Appraisal Scoop

An optimistic pessimist, or a pessimistic optimist? - Dodd-Frank Financial Recovery Bill

An optimistic pessimist, or a pessimistic optimist?

I’m not sure which I really am, although I tend to lean in the optimistic direction whenever possible. This relates to the brand new, hot off the presses after a year+ of vigorous debate, Dodd-Frank financial recovery bill just signed by President Obama. This bill (now a law) has a major section devoted to appraisers and appraisals, our pay for service, but not appraisal ordering. Bear with me – I’ll get to those points in a moment.

But first I’d like to discuss some HVCC & FIRREA history.

Is this new bill really anything different than what transpired in the past? Actually, not really.  I’m a relative greenhorn in this business, having entered in 2001 with the help of my outstanding mentor. So I was not around the biz in the late 80’s when, in 1989, during the Savings and Loan Crisis FIRREA was enacted in much the same way the Dodd-Frank bill was done. Crisis’s always lead Congress to ‘do something.’

I enjoy talking with ‘more ancient’ appraisers who help me understand the history of things. Today Woody dropped a kernel into my noggin, which I confirmed by research. Guess what folks … FIRREA actually mandated what the too often maligned HVCC enforced, 20 years later. A key provision of FIRREA was that no person connected to loan production, i.e., the loan officers, would be permitted to directly order an appraisal from their favorite appraiser. What does the HVCC say? Read that preceding sentence again … the one about loan officers.

So what happened? Simply put: lack of enforcement of FIRREA, regulated banks getting out of the direct mortgage lending and appraisal ordering business, abdication of loan production regulation to non-bank personnel, and a breakdown of ethics through all facets of the mortgage lending industry. So in reality, the HVCC was the giant enforcer many years after FIRREA was enacted. It took a second national and worldwide crisis to enforce provisions mandated during the first crisis.

That brings us current, 21 years after FIRREA and 14 months after the HVCC, with the ‘new bill’ that is supposedly going to make our life better. Optimist? Pessimist? I wish I could say for sure!

 Pay for service: the bill says appraisers should be paid ‘usual and customary’ fees for appraisal service. There is much gnashing of teeth over this provision. AMC’s say (and may initially demand) that the “U&C” fee is what they offer to pay, not what you desire to charge. Some appraisers buy into that argument. Most skilled appraisers know that AMC fees paid are generally not fair compared to the amount of work involved to produce a quality report, especially for appraisers working in small urban, or suburban and rural areas.

The bill also says that the “U&C” fee cannot be mandated by what the AMC chooses to pay, but must be determined by independent surveys or fee tables from governmental agencies. But the rub is this: if you are a ‘contracted’ vendor independent appraiser working for an AMC with a fee table you have agreed to, you may be stuck. It may take a few court cases to get this resolved, and the AMC’s will fight hard against appraisers.

If you’re not ‘contracted’ and the one-hit-wonder AMC calls out of the blue to ask about ‘fee and turn time’, stand your ground with the fee you charge. The more appraisers do this, the better we all will be paid for the complex work we do.

What’s a “U&C” fee in your area? Most appraisers seem to agree that it would be what would be charged for a non-complex, non-FHA, non-VA, non-AMC full appraisal assignment that you would request from a local bank, attorney, CPA, private homeowner, etc. Per ‘the bill’ you can consult a independent fee survey for your state and county, like the one produced by alamode software company, or utilize the VA fee table for your area – although that governmental agency has more rigorous reporting requirements than typical mortgage lending assignments, so their fees are higher in some areas.

Talk to your neighbor appraisers – one on one. C’mon folks, quit being so independent from and against each other. Your peers are actually pretty nice people. Pick up the phone. Meet for breakfast or lunch, or a brewski. Join a national or state association. One on one chats about fees are perfectly fine. Find out, and share, the ‘floor’ amount that seems reasonable for your area. But when three or more of us are in a room together, ‘the weather’ might be a more appropriate topic to avoid potential accusations of price fixing or collusion. In time the word will get around. And the optimistic part of my noggin says that ultimately the AMC fee issue will be resolved in our favor.

Appraisal ordering: ‘the bill’ does not have any mention of how appraisals will be ordered. That is left up to the regulators who are right now drafting the new interim regulations that will be implemented within 90 days of the bill’s effective date on 7/21/2010. At first I was optimistic that we as an industry might be able to lobby the regulators to allow highly regulated ordering direct from the loan officers. Personally, I’d still like to see that so that the prior business (commerce) relationships could resume. But the pessimistic side of the gray matter is seeing how FIRREA and the HVCC prohibitions about this may continue unless we as an industry lobby to allow regulated ordering procedures. 

