Appraisal News and Business Tips

Posts Tagged state appraiser regulators

11-10-16 Newz// CFPB and Dodd Frank Going Down?, Zillow, Man caves

How Man Caves Took Over America’s Basements

Excerpts:

A man cave usually develops in spare rooms, such as bedrooms, offices, finished basements, or recreation rooms. The garage, another traditionally masculine space, is more often a workshop or place to make repairs. Its connotation with work (often frustrating and unsavory as any viewer of Home Improvement can attest) as well as its thermal issues (it’s rarely cooled or heated like the rest of the house) demarcate it from the man cave, an interior space.

While men have always had their sacred spaces in the home such as the garage or study, the domesticity of the 19th and early 20th century overall implied that the home was, of course, the woman’s place. In the previous centuries, men sought refuge outside the home in establishments such as gentlemen’s clubs (think more country club than strip club), and male-only social clubs and establishments such as the Freemasons.

Very interesting, especially the history!!

http://www.atlasobscura.com/articles/how-the-man-cave-took-over-americas-basements

My comment: I live in California, where there are few basements. I do see garage “man caves”. But, they are not as fixed up as basements, mostly with a tv, beer fridge and some tools. Sometimes I see bedrooms set up as computer rooms.

+++++++++++++++++++++++++++++

Collection and Verification of Residential Data in the Sales Comparison Approach APB Valuation Advisory #8

Voluntary Guidance on Recognized Valuation Methods and Techniques:

My comments: This is advisory and not part of USPAP. Finally the Appraisal Practices Board has 48 pages of practical advice for practicing residential appraisers, the vast majority of appraisers. It discusses what different types of clients want, such as Fannie, VA, Rels, relocation, data, data collection, CU, etc. Scope of work examples are included. The last 17 pages are about verification. Worth reading.

https://www.appraisalfoundation.org/imis/docs/Valuation-Advisory-8-Collection-and-Verification-of-Residential-Sales-101716.pdf

Read more!!

8-11-16 Newz//How to fix the appraiser shortage now, Photo blurring, Gold medal for town planning in 1936 Olympics

America’s First Medal at the Nazi Olympics Was For…Town Planning

Excerpt: Yes, from 1928 until 1948, town planning was an actual Olympic sport.

Town planning fell under an “architectural design” category at the Olympic art competition. The field that year was dominated by German entries. Yet the first U.S. medal of the Olympics went to Lay, a New York architect, for his ambitious blueprint to modernize Marine Park in Brooklyn.

http://www.atlasobscura.com/articles/americas-first-medal-at-the-nazi-olympics-was-fortown-planning

My comment: I love these Obscure Olympic Facts ;>

—————————————

Photo blurring gone waay overboard!!

Excerpt: At issue was the ubiquitous “client requirement” involving digital masking of people from images. While lenders and AMCs wave the Fair Housing penalty flag in order to assure compliance; there is NO such law. Never has been.

Lenders need to re-examine the reason for all of these pointless and invasive interior shots. They add nothing meaningful to the file. Nobody is laying out mortgages for Beanie Baby collections and bad drapes. So why are appraisers wasting megapixels on decorating images?

AMCs are on notice to cease demanding and insisting that appraisers do digital staging. That is clearly in violation of Illinois law.

Click here to read the full article plus the comments, of course…

http://appraisersblogs.com/digital-staging-amc-fair-housing-myth

My comment: Blurring interior pictures on walls, personal objects, etc. seems very excessive. Don’t know about rooms with strange devices and chains hanging from walls and ceilings, etc ;> Maybe appraisers will only be able to appraise vacant homes with nothing in them without getting requests for blurring. This applies only to AMCs doing business in Illinois, but maybe the AMCs will quit doing it in other states.

Read more!!

Newz 3-3-15 Abandoned places, Late appraisal, Cost vs value, Fees

Spam blockers are going wild!!! I have made some changes in subject line and some changes in newsletter content so more subscribers will get this newsletter. I can’t even mention some of the changes as using the words may send this email to spam!!!
=====================================================
17 abandoned places around the world
Take a break from your appraisals with these Interesting Links!!
 
Here are a few:
1.  House of the Bulgarian Communist Party – Mount Buzludzha, Bulgaria
9. Michigan Central Station – Detroit, Michigan, United States
10. Sarajevo Olympic Bobsleigh and Luge Track – Sarajevo, Bosnia and Herzegovina
Good for taking an appraisal break!!
———-

Read more!!

