What level appraiser are you?

How to Level Up as an Appraiser

By Conrad Meertins Jr.

Excerpts: 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.

The three levels that we are going to discuss are “Beginner,” “Intermediate,” and “Pro.” Now, we could go deep and say that there are levels within the levels, but for now we will keep it simple and explore these three main levels. Some view each level as a stepping stone, and some view each level as a permanent parking space. It’s your choice which level you choose to pursue. The goal here is for us to evaluate which level we are at and determine which level we want to achieve.

Level 1 – Beginner

This is where we all start. There is no shame in this level. Depending on how you were trained, at the beginner level you typically view appraisals as forms — forms with checkboxes to be checked or left blank. If all the right boxes are checked and your report is signed with a value, mission accomplished!

Level 2 – Intermediate

At the intermediate level, you realize there is more to appraising real estate than checking boxes. Here is where you provide more explanations. If you say the market is stable, perhaps you add a sentence or two to expound on that. If you say that comp #1 was the best comp, you add a sentence explaining why. If you don’t adjust for the subject being on a busy road, you add a sentence about the neutral impact of the busy road and a comparable to support that conclusion—before being prompted to do so by the underwriter.

Level 3 – Pro

There is a subtle difference between Level 2 and Level 3. But one indicator that you have crossed the line from intermediate to pro is understanding how all the pieces fit together. For example, you understand that you do not need a form to produce an appraisal.

To read more, click here

My comments: Hybrid Appraisals are coming fast for lender appraisals, when any “human” appraisals are done. Full appraisals that Level 1 and most Level 2 appraisers cannot do will be done by Level 3 appraisers. I am writing two long articles for the November issue about Hybrid Desktops and Property Data Collectors. Both positive and negative sides for appraisers. If you want to continue to do AMC appraisals, this is an option.

What if you don’t want to do either one? If you have done AMC lender appraising only, you only appraise homes that conform to GSE requirements. You have a low skill level.

If I did lender work now, I would be in the “top tier” to be called when other appraisers said no. For as long as I have been appraising, lenders had special lists for the tough ones, or for a valuable bank client that borrows money from the bank and has large deposits.

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2024 USPAP For Appraisers

2024 USPAP

Source: Appraisal Foundation

The 2024 Uniform Standards of Professional Appraisal Practice is now available for purchase in physical and digital formats.

This year, for the first time, you can purchase just the book of USPAP standards for $35. This covers all Definitions, Rules, and Standards.

We also have a new product launching this year. All Advisory Opinions, Frequently Asked Questions and the recently launched Reference Manual will now be part of a standalone publication called the 2024 USPAP Guidance and Reference Manual.

This change reflects the maturation of USPAP, resulting in longer effective dates. The ASB will continue to review USPAP for changes when necessary but will shift much of its focus to providing more guidance to the marketplace. Appraisers can now buy one set of USPAP standards and keep that publication on their bookshelf for as long as that edition is effective and purchase just the Guidance and Reference Manual as needed for coursework and updates.

If you like having the USPAP standards and guidance material linked, we still have you covered. You can also purchase a linked digital version of the eUSPAP and Guidance and Reference Manual and get seamless access across both documents.

To read the full letter, click here

My comments: USPAP 2024 is effective January 1, 2024. I’ve been waiting for a very long time for longer than 2 years between effective dates. Also, there is no ending date for the 2024 version.

When USPAP started, it was very exciting as appraisers had to decide what needed to be changed or added. Lots of people wanted to be on the ASB. Over time, I quit following the updates as there were few significant changes.

2024-2025 USPAP 7-Hour Update Course is being approved or is approved, in the states. I assume a new class will be required every two years in the future. Gotta keep that money coming into the Appraisal Foundation, I guess…

I really hated the classes when there was not much to say except a rehash of the past. I taught USPAP before the ASB told you what to teach. It was my favorite class as we could focus on issues in our current market. Of course, now there is appraiser discrimination, the current hot topic. Personally, I think there is very, very little intentional discrimination by appraisers, compared with the intentional discrimination by lenders (and others). “Red Lining” still exists, some are in the same locations.

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The End of Lender Appraisals?

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.

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Fannie: Words and Phrases in Appraisals

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NOTE: Please scroll down to read the other topics in this long blog post on non lender appraisals, USPAP, Bias, real estate market, mortgage rates, unusual homes, mortgage origination

 

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FHA: Cosmetic vs. MPR Repairs

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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Appraiser Professional Goals

1-6-23 NEWSLETTER

Appraisers Share Their Top Professional Goals for 2023

By: McKissock (Survey)

Excerpts:

  • Maintain my current business (26%)
  • Earn a designation or certification (16%)
  • Grow my business (15%)
  • Prepare for retirement (12%)

“I would like to turn over my appraisal business to my daughter, who is certified.”

Should have retired last year but put it off due to the high amount of requests!”

After 23 years in appraising, which was very beneficial for me and my customers, I’m preparing for retirement.”

  • Achieve a better work-life balance (10%)
  • Other (6%)

To read more, including personal comments from appraisers, click here.