It is my contention that with the new LO national licensing requirements, the infraction reporting procedures built into ‘the bill’, the ability to track appraisers and LO’s connected to the loan via the soon to be implemented MISMO function, and the heightened awareness and bill wording about appraiser independence, then direct relationships can be resumed.

You can help this happen by being an optimist about a pesky pessimistic situation. Send your comments about this to the regulators today.

And let’s be optimistic that the ‘new bill’ will be better enforced than FIRREA. Maybe prior history will actually teach us something. Wait…that sounds too pessimistic!

Dave Towne

Towne Appraisals

Mount Vernon, WA

360-708-1196

mailto:dtowne@fidalgo.net

Draw Plats from Legal Descriptions on Your iPad

 From James' Real Estate Business Blog:

"A new app I just downloaded for my iPad is called Metes and Bounds. I decided to test it the minute it opened with a current deal and entered 25 calls from the legal description to draw the plat. And, to my great surprise, the lines didn't close at the Point of Beginning, a problem. There was a gap."

"It wasn't a problem with the app, and I looked pretty good when I informed the title company of the typo in the legal description."

Read about Metes & Bounds and what it does in this profile.

Appraisers lose out in Wells Fargo lawsuit - Valuation Review

The following was re-blogged with the permission of Valuation Review Editor, David Napuk.  Thanks Dave! 

Since there has been a great deal of buzz in the industry surrounding the decision in the Wells Fargo/Rels Valuation v. appraisers lawsuit, Valuation Review is giving you the unique opportunity to sample of the premium content that our subscribers receive every week.

Wells Fargo and its appraisal management subsidiary Rels Valuation won an important lawsuit this month when a [U.S.] district judge granted the company's motion to dismiss. The lawsuit was filed by two residential appraisals who claimed that Rels Valuation had pressurized them into reaching inflated values on appraisal reports and then subsequently blacklisted them when they did not comply with demands.

Don Pearsall, from Puyallup, Wash., and Timothy Savage of Vail, Colo., both claimed that Wells Fargo and Rels tried to strong-arm them into inflating appraisal values and then blacklisted them when they refused to hit the desired numbers. They were represented by Hagens Berman Sobol Shapiro (HBSS), the Seattle-based law firm that has filed similar lawsuits against several lenders.

The case is Sound Appraisal and Savage Appraisal Services, Inc., on behalf of themselves and all others similarly situated, v. Wells Fargo Bank, N.A. and Valuation Information Technology, LLC, d/b/a Rels Valuation, No. C 09-01630 CW. It was filed in U.S. District Court in San Francisco in April 2009.

Although Wells Fargo was the primary defendant in the case, Rels is technically a joint venture between First American Solutions, a subsidiary of First American Corp. and Wells Fargo Foothill, a subsidiary of Wells Fargo & Co.

The plaintiffs alleged that, in an effort to increase market share in the home mortgage business, Wells Fargo has engaged in a pattern and practice of pressuring appraisers to write appraisals designed to justify the loan even if the appraisal violates USPAP. The plaintiffs also alleged “If an appraiser does not 'play ball' and produce a report affirming the property value or the parameters that Wells Fargo expects or wants, Wells Fargo, through Rels Valuation, suspends the appraiser or removes the appraiser from the list of preferred appraisers and, in essence, 'blacklists' the appraiser.” 

The plaintiffs also claimed that Wells “utilized a host of indirect methods to communicate to the appraiser the value needed to fund the loan, and the value the appraiser is expected to 'hit.' As an example, they claimed that Rels' appraisal order form, which indicates the Borrower Estimated Value, reflects the value that the appraiser is expected to meet or exceed in the appraisal.

According to court documents, Pearsall completed an URAR appraisal for Wells Fargo and Rels in June 2007 in Enumclaw, Wash. After submitting his report, an officer of Rels requested that he alter it to reflect the company's desired views on the property. Specifically, Rels' area manager, Randall Pierzina, asked Pearsall to remove all indications that the home in question was currently being remodeled. Pearsall refused to alter the report, noting that doing so would be a violation of his ethical duty under USPAP. In response, Pierzina yelled, “[Y]ou appraisers take USPAP too seriously.” Pierzina then threatened to remove Pearsall from his list of “eligible” appraisers if he “did not receive the requested, altered report immediately.” [Mr. Pierzina is no longer the Rels Area Manager]

After refusing, Rels blacklisted Pearsall, which meant a loss of approximately 21-36 percent of Pearsell's business. When Pearsall inquired about the loss of work, he was told by Pierzina that he had been suspended for refusing to comply “with an OPUS issue.” However, Pierzina did not explain what an “OPUS issue” was and never provided any further explanation for the suspension or notified Pearsall of any procedure by which he could challenge his suspension.