AQB – possible changes to college degree, practicum, alternative experience, etc.

AQB wants comments on possible changes to college degree, practicum, alternative experience, etc.
Comments deadline March 31, 2016
College degree – alternative for licensed upgrade to certified
My comments: I keep hearing from appraisers that college graduates have lots of high paying opportunities. But, these types of jobs are only for engineering, computer science, etc. jobs. Some with business degrees from highly rated schools can get “Wall Street” jobs. Not for the vast majority of graduates with degrees in English, psychology, etc. I don’t know how realistic it is to offer a route from Licensed to Certified with no 4 year degree required since few lender clients will accept licensed appraisers and their numbers have dropped significantly.
Practicum – alternative experience up to 50%
My comment: I studied science in college and spent many afternoons in labs. When I graduated I was ready to go to work and needed no training. This is a significant problem for appraisers.
The only appraisal class I ever had with practical experience was a junior college appraisal class taught by a real estate agent. We all appraised his home using Fannie forms. A practicum was offered awhile ago by the AQB but was too difficult to set up and none were ever offered. Hopefully, these new requirements will be easier and, more important, include hands-on appraisal experience.
Click here to read the full document
My comments: Lender appraising has been a boom and bust business since Fannie and Freddie started securitizing loans in the 1960s, requiring armies of new appraisers during the booms with most laid off during the busts. Everyone seems to forget this. The current licensing system does not consider it.
Of course, the biggest problem today is lenders not allowing trainees to sign on their own. Lenders can solve this problem now. The draft recognizes this problem. But, AMCs (low fees and  Scope Creep) are the most significant reason for the “brain drain” of experienced residential appraisers leaving the profession since 2008. Retiring baby boomers is another factor.
Who is worried about an appraiser shortage? The Appraisal Foundation’s income will go down. AMCs will have fewer appraisers to broadcast cheap fees. Finding appraisers in rural areas will be more difficult, but this has always been a problem. Lenders are hoping maybe they can use AMCs or “alternative products” because of the shortage. Of course, not much of this applies to commercial appraising, only to residential AMC work.

Appraisal Today newsletter

Fannie warning letters – GLA adjustments and lots more coming

Fannie warning letters-GLA adjustments

Fannie has been sending out warning letters to appraisers about variations in Q and C ratings. Now they are sending out letters about using low GLA adjustments. According to people who attended, or heard about a recent speech that Bob Parsons of Fannie Mae gave an appraisal conference, $25 per sq.ft. Seems to be used by lots of appraisers for lots of properties that vary widely in size, etc. I wasn’t at the speech and don’t know what was actually said, but $25 per sq.ft. Was used in a large number of appraisals.

A quote from a recent email I received: “A friend of mine just got a letter from Fannie Mae stating that they have been monitoring his reports for 6 months. In that time they said he used $35 Psf for gla adjustments 14 times. This is a warning. Further action may be required if this continues.” I haven’t seen any of the letters myself but have been hearing about them for a few months. This The last two sentences have been pretty common in the warning letters sent about Q and C adjustments, which are a lot more shakey to support and are much more controversial.

Hmm… In my area, the San Francisco Bay Area, with a median home price of $601,000 in October, 2014, slightly down from June as many markets have slowed down. San Franciso’s median home price is around $1,000,000. I hope no one there is using $25 per sq.ft.!! Except maybe in neighborhoods with relatively low home prices or some lower priced condos condos. In my small city of 75,000 population the median price in October 2014 was $690,000. Our prices are around the median for the area. Very few homes or condos under $300,000.

Sq.ft. is one of the easiest adjustments to support, as compared with lots of other features. For many years, it has been one of the few almost always reliable adjustments when using regression analysis. You can sometimes even use matched pairs. I have no idea why appraisers don’t try to figure out an appropriate adjustment.

This is just a start. Read info on Fannie’s UCDP Fannie Mae Appraisal Messaging Change Notification” – link below, with a list of all of the appraisal data that Fannie is looking at below.

——————

Dave Towne on Collateral Underwriter
Thanks to appraiser Dave Towne (again) for his Most Interesting Comments:

Appraisers……..

Many know by now that the GSE’s…primarily FannieMae……..have instituted a new ‘appraisal scoring’ procedure based on an electronic read of your reports ……….. specifically on a SFR 1004 or the Condo 1073Those are the only forms currently being analyzed by the CU process.

