Warning to Appraisers: Banks Misusing Complaints to Challenge Reports
In this issue:
- Misuse of Complaints: Banks like Wells Fargo misinterpret appraisal terms, unfairly targeting appraisers.
- Risk to Integrity: Appraisers face legal and reputational harm, pressured to alter reports.
- AI Advocacy:The Appraisal Institute perspectives on FHFA Valuation Modernization Summit
Insights
Warning to Appraisers: Financial Institutions Misusing Complaint Process Over Misinterpreted Language
A troubling trend has emerged where major financial institutions are filing complaints against appraisers based on absurd misinterpretations of standard appraisal and real estate terminology. Common industry terms like “diversified uses” of property are being misconstrued as indicators of racial bias, leading to unfair regulatory scrutiny and reputational damage for appraisers.
These complaints are not rooted in genuine discrimination concerns but rather in a misunderstanding—or deliberate misrepresentation—of appraisal language. By weaponizing the regulatory process, these institutions deflect attention from their own fair lending practices while putting appraisers at risk of costly legal battles and disciplinary actions. If regulators accept such misinterpretations, appraisers may be forced to alter their language or conclusions to avoid baseless complaints, undermining professional integrity.
The Appraisal Institute remains committed to pushing back against these frivolous complaints, actively engaging with lenders and regulators to ensure fair treatment of appraisers. The appraisal profession must stand firm against this manipulation. Financial institutions should not be allowed to misuse fair lending concerns to unjustly target appraisers. By raising awareness and pushing for fair regulatory oversight, appraisers and their professional organizations can work to protect the independence of the profession while ensuring that complaints are based on genuine misconduct rather than misinterpretation.
To protect themselves, appraisers should ensure clarity in their reports, document all lender communications, and report unfair complaints to professional organizations and regulatory bodies. The Appraisal Institute will continue advocating for the profession, challenging misguided allegations, educating clients and regulators and working to safeguard the integrity of the valuation process.
First Annual Legislative Day Registration – Now Open
We are excited that the first annual Appraisal Institute Legislative Day will be held in conjunction with the Leadership Development and Advisory Council meeting in Washington, DC on May 14-15. This is an opportunity for all appraisers to help shape the future of the appraisal profession by engaging in grassroots advocacy on Capitol Hill – Your Voice. Your Advocacy. Your Impact.
Legislative Day will culminate in a dynamic day and a half of policy education, grassroots advocacy and unparalleled networking opportunities. During Legislative Day, you’ll have the opportunity to:
- Engage directly with Capitol Hill staff on critical public policy issues affecting appraisers, including appraisal waivers, hybrid appraisals, property data collectors, appraisal management companies, and more.
- Advocate for meaningful change that supports and strengthens the appraisal profession.
- Network with peers from across the country and build lasting professional connections.
Your Benefits
The Appraisal Institute has partnered with Commercial Real Estate Exchange, Inc. (Crexi), a leading commercial real estate (CRE) marketplace and data platform, to provide AI members with discounted access to its extensive commercial real estate data, including verified sales comparables and market reports.
Access to high-quality, reliable data is critical to the credibility of an appraiser’s work. However, there are relatively few comprehensive commercial real estate data providers in the marketplace. By partnering with Crexi, the Appraisal Institute is helping commercial appraisers gain access to another robust data source, creating efficiencies in the valuation process and enhancing their ability to produce well-supported appraisals.
Through this partnership, AI members can leverage Crexi Intelligence, the platform’s premium data solution, to access verified commercial property sales comparables, analyze market trends, and generate comprehensive market reports. These resources will help appraisers strengthen their valuation work with up-to-date transaction data and actionable market insights.
AI members will receive a 20% discount on any Crexi Intelligence subscription, making it more cost-effective to access the critical commercial real estate data needed for high-quality valuation work. For more details on this exclusive member benefit, visit the Appraisal Institute’s Resources and Discounts for AI Members for demonstration and sign-up information.
Trending Topics Thursdays: Sign up for our next free webinar
Expert Witness Support: Pitfalls to avoid and best practices for appraisers working as expert witnesses
Thursday, March 6, 2025
12-1pm ET
Featuring John Underwood, Jr., MAI, SRA; Larry Wright, MAI, SRA, AI-GRS; Steven Albert, MAI, SRA; and Sharon F. DiPaolo, Esquire, CRE
This webinar will explore valuable insights into the challenges and best practices of working as an expert witness in litigation. Whether you’re just starting to explore this niche or have already participated in multiple trials, our panelists will offer advice on expanding your practice, strengthening your courtroom presence, and collaborating effectively with attorneys. Understanding the complexity of engaging in litigation work, managing the pressures of court proceedings, and maintaining credibility is essential for success. The webinar will explore common pitfalls appraisers face in litigation and strategies for avoiding them. Through this high-level overview, gain practical knowledge on how to navigate the expert witness role with confidence and professionalism.
Our panelists will discuss:
- Expanding your practice into litigation work
- Best practices for collaborating with attorneys
- Common mistakes made when engaging in expert witness work
Advocacy Updates
Appraiser’s Perspective on the FHFA Valuation Modernization Summit
The Federal Housing Finance Agency (FHFA) held its second Valuation Modernization Summit on Feb. 26 in Washington, D.C., bringing together industry stakeholders to discuss the future of real estate valuation. The Appraisal Institute was represented at the Summit by Immediate Past President Sandra Adomatis, SRA; Director of Government Affairs Scott DiBiasio; and Senior Manager of Federal Affairs Brian Rodgers.
