Blog - Appraisal Today

Lenders Not Using AMCs for Appraisals

By Ann O'Rourke on July 1, 2023 / Leave a comment

Lenders Not Using AMCs for Appraisals

By: McKissock June 23, 2023

Excerpts: Some appraisers seek alternate ways to find work outside of appraisal management companies (AMCs). One strategy is to pursue opportunities to be engaged directly by financial institutions and banks by being included on their fee panel. To help you get started, we asked our appraisal community, “What advice can you offer on how to identify financial institutions and banks that engage appraisers directly, without involving AMCs?” Here’s what they said.

Below are helpful tips on how to find financial institutions and banks that engage appraisers directly on fee panels. In a nutshell, our survey respondents recommended that you should:

Look for small, local banks and lenders.
Network to build relationships.
Join the Mercury Network.
Simply ask around!

To read more, click here

My comments: Short and worth reading. When I started fee appraising in 1986, my first client was a small local bank with a few nearby branches. After AMCs took over, the bank continued to do their own appraisal management. Their volume went up and down with mortgage rates, but they always had some appraisals to fee out. Even today, their regular fee appraisers get some work.

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Posted in: appraisal, appraisal business, Fannie Forms

Tags: appraisal, appraisal business, Fannie forms

Appraiser Liability Risks

By Ann O'Rourke on June 23, 2023 / Leave a comment

This Is Where Appraisal Liability Risks Lie (Plus Tips on How to Avoid Them)

By: McKissock

Excerpts: While it’s difficult for a litigant to win a judgment against an appraiser, that doesn’t spare appraisers the inconvenience of being sued, which can be costly, time-consuming, and harmful to one’s reputation even if the suit fails.

Attorney Peter Christensen, general counsel at the Christensen Law Firm in Bozeman, Montana, notes that lawsuits against individual residential appraisers, or small residential AMCs, are fairly rare, and successful suits rarer still. However, it’s a good idea to know where the risks lie—and how to avoid them.

Topics include:

USPAP and state laws
Types of lawsuits brought to appraisers
Disclosures and disclaimers to reduce appraisal liability risks

To read more, click here

My comments: Peter Christensen is very knowledgeable. Well written, short, and worth reading. As we all (should) know, any person or company. can sue you for any reason at any time.!

NOTE: Please scroll down to read the other topics in this long blog post on AVMs and AI, good appraisal book, Real estate market, Fannie, non-lender appraisals, unusual homes, mortgage origination stats, etc.

Click Read More below to read lots more!

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Posted in: AI, appraisal how to, AVMS, Fannie, real estate market

Tags: appraisal how to, AVMs, Fannie, real estate market

Fannie: Words and Phrases in Appraisals

By Ann O'Rourke on June 16, 2023 / Leave a comment

What Fannie Says Effective June 29, 2023

Say This, Not That: Words and Phrases to Replace in Your Appraisal Reports

By McKissock

As part of our contributor series, Julie Molendorp Floyd gives tips on how to use more objective language in your appraisal reports ahead of the new Loan Collateral Advisor (LCA) alert messages that will take effect June 29, 2023.

Excerpts: Following that thought process, our appraisal language has simply got to change to reflect current times. In addition, our lenders and GSE’s are implementing tools and programs to identify when “Certain prohibited, subjective or potentially biased words or phrases are included in appraisal reports.”

(Freddie Mac Announcement: “Loan Collateral Advisor: Starting June 29 New Messages Alert Users to Certain Unacceptable Appraisal Practices,” April 28, 2023)

To read, click here

So, if we have the technology and tools to present our conclusions in clearer, fact-based ways, let’s get ahead of the program and make the changes proactively.

None of us enjoy completing revision requests. They take time, effort, and ultimately do not contribute to our bottom line. However, revision requests are part of an appraiser’s life. How can you go about crafting your appraisal report to avoid a revision request for “problematic language” or “unsupported conclusions”? Let’s dive into some words or phrases that should not be included in your appraisal reports and uncover ways to convey your meaning in a compliant, credible way.