My comments: The post has links to some topics above with many tips. I have recently been writing about many of these topics since the market changed.

I write about non-lender work, staying up when business is down, retirement planning, and more in my monthly newsletter. I will be writing soon about upgrading to Certified General. I have always done both commercial and residential. My business has been much more stable as I can shift between them when the appraisal markets change, especially fees.

What are you planning to do in 2023? Now is the time to learn all the features in your MLS and forms software, upgrade your skills by taking seminars and classes, and more.

The future of residential appraising

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Reconsideration of Value and Appraisers

How to Respond to ROV Requests: Updated Guidance

By Greg Stephens, SRA, AI-RRS

Excerpts: Suggested protocols for responding to Reconsideration of Value requests

When you receive an ROV request, some recommended steps to take include:

1. Maintain USPAP compliance – Confirm the ROV request came from your client, either directly or through the client’s AMC, acting as an agent for the client, or other party designated as an agent by the client. The importance of this cannot be overstated. Appraisers are still required to comply with USPAP when responding to an ROV request, including the confidential nature of assignment results.

2. Identify ROV content to determine next steps – take the time to analyze the content of the ROV to determine what specifically is being requested of you (the appraiser) and what level of information will be needed to respond to the requestor of the ROV. This is an opportune time to maintain a professional demeanor and not react to an ROV request as if it is an affront to your competency or experience. After receiving an ROV request, send an acknowledgement of receipt and advise the client that the ROV request will be analyzed and responded to in a timely manner.

To read more, click here

Click here to listen to Tim Andersen, MAI’s podcast, “Reconsiderations of Value: Satan’s Own Seed, Right?” (Podcast 9.5 minutes) on ROVs, included in a 12-21 issue of this newsletter, so it may look familiar to you.

My comments: ROVs are a PITA for many appraisers. Very well written and practical. Greg Stephens is a very experienced appraiser and reviewer. He worked in management positions for several large AMCs.

Reconsideration of Appraised Value

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Weird Real Estate Agent Photos for Appraisers

 

57 Weird Real Estate Agent Photos

Excerpt: Yes, many great real estate photos really capture the house. This post though is a tribute to the other kind that we’ve all seen – hilariously terrible MLS photos.

From horror movie-esque semi-abandoned homes for rent to home decor that overshot “unique”, the owners and agents behind these funny ads thought things were perfect just as they were for their photos and open houses.

Caption for Photo Above: That way, you can still work on the garden even if it’s raining!

To read more, click here

My comment: We all love these photos! If used in the MLS on a comp, makes you wonder how it sold ;> Or an expired listing that didn’t sell. Data for those fixer homes (contractor specials).

More Terrible Real Estate Agent Photos for Appraisers

Appraising Weird Stuff is Challenging!

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Appraisals and Water Frontage

Appraisals and Water Frontage

Steven W. Vehmeier

Excerpts:

What about an off-site water view?

In a large townhouse-style condominium complex, there were only eight units that had water views. The view was of a section of the Intracoastal Waterway. It was from the second floor only, and over a six-foot high concrete block wall and across an open field. The builder charged more for those units because of the partial view.

My research discovered that the open field had just been purchased by a group that was building a four-level high-and-dry boat storage building. That bit of news made quite a few folks very unhappy and had a distinct impact on the value of those units. The moral of this story is that when you see open land between your subject property and the water, review ownership and the local building and zoning department’s comprehensive land use plan.

Water rights play a major role

With many water fronting properties, the topics of “riparian and/or littoral rights” (and the “prior appropriation doctrine” in the western states) come into play, along with several other issues. Those topics are fodder for other lengthy blog posts all by themselves. Appraisers should familiarize themselves with their state laws regarding water frontage and related rights, as they can vary from state to state.

Among the rights that come with real property ownership is the right to exclude others. When oceans, lakes, bayous, estuaries, rivers, streams, and ponds are involved, this right is a large part of what property purchasers are paying for.

To read more, click here

My comments: Worth reading, especially the last section “Final thoughts on the topic.”

I have lived in my island city for 42 years and had two waterfront homes, with docks, during the first 30 years. Both had many water related issues. One was on a tidal canal and built around 1943. Over time many homes along the waterfront, including mine, had non-permitted structures built over the water. The canal was owned by the state with an unclear easement for building beyond the rear lot line. The property owners asked me to do appraisals on the homes, including the rear structures but did not like my very high fee. It was so complicated the state and the city gave up trying to straighten it out.

The other home, built in 1946, faced a small bay off an outlet to a large part of San Francisco Bay. The large rear part of the lot was owned by the state and the city, which was leased to the homeowner. When the state said they were considering giving public waterfront access along the rear of all the homes unless we paid an annual lease fee, based on the extra lot square footage, we agreed to pay it.

I always wondered what other appraisers thought about these issues. They may not have even recognized or asked about them. Appraisers called very rarely.

I will never forget one of my first house appraisals here. The owner said it had a Bay view but did not mention you had to stand on the toilet to see through the window. After that, I told them the view had to be from a chair that you sat in!