From an appraiser’s standpoint, the discussions underscored significant shifts in valuation process and procedure, the growing reliance on alternative appraisal processes and the challenges these changes pose to the profession. One of the primary topics was the expanded use of inspection-informed appraisal waivers to reduce borrower costs. While this initiative enhances efficiency, it also raises concerns expressed by the Appraisal Institute about the diminishing role of appraisers in the valuation process. Similarly, the increased adoption of hybrid appraisals may accelerate turnaround times but brings into question the reliability of third-party data collectors who lack the expertise and accountability of licensed appraisers.
A key focus of the Summit centered around the rollout of the Uniform Appraisal Dataset (UAD) version 3.6 and the new Uniform Residential Appraisal Report (URAR). These updates aim to improve transparency and consistency in appraisal reporting but will require appraisers to adapt to new reporting standards. Limited production use of UAD 3.6 is set for September 2025, with full adoption by November 2026 and a complete phase-out of UAD 2.6 by May 2027. While training programs, including those to be released by the Appraisal Institute, will be available to support this transition, some participants expressed concerns that certain appraisers may be unwilling to adopt the new system. As a result, these appraisers may choose to stop working with GSE lenders altogether, potentially reducing the number of qualified professionals.
Another focus of the summit was FHFA’s collaboration with Fannie Mae, Freddie Mac, the Federal Housing Administration, and bank regulators to standardize reconsideration of value (ROV) policies. While standardization promotes consistency, appraisers must be vigilant to ensure that these policies do not compromise their independence or lead to undue pressure to adjust values without sufficient market support. FHFA also confirmed that no new appraisal-related rulemakings are currently under consideration, providing a temporary period of regulatory stability for the profession.
Concerns were also raised regarding appraisal quality and the perceived gaps in appraisers’ support for adjustments related to time and market conditions. The GSEs suggested that app-based data collection tools might provide more accurate property condition reports than traditional appraisals. This was countered by Appraisal Institute representatives and other participants as overlooking the critical role of an appraiser’s expertise, judgment, and ability to assess market nuances that automated tools cannot capture. Furthermore, reliance on third-party data collectors introduces risks, as these individuals often lack the comprehensive training, experience, and professional accountability that licensed appraisers bring to the valuation process.
The summit reinforced the GSEs’ long-term commitment to hybrid and desktop appraisals as solutions to reduce turnaround times, particularly during peak demand periods. While these models were valuable during the COVID-19 pandemic, their expanded use may limit opportunities for appraisers to conduct full interior inspections, which remain vital for identifying property conditions that automated systems or third-party data collectors might overlook. Additionally, concerns were raised about the regulatory oversight of property data collectors, with the National Association of REALTORS® suggesting state-based regulation consistent with the Appraisal Institute’s position to ensure proper training, insurance, and background checks.
As the appraisal profession navigates these ongoing changes, it is critical for appraisers to remain engaged in policy discussions, advocate for sound valuation practices, and ensure that modernization efforts do not compromise accuracy, integrity, or the essential role of appraisers in the mortgage lending process. The evolution of valuation should enhance, not diminish, the expertise and professionalism that appraisers bring to real estate valuation.
Proposed IRS Rule Threatens Appraisers’ Due Process and Independence
The Appraisal Institute strongly opposes a proposed IRS rule that would amend Circular 230 by revising the standards for disqualifying appraisers. If implemented, this rule would significantly weaken due process protections and grant the IRS unchecked power to penalize and disqualify appraisers without appropriate oversight.
Under the proposed changes, the IRS would no longer need to assess a penalty before disqualifying an appraiser from participating in IRS proceedings. Instead, appraisers could be removed based on vague accusations of recklessness or gross incompetence—without a fair defense or independent adjudication. This shift creates an environment where simple valuation disputes could have career-ending consequences, discouraging appraisers from taking on IRS-related assignments altogether.
The Appraisal Institute highlighted the following key concerns with the Proposed Rule:
- Unilateral IRS Authority – The rule allows the IRS to disqualify appraisers at will, even in the absence of assessed penalties or independent review.
- Chilling Effect on the Profession – The risk of arbitrary disqualification will deter professionals from conducting IRS-related appraisals, reducing the number of qualified experts available to taxpayers.
- Erosion of Independent Valuations – Appraisers may feel pressured to align with IRS expectations rather than providing unbiased professional opinions.
- Increased Costs and Delays – Fewer available appraisers will lead to higher fees and longer wait times for taxpayers seeking appraisal services.
- Weakened Public Trust – Allowing the IRS to serve as both judge and jury in valuation disputes undermines confidence in fair and impartial appraisals.
Instead of expanding IRS authority over appraisers, the Appraisal Institute advocates for the creation of an Independent Appraisal Review Panel (ARP), modeled after Canada’s Ecological Gifts Program. This panel would ensure fair and transparent review of valuations, reducing disputes and unnecessary litigation. The ARP would consist of experienced, nationally certified appraisers and issue fair market value determinations within 90 days, providing taxpayers with a structured process for review and appeal.
A hearing on the Proposed Rule may be scheduled in the coming weeks, at which the Appraisal Institute intends to testify.
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