bias

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ChatGPT for Appraisers

By Ann O'Rourke on August 13, 2023 / appraisal business, appraisal how to, bias, liability / Leave a comment

Tags: appraisal, appraisal business, appraisal how to, bias, liability

ChatGPT: Valuable Tool or a Replacement for Real Estate Appraisers?

by Dustin Harris, The Appraiser Coach

Excerpts: ChatGPT: A Game-Changer for Appraisal Work

For those who have embraced it, ChatGPT has been transforming multiple aspects of appraisal work, such as:

Appraisal Work:

Writing narrative
Market analysis
Market-specific information
Descriptions of adjustments
Terminology
ResearchMarketing:
Creating lists
Writing emails and messages to current and potential clients
Crafting blogs
Strategizing networking and relationship development
Writing presentations for ‘lunch and learn’ events with real estate agents
Crafting the perfect apology letter when you upset a key loan officer in your small town
To read lots more, click here
My comments: Many thanks to Dustin for writing this article! I have not had time to use it, but have been reading and watching demos about how it can be used for appraisers for awhile. It definitely can be very useful, as Dustin explains. It can be tricky at first to use, but Dustin explains it.

I recently had to renew my California Driver’s license, as I am over 70 and had to do a written exam and eye test. I had difficulty setting up an appointment and clicked on “Chatbot”. It was much friendlier than any other Chat support I have used. I recognized the use of software similar to ChatGPT.

Fannie: Words and Phrases in Appraisals

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The Future of Residential Lender Appraisers

The End of Lender Appraisals?

By Ann O'Rourke on August 4, 2023 / appraisal business, bias, real estate market, USPAP / Leave a comment

Tags: appraisal business, Fannie, real estate market, USPAP

The End of Home Appraisals?

By Jeremy Bagott, MAI

Excerpts: In his 1946 essay “Politics and the English Language,” the late British novelist, essayist and critic George Orwell examined the connection between political orthodoxies and the debasement of the English language. In a truly Orwellian move, mortgage giant Freddie Mac recently announced its intent to censor an arbitrary collection of words such as “desirable,” “safe,” “well-kept,” “student” and “crime” when they appear, in any context, in the hundreds of thousands of appraisal reports it relies on in mortgage underwriting. It would be hard to make this up.

As with all banned words, Freddie’s list will lead to the need to ban additional words over time as appraisers, expunging the word “desirable,” will find synonyms when analyzing market reaction to the views of two homes or to the cul-de-sac location of a home versus the midblock location of a comparable. When discussing how market participants view side-by-side school districts, appraisers will figure out they can use synonyms like “advantageous,” “preferable,” or “beneficial” instead. Soon, these words, too, will need to be banned. In a college town, the banned word “students” will become “matriculants,” a word that will likewise need to be banned.

The attack on the protected speech of independent appraisers erodes their ability to describe how the properties they appraise relate to the preferences of market participants. The censorship is part of a march toward what appraiser and podcaster Phil Crawford has coined “universal basic home value” – a utopian vision among idealogues in which government technocrats dictate the supposed value of a property using algorithms and machine learning. The censorship began with Fannie Mae, and has now predictably spread to Freddie Mac.

To read more plus appraiser comments, click here

My comment: Worth reading. Lots more AMC/lender appraisal correction requests. Last week’s email had a discussion of the “words” which got a lot of clicks by appraisers wanting more information.

Fannie: Words and Phrases in Appraisals

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Appraisers: Be Careful with Your Words

By Ann O'Rourke on July 28, 2023 / bias, Fannie, Fannie Forms, george dell, non-lender appraisals / Leave a comment

Tags: bias, Fannie, mortgage lending

Pesky Words. Keeping Appraisers out of Language Purgatory

Appraisers: Be Careful with Your Words!

by Dave Towne

Excerpts: Appraisers, on July 17, 2023, a document from Freddie Mac was circulated to numerous appraisers around the US which identified certain words and other info that can be considered to be ‘BIASED’ in appraisal reports. Here is the Link to the Bulletin.

We need to step back for a moment and carefully analyze and consider why that was done, and what it means to appraisers.

In many ways, appraisers forget the purpose of the appraisal assignment – which is to value real estate. In other words, the physical structures tied to the land.

But too often, elements of personal or neighborhood demographics or other comments seep into the reports. Maybe not consciously or on purpose, but because appraisers are not critically reading what they write and may not realize the implications of how what they write can be interpreted.

To read more, click here

To read the Freddie document, click here

My comments: Well written and worth reading. Thanks to Dave Towne! I have subscribed to his emails for a long time. To join his list, send an email to dtowne@fidalgo.net requesting to join. I wrote about the July 17 Freddie announcement in this newsletter’s June 16, 2023 issue. Guess it finally got out into the appraiser internet world.

Fannie: Words and Phrases in Appraisals

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FHA: Cosmetic vs. MPR Repairs

By Ann O'Rourke on May 26, 2023 / bad appraisers, bias, FHA, lender appraisals, USPAP / Leave a comment

Tags: bias, FHA, mortgage lending, USPAP

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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State Appraisal Boards – What Do They Look For?

