Appraisal Scoop

How many appraisers are needed to change a light bulb?

Answers received

A: How about 101? One to screw it and 100 Scoop readers to debate whether the screwer utilized the right approach/technique, and if not, should he/she be turned in to the State Power & Light Bulb Screwer Board.

A: Three. One to research it, one to inspect it and one to call the client to ask exactly what number wattage to use.

A: First, if in the appraiser’s opinion, the original light bulb should be changed, the appraiser must identify and set forth any additional data considered and relied upon and the reasoning and basis for using a new light bulb.

A: Appraisers do not screw in light bulbs. They make an assumption that the light bulb has been screwed correctly, then forecast the light.

A: Appraisers do not screw in light bulbs. They watch others do it, interview them about their motivations and then write a report about it

A: Two. The appraiser and the review appraiser.

A: Seven. 1 to research the light bulb comparables, 1 to verify the data, 1 to review USPAP and select the right approach/technique, 2 to write the report, 1 to review the report and 1 to deliver the report.

A: None. If an appraiser was actually caught changing a light bulb (as opposed to evaluating and presenting supporting data that states in an unbiased report that the current light bulb has reached the end of it’s economic life, whether the ROI warrants replacing the bulb, the wattage of the light bulbs in the immediate area and the recommended wattage of a new light bulb, etc.), he could immediately find his license revoked with the added possibility of fines and prison time.

[NOTE: The readers of this survey should be aware of the notorious case of Dr. Hannibal Flyby, found guilty of numerous cases drive-by bulb-wattjackings. He was sentenced to 7 years with hard labor at the infamous off-shore island prison “Le Rat Mort”, located south of the Florida Keys. His only form of entertainment is watching teams of oversized/athletic roaches that play soccer games with the few bread crumbs that fall in the dirt floor of his cell.]

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Appraiser whose license was suspended for inflating property values has been appointed to the NC state appraisal board

CHARLOTTE, N.C. -- The head of the largest professional organization of real estate appraisers in North Carolina said Monday he was appalled a woman whose license was suspended for inflating property values has been appointed to the state appraisal board.

Hector Ingram said the appointment of Lauriette West-Hoff of Durham to the North Carolina Appraisal Board sends a "very poor message" to home appraisers and the public. He said appraisers have already come under fire for their role in the housing market meltdown.

"Frankly, it's irritated a lot of our members and a lot of other appraisers who are not members of our group," said Ingram, president of the 650-member Appraisal Institute's North Carolina chapter. "At a time when we need to be squeaky clean and above board, you don't appoint someone like that."

  Click here for the complete article!

The first set of letters that spell appraisal de-valuation. Part 1, Epilogue

I know that I promised an article on BPO’s at the conclusion of my last article, but I have been settling into my new position here at Braun & Associates, Inc.  During my break over the holidays and the relocation to Tennessee, I stumbled into some things that many of you have as well: one of my long term and largest clients hired a fee cutting appraisal management company (AMC). The guilty party: National City Mortgage (NCMC), which was recently acquired by PNC.

Fee Slashing Hits Very Close to Home.

I received a call from a colleague that does a higher volume of work with them explaining that it was rumored that EAppraiseit was taking over from Network Appraisal Services (NAS). Like many things in our business, I initially filed it in my brain under Just Another Rumor. I made a few calls to some folks at NAS and found out that not only was it true, that is was happening within 3 weeks, at the end of the year. I then called the branch I did most of my work with and starting inquiring about what was happening, and how it would affect my company (at this point I was transitioning the contacts and leads to another appraiser to take over for me once I moved) and most importantly my family.

The branch manager, and several of the more well known originators that I have had years of good, ethical business with had no clue what was happening. I was directed to contact corporate and speak with Peter Kirsch (his last name may be spelled incorrectly as I couldn’t confirm it) one of the vice presidents of the company at the national level. He and I spoke and I asked him what was happening and he explained that corporate had decided to move in a different direction. I started to explain to him the negatives that we were going to be faced with as appraisers and he cut me off. He explained to me that he was fully aware of the situation with Eappraiseit and Washington Mutual, and various other items of notability.