Pearsall confirmed his existence on the blacklist when he received an offer of an assignment from Rels on April 8, 2009. He told the employee over the phone, “I would love to take the job, but aren't I on your blacklist?” The employee put him on hold to check, then came back and said “I'm sorry, I wasn't supposed to contact you.” Savage had been doing appraisals for Rels for 12 years. In Jan. 2009, Savage performed two such appraisal assignments for Rels. After Savage provided these appraisals, a “Collateral Compliance Reviewer” for Rels emailed Savage with information “to support an increased value” of the appraised property. Savage reviewed the appraisal and determined that no such increased valuation was appropriate. The next month, he received a letter from Rels stating that he had been removed from its approved panel of appraisers. The letter did not provide an explanation for the removal.

Before being blacklisted Savage estimated he received 11-17 percent of his income from Rels.

The complaint also contained nine statements by appraisers in Arizona, Nevada, Washington, Pennsylvania, Illinois, Virginia, Indiana and Oregon who alleged that Rels also stopped hiring them because they refused to alter appraisals upon Rels' request. The original lawsuit had three causes of action, but two of these were dismissed with the only complaint remaining a violation of the common law duty to provide fair procedures.  

Granting Wells' motion to dismiss, District Judge Claudia Wilken opined that the case centered on the percentage of work that was lost as a result of the blacklisting, and on whether the fair process doctrine should apply to a private organization. “Certain private entities possess substantial power either to thwart an individual's pursuit of a lawful trade or profession, or to control the terms and conditions under which it is practiced,” she wrote, but “certain institutions and enterprises are viewed by the courts as quasi-public in nature: The important products or services which these enterprises provide, their express or implied representations to the public concerning their products or services, their superior bargaining power, legislative recognition of their public aspect, or a combination of these factors, lead courts to impose on these enterprises obligations to the public."

But to be held liable for violating the right to fair procedures, Wilken opined, a private entity must have the power to “significantly impair” the individuals' ability to work in a particular field. “In essence,” she wrote, “the law concerns exclusion or expulsion from membership by a gatekeeper organization, like a union or an insurance company,” which she determined did not apply to Wells Fargo. 

“Wells Fargo's extensive national involvement in originating and servicing mortgages does not necessarily mean that it wields significant power over the appraising profession in the geographic areas in which plaintiffs work,” wrote Wilken.

“It is especially important to note that, while loss of income after exclusion by a private entity is relevant, it is not 'conclusive proof' that the exclusion impaired the plaintiff's ability to continue in the profession,” she continued. In the judgment of the court, the percentage of business lost by Pearsall and Savage following their blacklisting was not enough to establish a duty to provide fair procedures. In addition, the blacklisting didn't affect Pearsall or Savage's ability to receive work from other mortgage companies. 

“No authority requires the imposition of the fair procedure doctrine simply because removal from a single company's list of appraisers it chooses to retain substantially affects the economic interest of a removed appraiser. Defendants simply made a choice not to do business with plaintiffs; they did not exercise power as a gatekeeper of a profession nor did they prevent plaintiffs from pursuing employment by others,” said Wilken. On this reasoning, she dismissed the claim against Wells Fargo with prejudice, saying that any further amendment would be “futile.”

At press time, neither Wells Fargo nor HBSS were able to return requests for comment to Valuation Review.

Editor: David Napuk [dnapuk@octoberresearch.com]

Fannie Mae Announcement SEL-2010-09 - Selling Guide Updates and Additional Guidance on Appraisal-Related Policies

 Fannie Mae's Announcement  SEL-2010-09 describes the following:

• Appraisal-related policies that update the Selling Guide
• Miscellaneous appraisal-related guidance (no impact on the Selling Guide)
  Miscellaneous Selling Guide updates
• Updates to Special Feature Codes
• Updates to Mortgage Insurance Codes

For each policy change or clarification that impacts the Selling Guide, the topics (and specific paragraphs) are noted and are linked to the updated Selling Guide. The updated topics are dated June 30, 2010.

Updated Appraisal-Related Policies

Fannie Mae’s post-purchase reviews of mortgage loan files have identified issues with appraisals. As a result of those reviews, new policy requirements and clarifications concerning existing lender requirements are being added to a number of appraisal sections of the Selling Guide, including:

• Inclusion of interior photographs in the appraisal report B4-1.2-06
• Lender changes to the appraised value and guidance on addressing appraisal deficiencies B4-1.4-21
• Appraiser selection criteria B4-1.1-03
• Sources of comparable market data B4-1.4-16
• Selection of comparable sales
• Communication under the HVCC
• Seller concessions
• Treatment of personal property
• Market Conditions Addendum to the Appraisal Report (Form 1004MC)

As a result of these changes, the online Fannie Mae Selling Guide has been updated, and now carries a June 30, 2010 date.

