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What is a residential complex property?

By on December 23, 2022   /  Leave a comment

How to Identify a Residential Complex Property

By: McKissock December 16, 2022

Excerpts: The property to be appraised is atypical

In this case, the property is an outlier, oddball, or not common for the particular area. Of all the characteristics that can make a property complex, physical features are the ones that are most obvious. Some of the key physical features that can make an appraisal assignment complex include:

The form of ownership is atypical

In this case, circumstances involving ownership are uncommon or make the appraisal more complex. For example: The owner doesn’t own property rights on a waterfront property.

The market conditions are atypical

In this case, unique market conditions increase the complexity of the appraisal. For example:

The property is located in an area where there are no other sales.

There is no market for the house; no sales are occurring for some reason (e.g., the property is near a nuclear site cleanup).

Note: the link to the complementary post, “How to Pull Comps on a Complex Property,” is included in this blog post.

To read more, click here

My comments: Worth reading with good tips. I published “Tips for dealing with complex residential appraisals” in the November issue, much longer with many more tips and examples.

Appraisal Business Tips 

Humor for Appraisers

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Appraisal Risk and Modernization

By on December 16, 2022   /  Leave a comment

Industry Insider Insight on Risk and Modernization

Excerpts: The Collateral Risk Network (CRN) met in Sarasota on December 6th to discuss a variety of issues ranging from appraisal turn times to Fannie Mae’s economic outlook for 2023. Bill Rayburn gave a rousing and lively explanation of exactly what quality means in valuation at a recent meeting. Lenders want a compliant document that allows the loan package to be sold as quickly as possible, while investors want an appraisal that allows for securitization or resale to another downstream buyer.

Appraisers were encouraged to provide convenience as one aspect of quality. His figures show there is a holding cost of $200 per day on an unclosed loan and this hinges on the appraisal which is the last thing in the critical path to closing. He suggested we redefine quality to include a time element.

Joe Minnich, a condo risk consultant, spoke on how loans secured by an individual unit in a condominium project have greater risk than found in typical SFR lending. Lenders must address the various layers of risk to ensure that the loan is of saleable quality and the likelihood the borrower can/will repay the loan.

To read more, click here

My comments: Bill Rayburn, Chairman, and CEO at mTrade, is an excellent speaker and very savvy. I have known him for many years. FYI, CRN (Collateral Risk Network) was set up for AMCs and lenders. It was “closed” to appraisers for a while but is open now. Worth attending.

Fannie New Appraisal Form Modernization

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How to Reduce Appraisal Revision Requests

By on December 9, 2022   /  Leave a comment

How to Reduce Appraisal Revision Requests

By Clear Capital November 14, 2022

Excerpts:

To cut down on appraisal revision requests, it is important to keep these best practices in mind:

Communicate in a timely manner

Address the request thoroughly and professionally. Add additional commentary where appropriate.

Ask questions. If you disagree with the request for appraisal submissions or have concerns or need clarification, please reach out for clarification.

1. Explain ‘How’, not ‘Why’ in the appraisal report

The most common frustrations arise when the appraiser focuses more on the type of adjustments made while the reader would look for the ‘how’ in the appraisal report. For example, if a positive or negative adjustment was applied in the report, the reader wants to know how the adjustment was determined.

“How did you determine that the subject comparable was inferior or superior in condition? Don’t leave the ‘how’ part out while applying adjustments. Be sure to address those questions; it will certainly help you in the long run.” says Ken Folven, Senior Director, Appraisal Quality Assurance at Clear Capital

2. Reduce lengthy commentary

In some cases, appraisers provide lengthy boilerplate commentary in an attempt to avoid a revision request. This strategy often backfires because parties involved in the lending process cannot find the specific information they are looking for in the report. Inconsistent commentary can result in common requests for revision.

Prior to submission, read the letter of engagement in detail, which highlights the customer-specific information, and make sure to include all required information in your report. Organize your commentary and explain your comparable selection process briefly.

“I always recommend organizing commentary by adjustment rather than by comparable and make it a habit to review the pre-delivery rules,” says Khan.

Derek Mitchell, a California-based Senior Appraiser at Clear Capital, has a different approach: “I use a lot of characteristic-based comments as opposed to comparable-based comments because it cuts down on the amount of writing that I have to do and the amount of reading the reviewer has to do,” Mitchell says. “It tends to get redundant when you’re just talking about different comparables but the same characteristics.”

In addition, staying up-to-date with Uniform Standards of Professional Appraisal Practice (USPAP), Federal Housing Administration (FHA), and GSE guidelines and industry requirements also goes a long way in drafting error-free reports that would otherwise create unnecessary revision requests.

