Appraisers: Watch for Concessions and Kickbacks

By on June 2, 2023   /   adjustments, ADUs, appraisal business, FHA, non-lender appraisals, real estate market   /   Leave a comment
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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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Chat GPT For Fannie Form Appraisal Reports

By on May 19, 2023   /   appraisal business, Fannie Forms, hybrid appraisals, non-lender appraisals, UAD   /   Leave a comment
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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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Data Collectors: Appraisers vs. Uber Drivers

By on May 12, 2023   /   appraisal business, Appraisal fees, data, Fannie, future, humor, non-lender appraisals   /   Leave a comment
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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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What Are Fannie’s New Appraisal Online Formats?

By on May 5, 2023   /   appraisal business, Fannie Forms, state appraiser regulators   /   Leave a comment
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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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Appraising Solar Panels

By on April 28, 2023   /   adjustments, appraisal business, appraisal how to, Fannie   /   Leave a comment
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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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Appraisers: How to Manage Your Emails

By on April 7, 2023   /   adjustments, appraisal business, lender appraisals, non-lender appraisals   /   Leave a comment
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The Mailbox is Full and Cannot Accept Any Messages at this Time. Goodbye. How to Manage Your Emails

By Paul Ryll

Excerpts: My mother told me today that she called last night and was greeted with, ‘The mailbox is full and cannot accept any messages at this time. Goodbye.’

I get a few telemarketers’ messages. Rarely is there a message from a friend or family member. I would say about 90% of the voicemails that I receive are from an irate homeowner worried about a rate lock or a stressed out realtor wondering if they are going to close on time.

AMCs

Assuring that the appraiser has the correct contact information for an inspection is very important. There have been numerous instances in which I have not been able to get ahold of a contact for an inspection only to find out weeks later that the AMC gave me the wrong contact information.

Communicating quickly with the lender is an issue with the appraisal process. I’ve requested guidance on assignments from the lender in which the answer came after the due date. Most recently, I had a detached condo that was ordered on a 1004 which needed to be switched to a 1073. The closing date came and went before I got the go-ahead from the lender.

Have one point of contact for an assignment. Nothing is more frustrating than 17 people calling me on one revision because the employees of the company don’t research to see if I have been contacted or read the notes in the assignment.

To read more, click here

My comments: Slow now? Work on organizing your emails. I have many email folders with automated inbox filtering, which helps a lot. Very good tips in the article. Written in 2-22 but is still very relevant today. I don’t see much written about appraisers and emails. I have always had a landline for business calls and a cell phone for personal calls. Having both on one cell phone is chaos, IMHO.

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What Do Appraisers Look For in a Sales Contract?

By on April 2, 2023   /   adjustments, appraisal, appraisal business, appraisal forms, appraisal how to, Fannie Forms, non-lender appraisals, UAD   /   Leave a comment
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What Do Appraisers Look For in a Sales Contract?

Why must an appraiser be given a copy of the sales contract? First and foremost, Standards Rule 1-5 in the Uniform Standards of Professional Appraisal Practice (USPAP) states that we are to: “analyze all agreements of sale.” That’s the real reason why—because USPAP says so.

Secondly, the appraiser is likely familiar with the local real estate contract forms, customary terms, and conditions of real estate transactions in the area, and might be able to identify irregularities and comment on them.

Thirdly, and more importantly, there may be provisions in the contract that identify concessions, non-real property items included in the sale, or other unusual conditions that would give the appraiser the opportunity to comment on or explain in the appraisal report as to why there is a difference between the indicated market value of the subject property and the contract price.

To read many practical tips, click here

My comments: Worth reading. Answers a lot of appraiser questions. Of course, I have always preferred not knowing the sales price as it seems like a conflict for an objective, unbiased appraisal.

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Appraiser Gets Subpoena – What to Do 3-17-23

By on April 1, 2023   /   appraisal, appraisal business, AVMS, non-lender appraisals, real estate market   /   Leave a comment
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Appraiser Gets Subpoena – What to Do

Excerpts: As an appraiser, you don’t have to be sued or be facing a lawsuit to find yourself on the receiving end of a subpoena—staring down a lawyer who is peppering you with questions.

Appraisers are often subpoenaed in legal disputes involving third parties, usually being tied to the dispute for no other reason than having appraised a property involved in the dispute. If the appraiser is not a party to the lawsuit, then typically they are being subpoenaed for documents and/or being called as an expert witness, sometimes without pay, to testify regarding a past appraisal.

First, subpoenas are court orders and you must not ignore the subpoena or you will find yourself in contempt of court. Tim Andersen, MAI, MSc, USPAP instructor and CEO of TheAppraisersAdvocate.com, says that if an appraiser doesn’t want to comply with a subpoena they can try to fight it, but that requires hiring a lawyer, which can be costly and has its own challenges. “One approach is to protest the subpoena to the judge indicating that your records are private, and requesting that your records be treated as confidential and not be made part of the public record. The judge, however, will do whatever s/he chooses to do,” reports Andersen.

To read more, click here

My comments: This is an excellent article on this topic. Read it to find out the issues. If you lost this link later, when you need help, Google “Dealing with a Subpoena Workingre”. This is specifically for appraisers. If you find other links online, they are not as useful.

I have never been served with a subpoena, but this is a regular topic among appraisers. I get calls occasionally from appraisers about this.

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Appraiser Adjustment Tools

By on March 3, 2023   /   adjustments, appraisal business, bias   /   Leave a comment
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What Tools Do You Use to Support Your Appraisal Adjustments?

McKissock Survey

Excerpts: Here’s a tally of the most popular answers—tools that were either selected or written in by multiple respondents. We’ve included “paired sales/matched pair analysis” in the list as well, even though it’s a method rather than a digital or software tool, because it was mentioned by so many appraisers.

In addition to the top answers listed above, we received many other write-in responses. Other methods and tools that our survey participants said they use to support appraisal adjustments include:

    • Market knowledge/research
    • Market extraction
  • Manual sales comparison
  • Regression analysis
  • Segmented market analysis

To read more, click here

My comments: First survey for this topic I have ever seen. Very interesting. Don’t miss the appraisers’ comments!

Using home’s previous sales in appraisals(Opens in a new browser tab)

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What is Your Appraiser Level? Why Does It Make a Difference?

By on February 24, 2023   /   appraisal business, bias   /   Leave a comment
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What Level Appraiser Are You?

Beginner, Intermediate, or Pro?

By McKissock

Excerpts: How do we measure ourselves?

What is the mark of an appraiser who is at the top of his or her “game”? Is it the letters behind the name (MAI, SRA, etc.)?

The key is not the letters but the competency or skill. For example, are you competent to prepare an entire appraisal from start to finish? You might answer, “Absolutely!” But what if the appraisal form was completely blank with no boilerplate text? Do you still feel the same level of assuredness? What if you could not use the URAR form at all, but still had to produce an appraisal report that could stand up in court? Are your legs shaking? These questions help us to start to gauge our current level.

A Level 1 appraiser checks boxes. A Level 2 appraiser adds explanations, graphs, and charts to those boxes. And a Level 3 appraiser knows how to think outside the checkboxes altogether. A pro-level appraiser may use a form. However, she is not bound by it; she can prepare a narrative report if it is needed or preferred. In addition, he understands the principles of USPAP and never stops improving his craft.

To read more good ideas, click here

My comments: Most appraisers are not busy. Now is the time to increase your appraisal skill level. There are AMCs who want appraisers to do the “tough ones,” not just those with the lowest fees. They will pay good fees. Non-lender appraisals, with higher fees, also require a higher skill level.

Appraisal Errors from Reviewers and State Boards

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