlcb that's where I would go
with it, just to make it fastand efficient, and I would feel
much more comfortable with thatmyself.
Speaker 1 (25:31):
That makes sense.
Yeah, I'll tell you, that'skind of been the board's
consensus.
When we do our podcast with theboard, they say, hey, we like
talking to legal counsel.
They're able to understand thelegal jargon, they're able to
understand the process that youknow someone representing
themselves pro se would notunderstand, and so, yeah, I
(25:55):
again think that that's afantastic point and I feel like
the board would agree.
Speaker 3 (26:00):
Yeah, 100%.
Somebody who can understand thelanguage, just like an
appraiser trying to explainsomething.
Speaker 1 (26:08):
Exactly.
Speaker 3 (26:09):
That's very important .
Speaker 2 (26:11):
Yep.
Doug, thank you so much forsharing your expertise and your
experiences with us here today.
I think this is going to bereally expertise and your
experiences with us here today.
I think this is going to bereally insightful and great
information for our viewingaudience.
Speaker 1 (26:23):
Well, thank you again , doug, for your time this
afternoon and thank you to ourlisteners.
You can learn more aboutAppraisal Shop and the work Doug
does by clicking on the link inour description below, and for
more information on this topic,you can visit our website, also
linked in the description below.
And for more information onthis topic, you can visit our
website, also linked in thedescription below.
Be sure to follow and subscribeto Know your Regulator for more
(26:43):
episodes like this.
Until next time, stay inspiredand continue engaging with your
regulatory agency.
Speaker 2 (26:50):
Know your Regulator the podcast that inspires you to
engage.
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