To read more, click here

My comments: Good practical tips. We all hate revisions unless maybe it was because we forgot to put the value in. I did this sometimes in appraisals for a local bank ;> Your clients hate them also. They take appraisers too much time and can sometimes make you very upset, which interrupts your workflow.

What Causes Appraisal Revisions?

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NAR: Appraisal License Equivalency Credit for RE Agents?

By on December 2, 2022   /  Leave a comment

NAR Urges Appraisal Foundation To Establish Equivalency Credit for Education and Experience

Excerpts: The AQB previously considered the option of allowing parallel professional non-appraisal experience. In a July 9, 2015, Concept Paper – Alternate Track to the Experience Requirements in the Real Property Appraiser Qualification Criteria, the AQB asked: “Are there practical alternatives for some (or all) of the appraisal experience requirements to include non-appraisal experience?”

The National Association of REALTORS® believes there are alternatives to some of the experience requirements that the AQB should consider.

NAR sent a letter to the Appraisal urging the Appraisal Foundation (TAF) to review the experience and education of workers in parallel professions and consider it for potential credit to satisfy the accreditation requirements of appraiser licensing.

Excerpts from the letter:

… including, but not limited to, experience in real estate market analysis and real estate brokerage, including:

• Evaluating and pricing residential real estate

• Counseling buyers, sellers, owners, and tenants on inspections and remediations, improvements, and the appraisal process

• Counseling buyers, sellers, owners, and tenants about listing and offering prices, and market rent

• Completing broker price opinions and Competitive Market Analyses

• Completing Evaluations in compliance with the Interagency Appraisal and Evaluation Guidelines

• Compliance with Fair Housing laws, rules, and regulations

• Compliance with the Equal Credit Opportunity Act

To read the letter (PDF), click here

My comments: Real estate agents and brokers are salespersons. They provide CMAs, etc., which can relate to valuation. I don’t know if Realtors can be re-trained to see value rather than price. I speak with a lot of Realtors and many are not oriented the same as appraisers.

Over the years, I observed that successful real estate agents seldom switched to the much less profitable appraisal side. Persons who started in sales but were not very good sometimes went into appraising.

On the other side, appraisal provides excellent experience for real estate agents. I know some successful agents who were trained as appraisers and appraised for awhile. There are also agents/brokers who are licensed appraisers and do both. Appraisers with real estate sales experience know real estate from the “inside” by interacting with buyers and sellers. Appraisers are real estate reporters.

Does NAR want to allow some appraisal experience and education instead of 100% sales experience and more than one appraisal class for a broker’s license? What about a salesperson license?

I have been a licensed real estate broker since 1986. I got it mostly for MLS access and have only done one sale, representing the buyer. At that time, no sales experience was required for a broker’s license, only a 4-year degree. I am familiar with the current experience requirements for a broker’s license. Can appraisal experience count for some of these experience requirements? It should go both ways.

NAR Appraisal Survey 2022

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More Crazy Appraiser Stories!

By on November 25, 2022   /  Leave a comment

More Crazy Appraisal Stories!

Excerpt:

Restraining Orders & Appraisals – Never a Great Mix

Eric VanderWaal

The majority of my appraisal work is on divorces and estates, both of which have their fair share of crazy stories.

I was appraising a home for a divorce several years ago. The husband had contacted me for the appraisal, but it was the wife who was living in the home. We met at 9:30 am, which was an odd time that he requested. When I arrived at the home, he said that she wasn’t home and had locked all the doors, so he called a locksmith to come to open the back door. The locksmith arrived shortly and started to work on the backdoor. The husband said that his wife was aware of the appraisal appointment and should have left the home unlocked.

I started on the outside and about ten minutes later, a woman comes to the backyard where the husband, myself, and the locksmith were and starts yelling at the husband about him not being allowed to be there. I thought it was the wife, but it turned out to be a neighbor. The wife was at an appointment which is why, I figured out, that he wanted the appointment at 9:30 am rather than 10:00 am. After several minutes of the husband and neighbor yelling at each other, the locksmith got the back door open. The neighbor left and we went inside…

To read more, click here

My comments: We all have these stories ;> Divorce is the best non-lender option for residential appraisers. Very little competent competition and very high fees for expert witness testimony.

You will probably be going up against an MAI. Your attorney says to the MAI: How many house appraisals have you done this year? Answer: 4. Your answer: much more than 4! Your attorney is happy at winning the case, and you get lots more divorce work.

I will be writing about this in an upcoming issue of the monthly Appraisal Today, with lots of marketing and expert witness tips.