Topics:

Moving toward fact-based language
Words and phrases to replace in your reports
Samples:
Say This Not That:
Within 10 blocks of shopping areas — Convenient to shopping areas
Conforms to current market trends — Traditional
Primary bedroom, ensuite — Master Bedroom

To read more, click here

My comments: If you do lender appraisals, read this post.

Changes in names is nothing new for appraisers. Since FHA, etc stopped redlining since the 1970s, appraisers have been asked to avoid certain words. Now Fannie’s computers will let lenders know.

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NOTE: Please scroll down to read the other topics in this long blog post Non-lender appraisals, ROVs, appraisal business, unusual homes, mortgage origination stats, etc.

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Posted in: appraisal business, Fannie, non-lender appraisals, ROVs

Tags: appraisal business, Fannie, non-lender appraisals, ROVs

Quality Adjustments for Appraisers

By Ann O'Rourke on June 9, 2023 / Leave a comment

Quality Adjustment Research and Methodology: The Basics

By McKissock

Excerpt: Quality and condition are not the same. Quality refers to the quality of items, materials, and construction. When making appraisal adjustments, examine the quality of your data and remember that any quality ratings in your county records or MLS are not always reliable. Here are some basic things to consider regarding quality adjustment research and methodology.

Reliability of data

You need to consider: What is this data telling me? How reliable is that data? If you’re using county data, and you’re looking at quality ratings in there, how reliably do they rate properties? Should you even be using that data?

To read more, click here

My comments: The blog post has a link to Quality Ratings. Quality is sometimes difficult to determine on the subject and very tricky on the comps. Another appraisal challenge!

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NOTE: Please scroll down to read the other topics in this long blog post on adapting to changes in appraisal, appraisal volume, unusual homes, mortgage origination stats, etc.

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Posted in: adjustments, appraisal business, appraisal waivers, desktop appraisals

Tags: adjustments, appraisal business, appraisal waivers

Appraisers: Watch for Concessions and Kickbacks

By Ann O'Rourke on June 2, 2023 / Leave a comment

Concessions, Kickbacks, and the Appraiser’s Nightmare

by Richard Hagar, SRA

Excerpts: What Appraisers Must Do

There are many steps appraisers must follow, more than I can list here. However, you should start off by listing and describing the concessions. Learn how to provide an accurate value conclusion that protects the appraiser from the potential ramifications of their bad acts.

On the first page of FNMA’s form, they ask this question:

“Is there any financial assistance [loan charges, sales concessions, gift or down payment assistance, etc.] to be paid by any party on behalf of the borrower?”

The appraiser has no choice when faced with this question, they must answer and if they get it wrong…then the appraiser is in trouble. After disclosing the information, the appraiser’s next task is to determine how the concessions have impacted the sales price. Federal law, FNMA/FHLMC guidelines and USPAP all point to a solution.

Solutions to Keep You Safe

Make sure you have a complete signed purchase contract.
In the appraisal, list how many pages of the contract you have in your possession (In case someone is hiding pages from you).
List the concessions on page 1 and in the final reconciliation.
In the sales grid, list any known concessions that were involved with the purchase of a comparable….

To read more click here

My comments: Some good tips on how real estate agents try to deal with this. I have known Richard for many years. He is an expert and is a most excellent instructor. I have taken many of his seminars over the years.

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NOTE: Please scroll down to read the other topics in this long blog post on FHA and ADUs, non-lender appraisals, unusual homes, mortgage origination stats, etc.

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Posted in: adjustments, ADUs, appraisal business, FHA, non-lender appraisals, real estate market

Tags: adjustments, ADUs, appraisal business, FHA, real estate market

FHA: Cosmetic vs. MPR Repairs

By Ann O'Rourke on May 26, 2023 / Leave a comment

Cosmetic vs. MPR Repairs: Guidance for FHA Appraisers

By: McKissock

Excerpts: If you are appraising a property that needs some cosmetic repairs but meets FHA minimum property requirements (MPR) in its current condition, you should make the appraisal “as-is.” Here is some guidance on cosmetic repairs vs. MPR repairs.

Topics include:

When can an FHA appraisal be completed “as-is” vs. “subject to”?
Cosmetic repairs Examples
MPR repairs Examples
Conditions that require inspection Examples

To read more, click here

My comments: If you do FHA appraisals, read this blog post. Photos and lots of examples. I quit doing FHA appraisals in the mid-1980s because of the inspection requirements compared to conventional appraisals, that did not have the requirement.