AI-Supported Provisions Included in Final Version of Financial Reform Bill - Appraiser News Online

The Appraisal Institute on June 28 praised inclusion of appraisal provisions in the final version of the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173). The House-Senate Conference Committee on Financial Reform completed work June 25 on the measure, which includes the most significant modernization of the appraisal regulatory structure since 1989.

via www.appraisalinstitute.org

" This bill represents a breakthrough for professional appraisers, who have consistently advocated for greater independence and competency," said Appraisal Institute President Leslie Sellers, MAI, SRA. "The Conference Committee has affirmed both ideals in the final conference report, and we believe that Congress should enact them into law."

'Sustainable' Housing Price Recovery Not Shown in April Case/Schiller Home Price Index

According to the latest S&P/Case-Shiller Home Price Index, the annual growth rates of all 20 MSAs and the 10- and 20-City Composites improved in April compared to March because of the home buyer tax credit program that ended April 30, 2010.

New York, June 29, 2010 – Data through April 2010, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show that annual growth rates of all 20 MSAs and the 10- and 20-City Composites improved in April compared to March 2010. The 10-City Composite is up 4.6% from where it was in April 2009, and the 20-City Composite is up 3.8% versus the same time last year. In addition, 18 of the 20 MSAs and both Composites saw improvement in prices as measured by April versus March monthly changes.

The chart above depicts the annual returns of the 10-City and 20-City Composite Home Price Indices with increases of 4.6% and 3.8%, respectively, in April 2010 compared to the same month last year. Of note, Dallas, Denver, San Diego and San Francisco have all posted six consecutive months of positive annual rates of return, recording +3.3%, +4.4%, +11.7% and +18.0% in April, respectively.

“Home price levels remain close to the April 2009 lows set by the S&P/Case Shiller 10- and 20-City Composite series. The April 2010 data for all 20 MSAs and the two Composites do show some improvement with higher annual increases than in March’s report. However, many of the gains are modest and somewhat concentrated in California. Moreover, nine of the 20 cities reached new lows at some time since the beginning of this year. The month-over-month figures were driven by the end of the Federal first-time home buyer tax credit program on April 30th. Eighteen cities saw month-to-month gains in April compared to six in the previous month. Miami and New York were the two that fared the worst in April compared to March. New York is the only MSA to have posted a new relative index low with April’s report.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. 

“Other housing data confirm the large impact, and likely near-future pullback, of the federal program. Recently released data for May 2010 show sharp declines in existing and new home sales and housing starts. Inventory data and foreclosure activity have not shown any signs of improvement. Consistent and sustained boosts to economic growth from housing may have to wait to next year. ”

The chart above shows the index levels for the 10-City and 20-City Composite Indices. As of April 2010, average home prices across the United States are at similar levels to where they were in late summer/early autumn of 2003. From their peak in June/July of 2006 through the trough in April 2009, the 10-City Composite is down 33.5% and the 20-City Composite is down 32.6%. The peak-to-date figures through April 2010 are -30.5% and -30.0%, respectively. 

New York posted a new index low in April, as measured by the current housing cycle, where it peaked in June 2006. The peak-to-trough figure is -21.7%. Eighteen MSAs and both Composites showed monthover- month improvements in April. The 10- and 20-City Composites were up 0.7% and 0.8%, respectively. Eleven of the MSAs reported monthly increases of at least 1.0%. Miami and New York were down 0.8% and 0.3%, respectively. San Diego has now shown 12 consecutive months of positive returns. It is the only market that did not contract in the late winter months.

The S&P/Case-Shiller Home Price Indices are revised for the 24 prior months, based on the receipt of additional source data. More than 23 years of history for these data series is available, and can be accessed in full by going to http://www.homeprice.standardandpoors.com

Amendment to Eliminate HVCC Still Alive in Financial Reform Bill [HousingWire]

An amendment to the Dodd-Frank Wall Street Reform Bill that would eliminate the Home Valuation Code of Conduct (HVCC) survived congressional debates last week, according to one representative’s office.

A congressional conference last week took place to reconcile both versions of the House and Senate financial reform bills. As it stands now, the HVCC would be eliminated 90 days after the bill is signed. A new set of “appraisal independence standards” would replace it, according to the bill.

The Federal Housing Finance Agency (FHFA) implemented HVCC in May 2009 in an attempt to improve the independence of appraisers by prohibiting lenders and third parties from influencing appraisals. It’s a controversial regulation, leading to an increase in demand for appraisal management companies (AMCs) and complaints from independent appraisers who claim they’re being cut out of the market.