On Nov. 18, 2014, FNMA released a document named “UCDP Fannie Mae Appraisal Messaging Change Notification” which you can find here:  https://www.fanniemae.com/content/release_notes/ucdp-change-notification-01262015.pdf

I encourage all appraisers to actually read this document … all 11 pages.

When you do read this document, you will learn that your reports are being compared to your peer’s reports, and to your other reports, and to some unidentified ‘model’ FNMA uses.

Some of the ‘checks’ being performed by the CU process include these:

The reported GLA is materially different than what has been reported by other appraisers.

The reported lot size is materially different than what has been reported by other appraisers.

The condition rating is significantly different than what has been reported by any other appraiser.

The quality rating is significantly different than what has been reported by any other appraiser.

Here are a few that can cause real concern among appraisers:

The GLA adjustment is larger than peer and model adjustments.

The GLA adjustment is smaller than peer and model adjustments.

The view adjustment is materially different from peer and model adjustments.

And I just love this one:

The appraiser-provided comparables are materially different than themodel-selected comparables.

It’s time for appraisers to get serious about meeting your peers in person, compare notes, and develop a regional adjustment chart for all variables … much like that yellow legal pad paper you were handed when you got in this business …. that paper with the ‘required’ adjustment amounts on it for almost all items.

Oh … and when you get that knuckle slapping letter from FNMA saying your adjustments or comparables don’t match the ‘model’ be sure to get the specifics and pass on ‘model info’ to your peers.

Yep, appraising real property and developing an opinio

My comment: Fannie, please send me all my adjustments. Then I won’t get questioned by my state regulator (hopefully), underwriters, reviewers, etc. I would really like to know what adjustment to be made for all the unusual features in the homes I typically appraise – most built before 1930 and many built before 1910 with all types of additions, remodeling, etc. Even tract homes have stuff like converted garages, original kitchen and baths, inlaw units in rear, views, etc. Of course, I have been using regression since the 1970s on homes and very few adjustments are very reliable. I wonder how Fannie is going to do it.

I remember commercial appraisers used to talk about getting cap rates from bottom of a stone monument ;> Maybe we are still looking for that darn piece of stone!!

————————————-

Dave Towne on Big Data, Hedonic Regression, etc.

Appraisers………

The new Collateral Underwriter electronic review process developed by FannieMae has many appraisers on edge. This will become the ‘ultimate authority’ or gold standard for reviewing appraisal reports as of January 26, 2015 …. at least as far as FNMA is concerned. Your reports will either ‘pass’ or ‘fail’, depending on many factors. Some of those factors are outside your immediate control.

“Big Data” is one giant pile of stuff that is being put into the CU pot, stirred together like a stew. Except there is no master chef involved that ‘we’ can interact with. Instead we have a bunch of secret sous chefs each contributing a chunk of meat, a bit of spice, some chopped carrots, and a few potatoes. None of them, or us, really knows the actual CU recipe, because part of what’s in the stew is a ‘model’ of something unknown. But some of that Big Data in the CU stew could be yours … or it might be data provided by your peer appraisers who work in your area – that your reports will be compared against. Not too tasty you say? Just add more pepper.

An aspect of this Big Data stew is Census Tract home price analysis, which is compared against your appraised property value. As an exercise, everyone reading this immediately write the neighborhood description using N, S, E & W directionals for the census tract in which your home residence is located. What? You don’t know the boundaries of your census tract? For shame! Some people using the CU stew might think you are deficient because you don’t know price trends in the exact census tract of the appraised property.

Then we have Hedonic Regression. It’s not a bad thing. But it’s becoming the buzz words of our appraisal adjustment process. It’s a ‘background component’ in the CU process, moving farther forward, faster than some might expect.

Bet you didn’t know that the adjustment grid is a form of Hedonic Regression! It’s a way a certain property’s components of value are itemized separately. By using Hedonic Regression, the individual value of the adjustable components can be calculated and plugged into the adjustment grid. In theory, this can lead to a more accurate property value.

The folks at Bradford Software were among the first to begin promoting use of regression techniques by appraisers. In other ways, the other appraisal software companies and some independent developers have been working on individual processes to make “Regression” more palatable and useful to appraisers. Bradford, and the independent developers, have either report software, or separate spreadsheets, that can help calculate property adjustable components, which in turn can lead to a more credible and supportable opinion of value for the appraised property.

