Posts Tagged appraisal business

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Where VA loans are soaring. Are you doing VA appraisals?

VA Required to Encourage Hybrid Appraisals

By Ann O'Rourke on December 30, 2022 / appraisal business, bad appraisers, forecast, hybrid appraisals, non-lender appraisals, va / Leave a comment

Tags: appraisal business, Bad appraiser, non-lender appraisals, va

VA Required to Encourage Hybrids – Senate Passes HR 7735

By Dave Towne December 21, 2022

Excerpts: The U.S. Senate has announced the passage of HR 7735, the Improving Access to the VA Home Loan Benefit Act of 2022.

Under the terms of HR 7735, sponsored by Sen. Dan Sullivan and Rep. Mike Bost, the VA will be required to:
- Issue certification requirements for appraisers;
- Execute minimum property requirements;
- Review the process for selecting and reviewing comparable sales;
- Implement quality control processes;
- Establish the Assisted Appraisal Processing Program; and
- Establish the use of waivers or other alternatives to existing appraisal processes.
This is not yet ‘law,’ but likely will be in the not too distant future. Has passed House and Senate. Needs Biden’s signature.

To read more, click here

My comments: Read the appraisers’ comments. The law is not surprising. The mortgage industry has been wanting this for a long time. I still recommend VA to appraisers as they are the only mortgage organization that wants to help the borrower instead of making as much money as possible

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Fannie New Appraisal Form Modernization

Appraisal Risk and Modernization

By Ann O'Rourke on December 16, 2022 / appraisal business, Fannie, real estate market / Leave a comment

Tags: appraisal business, Fannie, real estate market

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.

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What Causes Appraisal Revisions?

How to Reduce Appraisal Revision Requests

By Ann O'Rourke on December 9, 2022 / adjustments, appraisal, appraisal classes, appraisal how to, real estate market, retirement / Leave a comment

Tags: adjustments, appraisal business, classes, real estate market, RETIREMENT

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.

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NAR Appraisal Survey 2022

NAR: Appraisal License Equivalency Credit for RE Agents?

By Ann O'Rourke on December 2, 2022 / appraisal business, appraisal classes, marketing / Leave a comment

Tags: appraisal business, appraisal classes, marketing

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.

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Appraisal Neighborhood Analysis

Appraisers and Local Market Analysis

By Ann O'Rourke on October 21, 2022 / ADUs, appraisal business, E&O, humor, real estate market / Leave a comment

Tags: ADU, appraisal business, Fannie, liability, real estate market, RETIREMENT

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.

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What is the farthest you have traveled to complete an appraisal and still be considered geographically competent?

NAR Appraisal Survey 2022

By Ann O'Rourke on October 7, 2022 / appraisal business, Bad lenders, Fannie, real estate market / Leave a comment

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

NAR Appraisal Survey 2022

Excerpts from NAR Report (link below):

In May 2022, NAR Research conducted a survey of all 9,700 appraiser members and 50,000 randomly-selected non-appraiser members.

54% of appraisers report that appraisal management companies (AMCs) have been among the greatest challenges in their businesses in the past year; 30% cite expanding regulations.

The typical appraiser reports a 40-mile radius in which they conduct appraisals. 68% report practicing within a radius of 20–59 miles.

Virtually all appraiser respondents (97 percent) have conducted an in-person appraisal, and 79 percent have done so by desktop/drive-by appraisal. Eleven percent cite evaluations (non-appraisal opinions of value). The eight percent who cite other valuation methods most often explained that they use a hybrid approach or mostly an exterior appraisal.

Two-thirds of appraisers (66 percent) are asked monthly or more often to conduct appraisals outside of the geographic area or the property type in which they feel their expertise is. Close to one-third conduct an appraisal outside their area of expertise on a weekly basis. Twenty-three percent of appraisers report never having to conduct an appraisal outside of their geographic area or area of expertise.

Appraisers are significantly more likely than other members to say that the most competent are not being selected most of the time (22 percent vs. nine percent) or at all (16 percent vs. six percent) and much less likely to say they are being selected most of the time (12 percent vs. 23 percent).

A few comments:

“Appraisal Management Companies are destroying our profession.”
“Appraisers are the “truth tellers” in this process. While agents can “puff” we cannot! If a property is listed at $315k, with an offer of $345k, do not harass the appraiser when the appraisal comes in at list!! If it had a market value of $345k, it would have listed at $345k!”
“AMCs are a significant issue for not only appraisers but for the consumer. They bid out each appraisal to maximize their profit, usually harming turn times and passing on costs to the appraiser and to the borrower.”

To read the report, click here

My comments: Read the PDF report. Easy to read with good graphics, similar to the graphic above. Since it was done in May, it focuses on appraiser shortages and delays, mostly from the non-appraiser respondents.

It has both appraiser and non-appraiser survey questions, which is a bit tricky to read. Some of the questions are relevant today, such as AMCs. Other questions are not as relevant, such as fees, as the appraisal market in many areas is not as strong as in May when the survey was done.

How much appraisers travel was interesting. I only work in my island city, 1 mile by 3.5 miles. I hate leaving the Island! Island mentality, I guess ;> I used to work in a much larger area, of course.

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Where VA loans are soaring. Are you doing VA appraisals?