But the “appraisal independence standards” will be written and announced 60 days after the bill is passed. The bill, unlike HVCC, allows Fannie Mae or Freddie Mac to accept any appraisal report completed by an appraiser selected or paid by a mortgage loan originator.

The bill also stipulates that the new standards will include a requirement that lenders and their agents pay appraisers at market rates.

Download Dodd-Frank Finance Bill 2010

Per appraiser Dave Towne: Click above for the full bill as approved by the Congress conference committee on Friday 6/25/2010, now technically known as the “Dodd-Frank Wall Street Reform and Consumer Protection Act.” 

Here are the pages Dave suggests you print and read: 

• Pg 1 – bill title 
• Pg 15 – Subtitle F – Appraisal Activities (TofC for that section) 
• Pg 26 – Section 4 Effective Date (FYI…it appears this bill will become effective 1 day after the President’s signature) 
• Pages 2205 – 2250 – Subtitle F – Appraisal Activities (This is the section pertaining to appraisers/appraisals, etc.) Have fun reading!

 Click here to read the full article -  www.housingwire.com

Appraisal Game Changer on Horizon: HVCC Gone, BPOs, Reviews, AVMs Regulated, Greater Enforcement, Independence

Reprinted with permission from Working RE Magazine:  WRE Editor's Note: Hang in there. The Financial Reform Bill, now in Senate Committee, could be a game changer for appraisers. If signed into law, the bill would regulate the use of broker price opinions and appraiser valuation products, set new rules for appraisal reviews, beef up appraiser independence and enforcement and mitigate the effects of HVCC.

Appraisal Game Changer on Horizon: HVCC Gone, BPOs, Reviews, AVMs Regulated, Greater Enforcement, Independence  

By David Brauner, Editor

There are 61 pages of appraisal provisions contained in the base text of the Financial Reform Bill now in House-Senate Conference Committee. If passed and signed into law, the legislation could be a game changer for appraisers.

Some highlights included in the base text are:

·       Sub prime mortgages to require written reports by state-licensed appraisers, including an interior inspection (no more drive-bys). Failure to obtain such an appraisal by a creditor will result in a $2,000 liability to the applicant or borrower.

·       Appraisers must be licensed in the state in which the property is located.

·       Strong appraiser independence language mirroring that of the Home Valuation Code of Conduct (HVCC), including a national complaint hotline.

·       Sweeping powers for the Appraisal Subcommittee to police state appraiser boards.   

·       Mandatory reporting requirements of appraiser malfeasance and/or discovery of Uniform Standards of Professional Practice (USPAP) violations to state appraiser boards.

·       All appraisal reviews to be in compliance with USPAP. From the base text: "Appraisal reviews by a lender, appraisal management company (AMC), or other third party organization, shall be performed by an appraiser who is duly licensed or certified by a state appraisal board." 

·       AMCs to be regulated by state appraiser boards.

·       Quality control standards required for automated valuation products.  

·       Rules for broker price opinions (BPOs): "Broker price opinions may not be used as the primary basis to determine the value of a piece of property for the purpose of a loan origination of a residential mortgage loan secured by such piece of property."

·       Broker price opinions defined: "The term 'broker price opinion' means an estimate prepared by a real estate broker, agent, or sales person that details the probable selling price of a particular piece of real estate property and provides a varying level of detail about the property's condition, market, and neighborhood, and information on comparable sales, but does not include an automated valuation model as defined in section 1125(c)."

 

Game Changer

According to Darwin Ernst, SRA, Montana Real Estate Appraiser Board Member and designated Residential Member of the Appraisal Institute, these changes have the potential of being significant. "The base text says appraisals and appraisal reviews need to be done by licensed appraisers," Ernst said. "This could compel the GSEs (Government Sponsored Enterprises - Fannie and Freddie) to replace the use of AVMs and/or BPOs for quality control checks with appraisal reviews by qualified (licensed) appraisers. This could be a huge change."

"This legislation (if passed) will also lead to the removal of all unqualified personnel at appraisal management companies who are calling themselves appraisal reviewers. One goal of the legislation appears to be justly aimed at getting rid of people who are not qualified to complete appraisals or appraisal reviews. 'Qualified' now means a state licensed or certified real estate appraiser."

Ernst recently returned from an Appraisal Institute-sponsored lobbying trip to Washington, D.C. where he met with staffers from various members of Congress to provide input on these issues from the perspective of appraisers (see Fighting for HVCC Reform: Mr. Ernst Goes to Washington, WorkingRE.com, Premium Content).

HVCC, Customary and Reasonable Fees

Conspicuously absent from the base text are the elimination of the Home Valuation Code of Conduct (HVCC), which is due to sunset in November 2010 unless renewed, and any mention of customary and reasonable fees for appraisers (see Demanding Customary and Reasonable Fees for Appraisers, WorkingRE.com, Premium Content). However, both issues are addressed in a proposed amendment.