Many thanks to Appraisal Buzz for the image above. My favorite appraiser image ;>

Appraisal Business Tips 

Humor for Appraisers

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Fannie Mae Takes A Closer Look at Appraisals

By on November 20, 2022   /  Leave a comment

Sins of the Past Are Back to Haunt Appraisers

Fannie Mae Takes A Closer Look at Appraisals

By Richard Hagar, SRA

 

 

Excerpts:

In the recent past, when appraisers were swamped

Even with the Collateral Underwriter program review, appraisers were overwhelmed. Every lender and AMC were seeking and hiring review appraisers in order to keep up with demand. Due to the shortage of review appraisers (exacerbated by low fees and time pressures), tens of thousands of poorly created appraisals were accepted without receiving adequate review.

Unfortunately, because many appraisals were rarely rejected or required corrections, appraisers developed the false notion that poorly crafted appraisals were okay to turn in. Many appraisers were bragging about their ability to fill out two or three appraisal forms a day and receive no call-backs from lenders.

However, time and time again we’d review appraisals, that were accepted by lenders, but had failures such as:

• No highest and best use analysis (as if vacant and improved).

• Failure to make appropriate time/market adjustments (positive or negative).

• Using only a single approach to value.

• Incorrect land values.

• Square footage costs and depreciation based more on opinion than reality.

• Unsupported adjustments (adjustments based on “my 30 years in the business” instead of facts).

• Failures to personally inspect and photograph comparables.

What’s happening now

FNMA indicates that their 2022 lending volume is down 47% from 2021 and is expected to drop by another 50% in 2023. So, it’s pretty safe to state that the “appraiser shortage” of yesteryear is over, and reviewers now have more time on their hands.

Which appraisers are going to survive when the loan volume is down 75-85% and the poor appraisals of the past are catching up with the appraiser today? Well, for the most part, it’s based on the quality of the appraisals delivered to lenders over the past five years.

Do you believe that the quality of your work ranks you as a tier 1 appraiser or do you have a little concern about your rating? Tier 1 appraisers have little to fear but tier 2 and 3 appraisers…

What you can do today

Today, you likely have more time on your hands, so slow down and take more time improving the quality of your work. Superior quality appraisals can set you free.

Learn how to accurately determine adjustments. Follow the ANSI standard when measuring the subject (even if you disagree with the method — it’s the requirement). Take more classes! Don’t stop taking classes just because you have enough CE credit to meet your next renewal; that mentality is for the bottom tier of appraisers.

I typically obtain double the CE credit hours necessary to renew my certificate…double! Why? Because I want to do things better, obtain higher fees, and survive the purge that is coming. Lenders have more choices, and you need a way to stand out from the bottom tier and low fee appraisers.

To read more, click here

My comments: Worth reading. Hagar is one of the best residential appraisal instructors. I have known him for over 30 years and have taken many of his classes. Richard can be a bit negative but states what is really happening and what you need to do. Many thanks to Ryan Lundquist’s 2020 blog post for the very appropriate image above!

I also think that now is the time to increase your appraisal skills by taking classes and seminars. I also have always had more CE hours than I need.

I am an appraiser because it is challenging and never boring. I quit working in labs because it was boring after 7 years but have never been bored appraising. I want to be the best appraiser I can be. (I have always been an over-achiever).

Consider doing non-lender appraisals. I have been doing them since 1986 and writing about them in my monthly newsletter since 1992. No CU, UAD, reviews, many pages of differing AMC requirements etc. Your requirements are in USPAP.

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Reliable MLS Data important for appraisals

Appraisal Business Tips 

Humor for Appraisers

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Unacceptable Appraisal Practices from Freddie Mac

By on November 10, 2022   /  Leave a comment

12 Unacceptable Appraisal Practices from Freddie Mac

10-5-22

 

 

Here are 5:

  • Reliance in any appraisal analysis on inappropriate comparable sales, or the failure to use comparable sales that are more similar to or nearer to the subject property without adequate explanation
  • Use of unsupported or subjective terms to assess or rate, such as, but not limited to, “high,” “low,” “good,” “bad,” “fair,” “poor,” “strong,” “weak,” “rapid,” “slow,” “fast” or “average” without providing a foundation for analysis and contextual information
  • Use of comparable sales data provided by interested parties to the transaction without verification by a disinterested party
  • The use of inordinate adjustments for differences between the subject property and the comparable sales that do not reflect the market’s reaction to such differences, or the failure to make proper adjustments when they are clearly necessary
  • Development of value and/or marketability conclusions that are not supported by available market data

To read more, click here

My comments: From Freddie Mac’s Selling Guide with links to more information. Nothing new, but good reminders.

Review appraiser liability

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Practical Tips for Working With AMCs

By on November 4, 2022   /  Leave a comment

Appraisers Share Their Best Tips for Working with AMCs

By McKissock

Excerpts: In a nutshell, our survey respondents recommended that you should:

1) do your research and get to know the AMCs,

2) build a relationship with them,

3) treat the relationship as a partnership, and

4) prioritize communication.

