Appraisal News and Business Tips

The First Rule of Real Estate is location, location, location. But, do lenders care?

Not every property fits well on residential forms. Today, many don’t fit due to the incredible scope creep.

Savvy appraisers are screening appraisal requests and turning down any assignment that will cause “problems” when submitted. Many appraisers are very busy. Every minute spend on a tough appraisal is time that could be spent on appraisal that takes much less time, not counting all the stips. The time to take the “tough ones” is when business is slow. If an AMC doesn’t like it when you turn down assignments, drop them and get a new AMC to work for. There are plenty of them desperate for appraisers.

Lender appraisal commoditization, and the UAD, have significantly decreased the focus on the importance of what appraisers provide – expertise in a local market. Every market, and submarket, is different and unique. In many areas, the markets are changing on almost a daily basis.

More and more frequently, appraisers are not trusted and local experts. The incessant requests to “consider” comps from public records, change the “wording” of a phrase, appraiser vs. public records sq.ft., cats in photos, etc. Do they even care about local knowledge? Is it just fitting everything into a form that can be easily “reviewed” by software and unlicensed persons that focus too often on what is irrelevant to the value opinion? Is this information what clients (lenders and investors) really want?

More important, the wide use of non-local reviewers with no local knowledge really makes it hard to explain what is happening so it fits into their rigid criteria.

For example, in some markets location on a busy street is not a factor that affects market value and in others it has a significant affect on value. Or, location on the first floor in a condo project is a plus, and in others it is a minus, for various reasons.

Don’t let lender restrictions affect your value or what you put into your report!!

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14 Comments
  1. There is a way to stop the insane questions. I use it with a well known AMC. First, I tell them there were no more comparables in the subject market. Second, I tell them that if there is any attempt to request sales from outside the subject market or sales that are too old…this will mislead the reader and distort the value.Believe me, this works.
    . I have many more “tricks” that I employ
    V
    virtually stopped all call backs on complex

  2. I probably get 8-10 phone calls a week from AMCs asking for my fee and turn time on properties all over NH. It’s a small state but not THAT small. Thank goodness for caller ID because I don’t answer the calls nor do I return them. Try explaining to a reviewer in PA that there are no good comps within 10 miles for that 700 SF log home on 20 acres! That’s why I work only for local lenders and individuals. Of course it helps that there is a shortage of residential appraisers here….

    • Supply and demand of appraisers certainly seems to be a real key in separating oneself from AMC work. I am apparently approaching my annual reaffirmation date.

      Unlike you I answer the calls and I just accepted an assignment from one that is supposed to be kept in house. If history is any indication, I will be once again swearing off AMCs by the end of the month.

  3. The primary problem with the UAD is how it was created. Remember. God so loved the world that He did NOT send a COMMITTEE. But Fannie/Freddie created a 12 or 15 member committee that only had two appraisers to create an appraisal report format. Guess how often the appraisers recommendations were accepted.

    Another problem that goes back much further is the prohibition about people (and now pets) being included in photographs. What that tells me is that the banks believe their employees discriminate.

    We are at the property, we see the occupants and the neighbors, but we do not discriminate because it is against the law. However, the loan processor or underwriter could discriminate if they see a photo of a person. But fortunately, the processor or underwriter is too stupid to discriminate if they see the name of the borrower is Steinberg or Muhammad or Nguyen or Kawasaki. Doesn’t say much for how the banks see their employees.

  4. Hello Ann,

    Yes, it does appear that the complex assignments are being turned down in droves. I do not know that it is the “savvy” appraisers who are doing so, though.

    I regulary take such assignments and the AMC’s are happy to pay double or more the fee I would have charged for these assignments pre-recession, because they have such a hard time placing them.

    • Very smart idea!! Unfortunately many appraisers seem to be unable to ask for higher fees..

      • We ask for them and they say “They will get back to you” Then proceed to bargain with every appraiser on their list for a lower fee. Then we never here back.

  5. Ann,
    I believe you hit the nail on the head. Appraisal forms themselves can be rather limiting vs. a narrative format. The advent of the UAD has placed the focus on trivial information such as labeling photos of each room. God help you if you have two different angles of the same room or bathroom. In an effort to create a report that can be read by computers, they have created a report that needs a glossary attached so the lay person can understand the “codes”. The focus now is on format, not content. The UAD format has severely limited the quality of data within a residential report. We can’t even report the last transfer of sale in the appropriate box anymore. We are forced to place information that may not be quite true in our reports and try to clarify the information in the addendum. Case in point is the “special assessments” section. We don’t typically get a title report for a residential valuation and may not always know this information, buy the form makes us place a Yes or No. I can go on and on about this. Frankly it is as damaging to the appraisal and mortgage industry and ridiculous. What we need is the removal of the UAD form format and a focus on clean, well written reports with a focus on the information that matters. Ann, thank you for talking about this topic. We need more and more of us to come forward and voice our concerns.

    Gary Young

  6. The first rule of mortgage lending appraisal: It’s not the value. It’s how did you fill out the form.

  7. I have two tough assignments left. I have been taking on new construction. The sales prices are ridiculous. Location, Location, Location. What do buyers, builders and lenders not understand about this? If you want a home that is worth AB then build one or buy one in AB neighborhood. Not just run off in a CDE neighborhood and build the $$$$ home. I agree with you Ann. I am Anna

  8. You are correct that taking the tough ones creates austerity. But being a victim suits me. My observation is that the problems for appraisers that you refer to are coming right smack out of secondary mortgage work. And at the end of that jump rope is Fannie Mae. I believe the preferred method is to work lender direct, but short of that, at least pick assignments where the lender keeps skin in the game.

    The amount of respect from lenders who intend to stay in the picture for a substantial part of the loan period and use the loan to collateralize the loans they need is absolutely amazing.

    All of this tranching and quanting is akin to an alien invasion intended to obliterate life on earth.

    Well, I thought it was inspired by something like that .

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