The "Amendment to Title XIV" (see, WorkingRE.com, Sidebar) calls for the sunsetting of the HVCC. It also addresses customary and reasonable fees with more specificity than the FHA, which so far has failed to enforce its own mandate. The language in this amendment says: "Lenders and their agents shall compensate fee appraisers at a rate that is customary and reasonable for appraisal services in the market area of the property being appraised. Evidence of such fees may be established by objective third-party information, such as government agency fee schedules, academic studies, and independent private sector surveys. Fee studies shall exclude assignment orders by known appraisal management companies." The last sentence seems to debunk the notion that the reduced fees offered by AMC should be considered "customary and reasonable."

According to Ernst, whether or not the amendment is added, the base text of the legislation will have the De facto effect of superseding HVCC. "Most lenders will not make any changes to their current practices even when the HVCC is officially sunsetted, until they are forced by new regulations. The appraiser regulatory provisions in this financial reform legislation are such regulations. The GSEs' policies for lenders will likely have to change in order to comply with the new law,” said Ernst.

According to Ernst, it is possible that this legislation, if signed into law, may also curtail the use of BPOs for valuations. "BPOs are defined here as a 'probable selling price,' as distinct from an appraisal from a qualified appraiser that provides an opinion of market value," said Ernst.

Day of Reckoning 

The base text also calls upon the Comptroller General to conduct a study to determine the effects that the changes to the seller-guide appraisal requirements of Fannie Mae and Freddie Mac, contained in the HVCC, "have on small business, like mortgage brokers and independent appraisers, and consumers, including the effect on the quality and costs of appraisals; length of time for obtaining appraisals; impact on consumer protection, especially regarding maintaining appraisal independence, combating appraisal inflation, and mitigating acts of appraisal fraud; structure of the appraisal industry, especially regarding appraisal management companies, fee-for-service appraisers, and the regulation of appraisal management companies by the states; and impact on mortgage brokers and other small business professionals in the financial services industry."

Find the Appraisal-Related Base Text of the Financial Reform Bill at WorkingRE.com, Sidebar.

For background information, please see July 4 - Independence Day or Doomsday for Appraisers? at WorkingRE.com, Premium Content.

About the Author

David Brauner is Editor of Working RE magazine and Senior Broker at OREP, a leading provider of E&O Insurance for appraisers, inspectors and other real estate professionals in 49 states (OREP.org). He has covered the appraisal profession for over 16 years. He can be contacted at dbrauner@orep.org or (888) 347-5273. Calif. Insurance Lic. #0C89873.

A Modern "Appraiser Apprentice" Job Interview

Ever wonder what a real estate "Appraiser Apprentice" job interview, with a recent college graduate, would sound like?  The author, R. James Girardot ( aoi@oz.net) says . . . Let's see:

First - Job candidate, can you work for 2 years with no income?

Second - You won't mind setting your schedule around mine because I have to walk through all properties with you. Yes, I know doctors, attorneys, dentists, engineers, teachers, etc. don't require that stipulation, but you see, I am not sure I can tell you that you are entering a "profession" nor even a "business" in which anything from your degree is usable anyway.

Third - After 2 years of working for free and of scheduling your schedule around mine [especially since I will have 2 other apprentices in the same category plus will be doing appraisals myself so that I can financially subsist] your fees will be totally dependent on how many appraisers there are out there at that time competing for the same business that is left after the AVMs and the BPOs do their thing in government approved property valuations for mortgage purposes.  Could you gross $30,000 per year? You might. But, again, the trend currently is downward when it comes to appraiser fees.

Lastly, I cannot lie or mislead you, you will have expenses taken out of whatever fees you will earn: those will include:

• errors and omissions insurance,
• licensing for an appraisal software program,
• membership in a local agent multiple listing service,
• monthly fees for a reliable data source from which you can expect to get reasonably reliable property characteristics from county records,
• gas and wear and tear on your car,
• a place to work either in your home or renting a space somewhere,
• purchasing your paper supplies,
• paying telephone and internet connections,
• paying your own social security and, of course,
• paying all the local, state and federal taxes that will be based on the fees that you are paid.

You say your college buddies are getting 2 weeks vacation, medical insurance, 401(K) and more. No, no, no, you don't get any of that by being an appraiser. If there is income left from the wages you are paid for the appraisals you complete, then you might be able to take a vacation and do all those other things.

You think we should just charge more for your professional services? Sorry, again the answer is "no." There is no way you can charge what you need to in order to be an appraiser; those days are gone just like the dinosaurs. Appraisal fees today are totally beholden on how much of the appraisal fee (that the borrower pays the lender at the time of applying for a mortgage) that the lender and its appraisal agency are willing to pass on to you as the appraiser.