Build a relationship

“Be personable so they remember you.”

“Make yourself known by being efficient as well as timely with your reports. Be friendly—even when you feel like the UW’s question may be redundant or was already answered in the report. I promise you that this will make you known in your area.”

“Have a very responsive credo. Keep them up to date in every step of the report so that they can keep the Lender (and the Buyer/Seller/Realtor/Closing Attorneys when applicable) all in the loop on the progress of the report. Remember when they look good and trust you—you look good

Communicate, communicate, communicate!

“Update the orders quickly.”

“Keep them informed.”

“Over communicate!”

“Always communicate—even if it feels like too much. Our office updates AMCs on every scheduling attempt with details, every inspection appointment set and completion, and any materials needed ASAP in the assignment. They really appreciate it, and it ensures you can complete assignments on time as you had planned (no one likes waiting for a legal description only to have it show up on your day of 4 inspections!). It’s truly a win-win.”

“Stay in communication. Appraisers tend to get annoyed with constant emails from the AMC about inspection date, completion, report submission, etc. I make it a point to update them and answer their emails ASAP. In my opinion, that’s good business. And if you do need more time, more info, they are more willing to oblige.”

To read more, click here

My comments: Read this blog post with practical tips from practicing appraisers. It can help you get more business from AMCs (and other lender clients). Savvy appraisers I know who mostly do non-lender work also have a limited number of carefully vetted AMCs they work for, plus a few local lenders and “private” lenders.

Advertising Disclaimer: McKissock is one of my regular email advertisers. I keep my advertising clients and this newsletter’s content separate. But, McKissock’s blog posts are short, well written, and popular with readers, so I include them regularly.

LIA runs an informational ad at the top of each email newsletter. The ads regularly get the largest number of “hits,” indicating that readers like them. We all like free Liability advice!

Practical real estate appraisal writing tips for AMC questions

Reconsideration of value and Appraisers

Appraisal Business Tips 

Humor for Appraisers

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VA Update for Appraisers

By on October 28, 2022   /  1 Comment

VA Update for Appraisers

Interview with VA’s Chief Appraiser

By Isaac Peck

Excerpts: …the United States Department of Veteran Affairs (VA), is known throughout the valuation community for respecting the work of appraisers and maintaining reasonable fee schedules.

The questions:

  • Fannie Mae and Freddie Mac are making desktop appraisals a permanent fixture in their valuation offerings. Is the VA looking at these types of valuations and what are some of the considerations?
  • There’s been a lot of buzz about measuring homes to ANSI standards in the appraisal industry–what can you tell us about the VA’s stance on ANSI? Do you anticipate requiring ANSI on VA appraisals in the future?
  • There is a lot of concern about discriminatory appraisals—what is the VA doing to protect Veterans from discrimination and what are your thoughts on the topic?
  • What’s new at the VA? Any final thoughts?

To read the answers and more, click here

My comments: I have always strongly recommended doing VA appraisals, especially since AMCs took over other lenders’ appraisal management. VA wants you to help veterans. Lenders want to make more money. I wrote a long article about VA in the past, available to paid subscribers. I interviewed VA appraisal employees, fee appraisers who liked VA, and other appraisers who did not want to work for VA.

Appraisers and local market analysis

Appraisal Business Tips 

Humor for Appraisers

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Appraisers and Local Market Analysis

By on October 21, 2022   /  Leave a comment

Appraisers and Local Market Analysis

By Woody Fincham, SRA, AI-RRS, ASA

Excerpts: Social media and the mainstream media make a mess of these markets even in the best of times. They do not have the bandwidth to cover local markets. When you are in a metropolitan statistical area like Charlottesville and Waynesboro/Staunton you get some reporting from the local news. Still, if it is not driven to get online clicks from hyperbole it usually is not worth reporting. National data simply does not apply to the local real estate market and the closest large markets are Richmond and Washington DC. Neither are not great metrics for what our local markets are doing.

I think everyone has heard the old saying, “You can’t see the forest for the trees.” And that is true. We are in the middle of a market transition and exactly how it is transitioning is extremely hard to predict. The best market analysis is always retrospective, as they say, “Hindsight is 20/20.” Until we get past this period over the next few months it may be hard to say definitively what is exactly happening. As an appraiser, it is super important to understand how to gather and analyze relative data.

So, what metrics are worth watching?

  • Inventory levels
  • Absorption rates and marketing times
  • Actual days on market (DOM)…

To read more and see the graphs, click here

My comments: Read this article, including the case study. See if there are data types and graphs you can use in your appraisals. Your clients count on you to let them know the market today, not in the past. Of course, I agree with this. Appraisers have the most valuable data and analyses in a changing market: listings, pendings, price changes, etc.

Appraisal Neighborhood Analysis

Appraisal Business Tips 

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