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NOTE: Please scroll down to read the other topics in this long blog post on appraisal “modernization”, bias hearing, bad appraiser, USPAP, unusual homes, mortgage origination stats, etc.

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Posted in: bad appraisers, bias, FHA, lender appraisals, USPAP

Tags: bias, FHA, mortgage lending, USPAP

Chat GPT For Fannie Form Appraisal Reports

By Ann O'Rourke on May 19, 2023 / Leave a comment

Chat GPT For Fannie Form Appraisal Reports

By Dustin Harris

Excerpts: The world of real estate appraisal is constantly evolving (much to our dismay sometimes), and as professionals in this field, it is crucial to stay ahead of the curve by embracing innovative tools and technologies. ChatGPT is an advanced AI language model developed by OpenAI that can be used to streamline the appraisal writing process.

Can ChatGPT, and other AI models, actually assist appraisers in writing summary appraisal reports? The answer is, Yes! Here are some examples of real-life prompts I have used with success.

“Rewrite the following description of a house and property using brevity and professional language”

“Summarize all of these property descriptions into one, easy-to-read format with a professional tone for a real estate appraisal report.”

“I am a real estate appraiser completing an appraisal. For my square footage adjustment, I used a combination of paired-sales and sensitivity analysis to determine $65 a square foot was appropriate, but I did not adjust for differences between the subject and comparables if the difference was less than 100 square feet. Write a description of where the adjustment came from that I can use in the report.”

To read more, click here

My comments: Thanks to Dustin for writing this! I have been reading about using Chat GPT for appraisal marketing and narrative reports, but this is the first I have read about form reports.

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NOTE: Please scroll down to read the other topics in this long blog post on hybrid appraisals, business tips, UAD info from Freddie, Fannie modernization, non-lender appraisals, unusual homes, mortgage origination stats, etc.

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Posted in: appraisal business, Fannie Forms, hybrid appraisals, non-lender appraisals, UAD

Tags: appraisal business, Fannie forms, Hybrid appraisals, non-lender appraisals, real estate market

Data Collectors: Appraisers vs. Uber Drivers

By Ann O'Rourke on May 12, 2023 / Leave a comment

Certified Appraisers vs. Unlicensed Data Collectors

By Jonathan Miller

(13-minute video) Here’s a great take on the difference between Certified Appraisers vs. Unlicensed Data Collectors by Leigh Brown, President of the NC Association of REALTORS. Fannie Mae has been working hard to get rid of appraisers for years. Their latest twist is to re-categorize many appraisers as “Unlicensed Data Collectors.”

Fannie Mae will end up creating more instability for the trillions in the bond market – investors will have to process millions of valuations with the physical attributes of the home collected by unlicensed, uninsured, and unprepared individuals getting paid $10-$25 per inspection.

This is to follow up on a meeting Appraisal Institute representatives held in Washington, D.C. with members of the Federal Housing Finance Agency Divisions of Housing Mission and Goals and Fair Lending March 8 to discuss the new Value Acceptance program released by Fannie Mae…

Of particular concern is the encouraged development of an alternative workforce of property data collectors that may negatively impact aspiring appraisers’ ability to enter the appraisal profession…

To read more and watch the video, click here

To sign up for his weekly Housing Notes, click here I have been a subscriber for many years.

My comments: Miller tends to be negative about the AI, but this excerpt from his weekly email is worth reading especially the video!

This is the future of GSE using appraisers. Inspection or desktops are fine, but fees may be low and many don’t want to do them. Full appraisals only on the “though appraisals” where Fannie’s AI does not work.

Many appraisers are retiring or quitting. If you make it through this downturn there will be few appraiser competitors left for the next big upturn in business.

Appraisal vs Zillow vs AVM which is best

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NOTE: Please scroll down to read the other topics in this long blog post on humor, non-lender appraisals, mortgage forecast, staying positive when you’re slow, unusual homes, mortgage origination stats, etc.