But appraisers are independent business people.  Don't they set their own fees? Sorry, again, there are just not enough real appraisers out there to change that situation. The reasoning that is most heard is that "if I don't accept those wages, I will have to go back to the assembly line and I would do anything rather than that. Besides, I like not having a boss."

How many appraisals would you project you could do once you become licensed or certified? THAT is a good question. The answer is really dependent on whether or not you want to have any free time for yourself, your family and your hobbies or, alternatively, whether you want to invest the time in each appraisal to do the right job. You see, while reducing the fees paid to appraisers, those who assign appraisals to appraisers today also insist on getting their reports back within 1 or 2 days.

Yes, you are independent; as I said before, you will have no bosses. However, if you do not meet their timeline requirements, you will also have not appraisal business? So what approach would you use: find out how to cut corner? take the time to do the right job? And given either situation, how many appraisals do you project you could do if you are going to do them correctly, do them within the 1-2 day requirement and still have a private life.

Weekends? No, those who assign appraisals say you do not have to work weekends. BUT remember their clocks begin to tick away time once they send an order to an appraiser.

Could you compete to obtain more business because you are good and honest? Is that your question?I feel like I am apologizing for the Gulf oil spill I am saying "I am sorry" to you so many times. No, there is no competition in the "profession" today. You simply try to find what are called appraisal management companies, otherwise known by the acronym AMCs, see if they will let you register with them, look at their wage sheet to see if you can live with the wages they are offering (keeping in mind ALL expenses and fringes of life are yours to be paid by those wages only) and then see if they actually accept your name. That is just part of the system. The next thing you do is sit and wait for them to notify you that they have an appraisal for you to do.

How many orders will you receive and how often will you receive them? Very good question indeed. You see, the answer to that is totally dependent on how many appraisers that company has approved in its rotation directory. Based on experience to date, I would rather that you plan on a minimum of appraisal orders rather than how many an ambitious, bright and hard-working person you appear to be.

Okay, if I understand what you are saying now, you saying you really do not and never wanted to be a business person who owns their own business? So you had thought you could go to work for an appraisal company, conduct as many appraisals as you were willing to commit and physically able to do and leave all the other registering, delivering of appraisals, tax withholdings, business promotion and business retention to the appraisal company itself.

Again, and I really do mean this: I AM SORRY!  Because of the wage scale the companies that assign appraisals impose on those who are willing to do their work, companies like those with regional supervision and all the other benefits of a company team are gone like the dinosaurs, too. You see, those companies used to structure their pay on the experience of the appraiser, the ability of the appraiser and the fees that they used to be able to charge lenders for appraisals which used to allow a good businessperson the ability to budget money to actually pay a staff. But that is gone now that fees charged by appraisers are gone and have been replaced by wages payed by those who order appraisals.

Yes, I am sure your spouse's parents just paid $500 to have an appraisal done on the home they just purchased. But therein is the crux of the story: ask your in-laws to see if they can find out how much of that money actually went to an appraiser to appraise their new home. While this next step might be disappointing, too, you might also suggest that your in-laws now obtain a private appraisal not using their lender's appraiser. The only reason I say that is because of the number of loan officers with banks of all kinds and all sizes apparently now telling their mortgage borrowers not to depend on the bank appraisal as the actual value of the home.

I well appreciate your questions, "So why did I go to college? Why didn't someone tell me all of this before?" Rather than answering with the same answer you have heard me say so many times during our interview, let me just say I sincerely apologize for you feeling that way. Truly, going back to how or whether you will receive appraisal orders that we discussed just a few minutes ago, there is one other thing you should be aware of:

You know how you got grades in college? Well, you will still be receiving grades.

• However, now you will be graded on whether you called the borrower within a day,
• whether you delivered the appraisal in the time frames required by the assigners of appraisal orders,
• how many spelling errors you had in the report,
• how many typos there were in the report,
• whether the AVM conducted by the company that ordered the appraisal agrees with the conclusions of your appraisal and,
• if it doesn't, how quickly you respond to a follow-up request to submit what the company demands for the appraisal and
• whether you filled out the Fannie and Freddie appraisal forms the way that each appraisal orderer demands and
• provide any and all additional information that the orderers demand regardless of what USPAP, Fannie and/or Freddie publish in their standards and guidelines.

So you don't think you needed a college education to be able to fill out a form? So you think you will be communicating that to your congressperson?

Why don't we just provide training classes on how to fill out forms as other businesses do rather than make someone think they need college education to do that? You might also ask your congressperson that question if you do write a letter.