The days of “I’ve been an appraiser for 27 years, so I know what this house is worth” are rapidly coming to an end. The Big Data CU stew is overtaking appraising like the snow avalanches that have closed State Highway 20 in north Washington State in the Cascade Mountain range, not far from where I sit in my cozy bathrobe and bunny slippers.

My observation in this process is that appraisers, as a group, are not statisticians by training and are somewhat scared of that term – even though ‘we’ deal with lots of statistics and data. Thus, appraisers don’t have a clear understanding of what “Regression” is, or does. As a result, ‘we’ have been reluctant to embrace this ‘actually old’ technology in modern appraisal reports. And ‘we’ certainly are skittish about FNMA’s soon to be released (to lenders only) Collateral Underwriter which will analyze reports using “Regression.”

Another perspective on this topic is from this blog: http://www.housingwire.com/blogs/1-rewired/post/32165-does-fannie-mae-support-appraisers  This one is written by one of the regression spreadsheet developers, currently available to appraisers.

And for info on Hedonic Regression: http://en.wikipedia.org/wiki/Hedonic_regression

My comment: When I first started doing residential lender appraisals in 1986, we used census tract maps to find the code. Later, the codes were available on computers and we did not use maps. However, I found that they were very good for defining neighborhoods. I guess we all forgot about them since few, if any, appraisers look at the maps. I still have my old census tract books.

Appraisal Today newsletter

Bracketing – lenders gone wild!!

Filling up an appraisal report with “comps” that “support” adjustments is a hassle for appraisers and often does not contribute to the accuracy and reliability of the subject’s value. Note that the “comps” are sales, but not necessarily comparable sales.

Sure, it often works fine when you are appraising a typical home in a conforming tract with few adjustments. But, what if you work where I do, where most homes were built prior to 1930 and many Victorians were modified over the years? I am hearing about appraisers being asked to use sales from 2-8 years ago for “bracketing”. What if you have an “oddball” home in a conforming tract, such as a home with a large addition or an “inlaw” space?

One of my first appraisal clients was a local lender who still has an appraisal department, is very savvy and treats their fee appraisers as professionals. They specialize in Fannie Mae loans. I recently spoke with an appraiser who does appraisals for them. She said they were asking for “bracketing”, including asking their appraisers to consider using very old sales if necessary.

Why are lenders asking for “bracketing” of adjustments? The same reason we have been hearing since 2008. They don’t want Fannie to require buybacks of the loans they sold to Fannie. They are also worried that Fannie will not buy a loan. I have noticed that lenders are often like sheep. When one does it, or says it should be done, they all do it.

Perhaps they are doing this in order to have some sort of “support” for adjustments. I guess they finally figured out that putting “adjustments done using matched paired sales” in an appraisal doesn’t mean much.

More important, state regulators want to see “support” for adjustments. I don’t know how to “support” all the adjustments in many of my appraisals. I know what buyers will pay more or less for. But, the exact dollar amount can be very difficult to determine. I don’t think it is right to conclude an incorrect value just because I cannot prove the exact dollar amount. Matched paired sales and statistical analysis doesn’t work for many adjustments. Matched paired sales can be manipulated and statistical analysis often does not work due to lack of data.

Market conditions is the easiest adjustment. Square footage and number of bedrooms, lot size, can often be supported statistically. If I spent many, many hours I might be able to “support” some of the other adjustments. But, would my appraisal be more accurate? Does my scope of work agreement with my client include spending 2 weeks or much more on a home appraisal for a loan?

Appraisers should consider what affects value. I worry about appraisers not making adjustments that are indicated by the market because “support” can be very difficult resulting in a less reliable, or inaccurate, value.

I have been thinking about not using any adjustments in my non-lender residential appraisals. Instead I could just use plus or minus signs. Why? I can’t “prove” most of the adjustments for my state regulator. I worry about losing my appraisal license. My clients don’t care about dollar adjustments.

What’s the answer? The only answer I can think of is to carefully pre-screen appraisal requests so you only accept appraisals of conforming homes in conforming tracts.

Should you do bracketing when the sales you use are not comparable? Some appraisers refuse and others do it. In my business, when requested to include information that is not relevant to the value, I always put “Included at client request. Given no weight.” Only you can decide what works best for you.

I am writing an article for the August issue of the paid Appraisal Today about making more money increasing your hourly billing rate. Working in conforming tracts is Number 2 of my primary suggestions.

To subscribe, and increase your hourly billing rate, click on the ad below!!

Appraisal Today newsletter