Appraisal in Changing Markets

By Ann O'Rourke on September 23, 2022 / appraisal business, non-lender appraisals, va / Leave a comment

Tags: appraisal business, real estate market, va

Sellers Chasing the ball down the road in real estate

By Ryan Lundquist

Excerpts: Commentary from a (Ryan) appraisal: Here is a bit of commentary in one of my recent appraisal reports. This is only part of what I say because I’m a man who needs a few paragraphs. One box just isn’t enough.

“At the least we ought to describe the market as showing a downward seasonal shift, though it’s possible we can call this a downward cycle if the trend persists over time. For now, it is most reasonable to categorize the market as having growing uncertainty and blatantly inflamed downward seasonal price declines compared to a normal seasonal trend. At the least, properties are clearly selling for less than they did several months ago. The regional median price has ticked down about 7% since May, which is $45,000. This doesn’t mean every property is worth $45,000 less, but it’s been clear buyers have been resisting paying higher prices.”

Okay, one last thing about size: During the beginning of the pandemic there was a blatant spike in home size due to a greater focus on larger homes at higher prices. This spike basically peaked one year ago as size has started to normalize. Now let’s keep watching to see what happens to size. Will we see smaller homes more often as first-time buyers flood the market? Will we see fewer sales at the highest prices? To be determined.

To read more, click here

My comments: Scroll down the page for more comments from Ryan. Markets are changing in many areas, but are complicated by price range, size, etc. I remember the easy days of market condition adjustments 1% per month up or down, for example, to apply to all detached home appraisals. Ryan has been writing about the ups and downs of his market for a long time. Maybe you can use some of his ideas, graphs, and/or explanations in your appraisals.

==========================================

Navigating a Changing Market

by Isaac Peck, Editor

Excerpts: … senior leaders at AMCs, lenders and the GSEs have noted that slower appraisal volume will favor those appraisers who can stay in communication with their clients and provide faster turn times. “During the heyday of 3 percent interest rates, it was acceptable for appraisers to take three to four weeks to complete an appraisal and forget to update the client. Now that volume has declined to normal levels, those appraisers who aren’t providing good customer service may see their businesses suffer,” remarked a senior executive at a major bank.

At the end of the day, (Ryan) Lundquist says his goal is to report what is happening in the market right now—accurately and without sensationalism. “I’m constantly changing what I say in my appraisals, and I’m very careful of boilerplate and canned statements. A quick change in interest rates has led to a quick change in the market. My appraisals talk about more stable prices in my area but also about uncertainty regarding the future. Pending volume is softening, available listings are skyrocketing, and it is taking longer to sell—but there are still stats that suggest there is heavy competition for certain homes. It changes by the week. There’s no easy way to quickly do this, it takes effort. There’s no such thing as being a market expert without putting in the time to be an expert,” argues Lundquist.

To read more, click here

My comments: This article uses AEI data, graphs, and reports from June. Some are out of date in September. I follow AEI (American Enterprise Institute), which has excellent data and reports. For more info on AEI, click here

The MBA data, loan application volume (see below) is the future of appraisal volume. Using recent September data, loan applications are below the levels in 2019 and still dropping. I have a graph of this every month in my paid monthly newsletter. Loan applications went up this week but are still below 2019 levels.

The upcoming October issue of the monthly Appraisal Today has an article, “Which are your best current and former AMC/lender clients? What do they want?” The Big Three: Turn Time/Quality/Fee. I discuss what lenders want and how to provide better service and get more business. Number 1 for lenders (AMCs’ clients) has always been turn time.

What is the farthest you have traveled to complete an appraisal and still be considered geographically competent?

Appraisal Business Tips

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Appraisers – The Past and The Future

Appraisers: What should you have in your car?

By Ann O'Rourke on September 16, 2022 / appraisal business, appraisal management company, non-lender appraisals, real estate market / Leave a comment

Tags: AMC, appraisal business, non-lender appraisals, real estate market

Appraisers: What should you have in your car?

Excerpt: Here are a few items:

Screwdriver: A screwdriver has many uses. You can use it to take the cover off a crawl space entry panel, check wooden structural members for rot or insect damage, remove an electrical outlet cover to check for insulation in the walls, etc.
Voltage detector: To determine whether wires are live.
Ice pick: To check for termites or wood rot.
Magnet: To determine whether old pipes are made of iron or lead.
Mace or pepper spray: To defend yourself, especially if you’re appraising REO and foreclosure properties.
Bug spray: To protect yourself from mosquito bites, ticks, etc.
Spare clothes and footwear: Including an extra coat or jacket, hat, and boots—especially if you work in rural areas.

To read more, click here

My comments: Good tips! I definitely need to add some of the items to my car, especially dog repellent, which is not on the list. I have been bitten by dogs. I left the homes and contacted the lender. Don’t know if they got their loan and did not care. Once two large Dobermann dogs broke down a trailer door. I barely got into my car in time.

This was originally posted on McKissock’s Appraisal Blog, but that link was not working.

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Reconsideration of Appraised Value

Reconsideration of Value and Appraisers

By Ann O'Rourke on September 9, 2022 / appraisal business, Appraisal Foundation, appraisal how to, liability, USPAP / Leave a comment

Tags: appraisal business, appraisal how to, liability, non-lender appraisals

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.

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