It was a pleasure meeting you. I can tell from the interview that you are exactly the kind of new blood we need: you appear very professional, very honest, speak like you are ethical in all aspects of your life and your philosophy of life and I do believe you when you said you just wanted to provide an honest service for the benefit of those who are buying or refinancing the single largest investment they make in their lifetimes--their homes.

I would be interested in hearing what you decide to do for a career. Thank you for the opportunity to meet and chat with you.

Author: R. James Girardot [ aoi@oz.net ]

Appraisal Scoop Authors to speak at ICAP Summer Seminars - July 7 and Aug 11

The Illinois Coalition of Appraisal Professionals (ICAP) is pleased to announce registration for the 2010 summer seminars is now available on-line at http://www.icapweb.com/education.php. As usual, two seminars will be held this summer. The first seminar will be held on July 7th in Springfield at the Crowne Plaza hotel. The second seminar will be held August 11th in Lisle at the Hilton hotel.

“We are extremely excited about the seminars this year. The committee did a fantastic job of selecting topics and speakers. The people in attendance are really going to enjoy the day and will find the seminar to be pertinent to their daily work as real estate appraisers”, said Randy Neff, seminar chair. "As is tradition of the seminars, Mr. Brian Weaver, IDFPR appraisal coordinator, will be the keynote speaker."

The seminars will be headlined by Mr. Patrick Egger of Las Vegas, NV and Mr. Anthony Young, of San Ramon, CA. Mr. Egger will speak on the importance of analyzing key economic indicators in projecting trends in the real estate market. Mr. Young will speak on graphing market trends and then incorporating the graphs into appraisal reports. Ms. Markie Lemons of Chicago will give a presentation on short sales. “ICAP seminars are not typical real estate appraiser CE seminars.

Here's a little more info on the speakers this year and their topics . . .

Patrick Egger is from Las Vegas. He is an appraiser, professional educator, and author of many articles on the Appraisal Scoop blog under the blog category "Outside The Boxes".  He speaks extensively about using key economic indicators to project housing market trends. Patrick is nationally known among appraisers through his participation on blogs, forums, and speaking engagements. Mr. Egger will be speaking about…

Market Analysis: What moves the market? Indicators, Ratios and Relationships.  

"It’s often said that an appraisal is merely a “snapshot in time”. While snapshots provide a glimpse of what’s happening, they’re like tombstones, telling the reader little more than born when, died when an who’s in the grave. Presenting a simple matrix of key indicators will turn a market glimpse into market perspective. The key to any report is how you communicate your observations and conclusions to someone reading that report. A simple matrix of key indicators will inform the reader on what is motivating the market and why. In turn, you can use the same matrix and indicators to logically support your conclusions in key sections of the report, such as market trends, adjustments and the reconciliation."

"Not only is the information readily available, it only needs to be updated monthly or quarterly; and it can be used with any type of report, transforming static snapshots into dynamic perspectives. Clients expect reasonable conclusions. They also require rational explanations and support for those conclusions. The Data tells us what happened, however it doesn’t tell us why it happened. This is where the matrix will help the appraiser and the reader comprehend where the market was, where it is now and what factors may determine where it is headed."

Another one of the ICAP guest speakers is Anthony Young. Anthony is an active appraiser from San Francisco. He is going to illustrate how to graph housing trends using excel and inserting them into appraisal reports.  Here's an example of one of his Appraisal Scoop articles.

Real Estate Trend Analysis and Graphing

Anthony Young is a Certified Residential Appraiser and principle of Young & Associates Real Estate Appraisal Company in San Ramon, California, where he specializes in the valuation of complex and "high-end" residential properties and housing market trend analysis.

He enjoys showing Real Estate professionals graphing and charting techniques for studying the buying behaviors to conclude adjustments in valuations and has developed a How-To-Do-Trend-Analysis DVD that teaches professionals to measure (and visually graph) the behavior of the Real Estate Marketplace over time and to provide supported and credible results within the appraisal report.

Both Patrick and Anthony will be speaking in the afternoon. The afternoon session will include a real estate agent from Chicago, also known as the foreclosure queen, and Brian Weaver from IDPFR.

Marki Lemons will give a presentation on short sales, what they are, how they impact the market, how price is negotiated and other fundamental items about short sales. She specializes in short sales and foreclosures.

Sounds like a great lineup this year!!!

ICAP is using the Appraisal Institutes online education platform to register for the 2010 summer seminars. This is the second year we have used this platform.

You will have to create a username and password before you can register for the course.

As an ICAP member, you will receive a $25.00 discount for the class if you use the following promo codes. These codes are case sensitive so please type them as they appear below.

Springfield Seminar July 7: icap7sf

Lisle Seminar August 11: icap11lisle

Click on the following link to register….DON’T DELAY!!!

http://www.icapweb.com/education.php