By Ann O'Rourke on April 21, 2023 / bias, Fannie, liability, non-lender appraisals, state appraiser regulators / Leave a comment

Tags: bias, Fannie, liability, non-lender appraisals, state appraiser regulators

The State Appraisal Board Wants to Throw Me Under the Bus, Right?

by Barry Phillips and Tim Andersen

Excerpts: So, what do the investigator and the state board look for as part of their investigation? Again, simply put, the investigator and board look to see if the appraisal meets the requirements of USPAP’s Standard 1, and if the report meets the requirements of USPAP’s Standard 2. Everything else in such an investigation is merely an elaboration of the answers to these two questions.

Nevertheless, there is a warning due here. Increased numbers of state appraisal boards are looking at complaints against appraisers from the standpoint of the consumer, rather than that of the client and/or the intended user(s).

This, to a great extent, is a function of the current political climate. As all appraisers are aware, the consumer has no standing with the appraiser (assuming the consumer is not the named client or intended user). Nevertheless, state boards tend to favor the consumer (the complainant) over the appraiser (the respondent).

To read more, click here

My comments: Good analysis of how state boards work and what they look for. Tim Andersen, MAI, is definitely “The” USPAP Expert.

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Appraising vs. the Public Good?(Opens in a new browser tab)

Appraiser Adjustment Tools

By Ann O'Rourke on March 3, 2023 / adjustments, appraisal business, bias / Leave a comment

Tags: adjustments, appraisal business, bias

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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Appraisal Errors from Reviewers and State Boards

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

By Ann O'Rourke on February 24, 2023 / appraisal business, bias / Leave a comment

Tags: appraisal business, bias

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.

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Revised FHA Handbook 4000.1 effective 9/14/15. Are you ready for the changes? Get the facts!!

FHA Handbook 4000.1 Appraisal Changes

By Ann O'Rourke on January 27, 2023 / AMCs, appraisal business, bias, FHA, non-lender appraisals / 1 Comment

Tags: AMC, appraisal business, bias, FHA, non-lender appraisals

FHA Handbook 4000.1 Appraisal Changes

By Dan Bradley

Excerpts: On January 18, 2023, HUD issued an announcement regarding revisions made to Handbook 4000.1. According to the announcement, the revisions included “enhancements and revisions to existing guidelines and various technical edits.”

The most significant of these revisions was the elimination of the requirement to include the 1004MC form as an attachment to the appraisal report.

Changes to the Handbook also include several other minor, but nevertheless meaningful, edits and clarifications to FHA appraisal requirements, including:

Under “Attic Observation Requirements,” a clarification was made regarding the appraiser’s obligation to “safely” access the attic. The language requiring a minimum “head and shoulders” access into the attic was deleted.

Under “Crawl Space Observation Requirements,” significant revisions were made, including removal of a bullet point list of MPR/MPS criteria for the crawl space. Also, language requiring a minimum “head and shoulders” access into the crawl space was deleted.

The changes outlined in the Handbook may be implemented immediately but must be implemented for FHA cases assigned on or after April 18, 2023.

To read more, click here

My comments: Many thanks to McKissock for telling us what we need to know. Includes a link to the “redline” version of 4000.1 so you can skip over most of it. Scroll down to “Updates, Revisions, Notifications” to get the redline versions.

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So Many Appraisal Cost Approach Questions

Cost Approach – When to Use in Appraisals

By Ann O'Rourke on August 26, 2022 / appraisal business, appraisal how to, bias, cost approach, Fannie, george dell, non-lender appraisals / Leave a comment

Tags: appraisal business, appraisal how to, bias, cost approach, Fannie, George Dell

Fannie Mae and the Cost Approach

Excerpt: We often receive questions from appraisers regarding Fannie Mae and the cost approach. For example: “I’m appraising a property and have been instructed to comply with Fannie Mae guidelines. I understand that Fannie Mae requires the sales comparison approach, but what if there aren’t enough good comps? Can I use the cost approach as the primary method of valuation?”

Answer: No!

In order to comply with Fannie Mae guidelines, the sales comparison approach must be the primary method used to determine the value. In fact, Fannie Mae will not purchase a mortgage on a property if the cost approach is the primary or only method of valuation used.

Quite simply, if there isn’t enough data for the appraiser to develop a reliable opinion of value by the sales comparison approach, the mortgage will not be marketable to Fannie Mae.

However…

To read more, click here

My comment: I included this article plus the one below, which both address the Cost Approach’s common appraisal questions.

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The Cost Approach: An Underutilized Approach to Value

Excerpt: In residential appraising, the cost approach and the income approach have in many cases become less utilized in favor of sole reliance on the sales comparison approach.

There are occasions when the income approach can be the primary indicator of value for residential properties, such as developments with a high percentage of homes owned by investors.

The fact that Fannie Mae won’t accept reports that rely solely on the cost approach, with a few rare exceptions, doesn’t mean that approach can’t be the primary indicator of value. It just means Fannie Mae won’t buy that loan.

To read more, click here

My comments: I started with an assessor’s office in the 1970s. At that time, my county was changing from only using the Cost Approach for decades to a sales-based approach. I never liked to use only the Cost Approach when I started doing fee appraisals.

In my area, there are very few land sales. There has not been one for over 20 years in my city. Depreciation is always iffy when appraising Victorian homes built before 1915.

But, I always use the Cost Approach for new construction to determine the financial feasibility of custom homes. I use a few land sales from other cities. If the new proposed home is on a vacant parcel, I go back to when the parcel was purchased, sometimes many years ago, and do a market condition adjustment.

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