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Appraisals – Check the Water Source!

Excerpt: We continue to see claims alleging that the rural property appraiser failed to adequately identify or report details surrounding a water source. In one claim, the appraiser correctly noted that the property was serviced by a “private water well.” It was later discovered that the well was not located on the property which was appraised. Unfortunately, the well was actually located on an adjacent lot that, at one time, was part of the subject lot prior to the lots being subdivided.

My comments: An appraiser lost a lawsuit because he said the vacant parcel had public water access. It did not even though many lots nearby were developed. Nearby, I noticed a large water tank. It was shared by four nearby homes. This was not in a rural area. I worked for 4 years in rural areas. Water access was critical. If there was no access, trucks had to bring the water.

Appraisers – check the water source!

10-12-17 Newz//FHA-Appraisers responsible for water quality reporting?, Hybrid appraisal survey)

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My Comments on Market Changes

My inbox is flooded with news emails about opinions on what is happening now and forecasts for the future. (Most of the information in these newsletters comes from emails. I am on many email lists.) It looks like the change is starting because of increasing mortgage interest rates. I have included some of the articles below.

Fannie and Freddie have long said that they want appraisers to tell them about their markets. Include graphs and charts in your appraisal to show your clients what is happening now and why they need human appraisers.  

It is extremely important for appraisers now to closely track changes in your local markets at least once every day and tell your lender clients about it. When will it affect your market? No one knows if there will be foreclosures or when they will start. The number of potential buyers will decrease as rates go up in many markets.

Segments may be very different from the overall stats. A few examples:

  • Different price ranges – first-time homebuyers, high end
  • New homes – what is happening?
  • Detached vs. townhomes and stacked condos.
  • All cash and investors
  • How many offers
  • No inspections or appraisals?

COMPS ARE THE PAST. YOU MUST KNOW YOUR MARKET TRENDS. TRACK AND GRAPH THE NUMBER OF LISTINGS VS. PENDINGS AND EXPIREDS, DAYS ON THE MARKET, PRICE CHANGES, ETC. 

Today is NOT the same as 2008+, with its massive fraudulent loans made to unqualified buyers. Computer modeling did not predict the 2008 crash. Many were in denial that it was coming and refused to listen to appraisers. We have never seen a pandemic real estate market before. Did anyone think in early 2020 that home values all over the country would go off the charts? No one did. Appraisers wrote up long disclaimers about how they did not know the effects. Some still include them in their appraisal reports today.

Watch the excellent 4-minute video with Mark Zandi, “There’s a comeuppance coming in the housing market”. It discusses how today is different from 2008 and what is happening today. Before becoming the chief economist of Moody’s Analytics, he was a real estate economist. I listened to him for many years about real estate economics. He is very savvy. I agree with what he says about real estate. I am unsure about inflation. To watch the video, click here

I have been writing about these upcoming changes in these newsletters for a while now. Ryan Lundquist writes about this almost every week. He has lots more details and examples of graphs that can help you see what is happening in your market. www.sacramentoappraisalblog.com He writes for the Sacramento, CA market but what he writes is relevant for other markets also.

Two days ago the Fed raised rates by 0.75%. Recession? Lower inflation? Real estate market?

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Appraisal Comps in Lopsided Markets

Different colorful shapes wooden blocks on beige background, flat lay. Geometric shapes in different colors, top view. Concept of creative, logical thinking or problem solving.

Choosing comps in a lopsided market

By Ryan Lundquist
Excerpt: QUESTION: With so many listings receiving offers above list, and people having to pay the shortfall between the appraised value and the contract price, how do appraisers look at comps? If a property sold at $580,000, but it actually appraised for $547,000, and the buyer paid the difference, which number do you use? $580,000 or $547,000?
ANSWER: Here are a few things on my mind.
1) Weigh the comps:
In any market (not just today), we have to weigh the comps. Or another way to say it is, we have to appraise the comps so to speak. What I mean is if something clearly sells for too much, it’s reasonable to give that property less weight in our analysis. Likewise, if a property sells for too little, we might also give less weight to that sale. Granted, selling for too little isn’t as common lately, but in past markets we regularly considered whether short sales or bank-owned sales sold below market value.
2) One sale doesn’t make or break the market:
It’s important to note one sale doesn’t make or break the market. This means one lofty “lone ranger” sale doesn’t all of a sudden mean the rest of the market will go to that level. This would be like saying that record-breaking $7M sale in Shingle Springs from August will pull the rest of the market up. Nah, I don’t think so. Or Zillow buying a house for $40,000 more than the comps will cause the rest of the market to rise. Nope. If one sale closes at $580,000, but the rest of the market is below $550,000, we won’t arbitrarily accept $580,000 as the new neighborhood price threshold. The same would hold true if a different house sold at $450,000. This one “low ranger” (sorry) won’t automatically drag the rest of the market down.
To read more plus lots of comments, click here
My comment: Some good comments and tips for this crazee market!!

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