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Posted in: appraisal business, Appraisal fees, data, Fannie, future, humor, non-lender appraisals

Tags: appraisal business, Fannie, future, humor, non-lender appraisals

What Are Fannie’s New Appraisal Online Formats?

By Ann O'Rourke on May 5, 2023 / Leave a comment

Fannie’s New Appraisal Online Formats

By Brent Owen

Excerpts:

To Be Or Not To Be (a form), That Is The Question

The first thing to notice is that the ‘form’ isn’t really a form anymore. It is more of a complex decision tree or flow chart, where ‘yes/no’ questions trigger new sections and required data and supplements. For instance, answering ‘yes’ to a question about noted deficiencies will create a new section where details are needed regarding the deficiency which include further questions about whether or not repair is required and if so, the estimated costs of those repairs and section to provide a photo of the deficiency. All of that is integrated into the URAR itself. It is through the use of this decision tree model that the GSEs are able to use the same ‘form’ for almost any residential property type conceivable.

The Never-ending Story

It is also apparent that the report will be far longer than its predecessor. Appendix D-1 contains a sample URAR of a simple single family residence with no site value, cost approach, or income approach, with only 3 sales and very limited commentary and no additional addenda (with photos, maps, and graphs integrated into the URAR). The report was 21 pages, and would still be at least double the length of the current URAR without the integrated photos, map, and graphs.

That in and of itself isn’t necessarily a problem. After all, my typical reports are more than 40 pages long. It’s not the length of the report which is of ultimate importance, it is the time necessary to develop the appraisal that is key. My sense so far is that there will be some additional time necessary (beyond the expected additional time necessary to become proficient with the new format and associated technology).

To read more plus appraiser comments, click here

My comments: Read this article! A good analysis in one location. I have read lots of very short comments, but this one is much longer. Unfortunately, Fannie has not provided separate information for appraisers. The announcement included many pages as it was for everyone: appraisers, forms vendors, lenders, AMCs, etc., with lots of very detailed information.

Appraisers – The Past and The Future

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NOTE: Please scroll down to read the other topics in this long blog post on Appraisal Institute President, non-lender appraisals, Changing state appraisal laws, Fannie modernization, unusual homes, mortgage origination stats, etc.

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Posted in: appraisal business, Fannie Forms, state appraiser regulators

Tags: appraisal business, appraisal fees, bias, Fannie forms, non-lender appraisals

Appraising Solar Panels

By Ann O'Rourke on April 28, 2023 / Leave a comment

Appraising Solar Panels

By Mark Buhler

Excerpts: You drive up to the property. There they are, on the roof: those shiny black rectangles that are just about to turn a simple assignment into a headache. What to do? Put the car in reverse and slowly back away? Call the client and have them re-assign the order?

Those are certainly options. But in today’s tight market, with orders as scarce as hens’ teeth, let’s explore some other approaches to solving this problem.

First: How do appraisers value any amenity of a property?

Appraisal 101 would suggest the matched pairs analysis. So our first task is to find a property with solar panels that’s similar to the subject.

That search quickly comes to a screeching halt. (I can almost smell the brake dust.) There are no comps with solar panels in the area. So when we type the report, a comment like this might slip past the reviewer and underwriter: “A thorough search of the subject’s marketing area revealed a scarcity of sales comparables with solar panels.”

So far, so good. Now let’s continue with that reasoning: “Due to a lack of comparables with solar panels, no contributory value can be extracted.”

This supports a zero (0) adjustment, right?

Well … maybe. A savvy underwriter or reviewer might wonder why the appraiser didn’t consider the cost and income approaches…

To read more click here

My comments: Good, practical advice. The article is worth reading. Solar for homes is everywhere now. I recently spoke with Mark. I asked some technical questions about financing solar and electric companies lowering what they pay to homeowners with solar. He knew everything! Taking a webinar or class from him is definitely worth the price. He has been teaching the classes for a long time.

Complex Residential Properties for Appraisers

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NOTE: Please scroll down to read the other topics in this long blog post on unusual homes, mortgage origination stats, etc.

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Posted in: adjustments, appraisal business, appraisal how to, Fannie

Tags: adjustments, AMC, appraisal business, appraisal how to, Fannie