Getting an appraisal right is essential when you work in the real estate valuations sector. And in the post-Dodd Frank world, it’s more than essential—it’s critical to a firm’s reputation and very survival, executives with real estate valuations firm PCV Murcor said.

"I think the biggest challenge overall is having the manpower to do it," said Cindy Nasser, vice president of operations at PCV Murcor. "To complete all of the audits and to go through all of the rules and requirements – and then figure out which rules apply to third-party vendors."

The appraisal process has never been black or white, but it did have a few safety valves to push. But in today’s world, lenders can no longer hide behind the decisions of third-party vendors—which is the status their appraisal vendors hold.

Instead, regulators want all eyes on the ball, and if that means keeping the appraisal firm you select in line, lenders are required to have the manpower, guidelines and intention to meet this mandate.

PCV Murcor says it’s prepared for a world where lenders are charged by their regulators – including the Office of the Comptroller of the Currency – to evaluate the quality of third-party vendors. Vendors who offer real estate valuations for banks are going to remain under the microscope since they now have to be routinely evaluated and managed by the lenders that hire them.

PCV Murcor executives say they celebrate the added oversight and have maintained this ‘quality control’ mindset for a while.

The OCC bulletin charged lenders with ensuring they know about all of the inherent risks stemming from the activities of their vendors, while simultaneously monitoring the work to ensure its meeting all performance and reporting standards.

The firms also are asked to conduct independent reviews of the risk management processes at vendor firms. A failure to detect and resolve such an issue can leave a lender on the hook for special fees if a third-party vendor messes up.

Keith Murray, president and CEO of PCV Murcor, is not afraid of the new rules; he embraces them.

"As a company that has made appraiser selection and assignment a core component of everything we do, we agree with the OCC's new recommendations," said Murray. He added, "Appraisal quality begins with the appraiser, and when the right appraiser is selected, the downstream risk is minimized tremendously."

The big question is can the industry make the adjustment or will the expense of compliance prove too much for certain appraisal companies. 

Nasser says it's definitely a challenge in terms of compliance expenses. Not to mention, getting the rules laid out in time means establishing a timeframe for accomplishing each step.

"Some banks are probably doing a lot of this already and are well suited to comply," she said. "Others may have to put new oversight infrastructure in place or expand their existing departments."

By early 2014, she expects most impacted lenders and third-party vendors will be close to 100% ready to go, although tweaks may be required over time.

The banks are left playing a guessing game since some of the oversight guidelines do not apply to all third-party vendors. Yet, there are a lot of rules that don’t apply to appraisal management companies, Nasser says.

But change has not rocked PCV Murcor out of step.

Nasser says even prior to the OCC bulletin, the firm and other appraisal companies were forced to register with most of the states and to take out bonds in certain jurisdictions just to maintain registration in those areas. Change has been coming swiftly in terms of oversight.

Nasser’s confidence in the system developed in-house and is echoed by PCV Murcor CEO Keith Murray.

Not long after the release of the OCC bulletin, he advised appraisal management companies to use technology and licensed appraisers to score and review every appraisal before it's sent to a client. He noted that this monitoring is needed to ensure the appraisal firm is staying in control of quality, while simultaneously proving to the lender that it has a compliant and well-versed partner on the valuations side.

Gone are the days when an appraisal firm wins a third-party contract on pricing and simple criteria alone.

Under the new guidelines, being right is critical to a firm’s survival.

"Too often, we hear of appraisers being chosen on the basis of just one of those factors, or just the lowest fee, which can actually be a recipe for disaster," Murray said. "AMCs should be looking at all these different data points and selecting appraisers based on how well they match up to a specific appraisal order. The simple fact is that not all appraisals or appraisers are alike. Every market and every property require different competencies."