My point to him was going to be regarding the fee cut and the damage that was going to do to the appraisers who, like me, had a long term relationship with NCMC. He started in the other direction, and I was very shocked that he was familiar enough with it to assume that was my complaint. That means that NCMC actually disregarded what ended up causing the entire HVCC, as being little else but white noise when it came to profit. You see, in my case I was charging $350.00 for a normal residential lending use report. Eappriaseit cut the fees to $210.00. That is a forty percent (40%) cut in fee!

I spoke with this gentleman for a few more minutes and touched on the harm it was going to do to real, everyday working people. People that had helped build his company into what it had become. He was at the very best, flippant and careless about it. He can be summed by one of his own statements. “It really is a business decision, as if you won’t do the work there are more appraisers who will”. I was shocked, angry and did my best to simply be polite and end the call.

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News Release: Appraisal Organizations "Strongly Object" to Proposed Federal Interagency Appraisal and Evaluation Guidelines

The American Society of Appraisers (ASA), the American Society of Farm Managers and Rural Appraisers (ASFMRA) and the National Association of Independent Fee Appraisers (NAIFA) have filed written comments with the federal bank regulatory agencies which “strongly object” to the proposed federal Interagency Appraisal and Evaluation Guidelines.

The three professional appraisal organizations told the agencies that their proposed collateral valuation requirements “actually weaken, rather than strengthen, the safety and soundness of real estate loans made by regulated institutions”; and, they urged that the proposal be withdrawn so it can be greatly strengthened.

The proposed guidelines establish when a professional appraisal is required in connection with mortgage and other loans collateralized by real estate (Title XI of the federal Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989 established the basic requirement for the use of professional appraisers in certain federally-related transactions).

ASA, ASFMRA and NAIFA were specifically critical of the fact that the Guidelines exempt a dozen categories of real estate lending transactions from the Title XI requirements; and, permit the use of “untested and unreliable alternatives to appraisals (i.e. automated valuation models; broker price opinions; and, property tax assessment valuations) to substitute for the opinions of individuals who have been Certified and Licensed as appraisal professional by the 50 states and territories.

“We believe the approach to valuation issues reflected in the Guidelines is fundamentally flawed; and is inconsistent with the bank regulatory safety and soundness reforms promised by the incoming (Obama) Administration,” the joint letter states. The three professional appraisal organizations also commented that while they would oppose the Guidelines even during “normal” times, the banking agencies’ preoccupation with exempting lenders from professional valuation requirements was “particularly troubling” coming at a time when there is enormous stress on the banking system and mortgage markets, when the real estate markets are in an extreme state of flux and when the government’s loan modification programs for troubled mortgages, are so dependent on accurate valuations of collateral properties.

The three organizations concluded by stating that because of the “many exceptions to and exemptions from reliance on professional appraisals”, the Guidelines are a regulatory “step backwards” that causes us to oppose them.

The comments were delivered to the Office of the Comptroller of the Currency, the Federal Reserve System, the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the National Credit Union Administration. To view the complete contents of the January 20, 2009 comment letter, visit www.appraisers.org.

CONTACT: Ann Susko, IFA NAIFA Liaison to the Appraisers Coalition News release drafted by Peter Barash, Lobbyist for ASA

Live Webcast Interview of George Dodd, SRA TODAY!

Marco Ruiz has been working with Scott Draughon of http://MyTechnologyLawyer.com  on developing a series of appraisal related programs for the Internet.  Past programs have had such notables as Dave Biggers (Chairman of a la mode, inc), Patrick Egger, Richard Ferris, Brian Davis and others.

The radio interview/talk show is presented every Thursday at 4:00pm EST on My Technology Lawyer.com (http://www.mytechnologylawyer.com/radio) or http://www.ruizappraising.com/radio

George Dodd, SRA will be their guest today!   Many of you know George for his work in drafting the IVPI proposal and as the original petitioner before the Virginia REAB on the matter of web portals such as AppraisalPort.

To learn more about the show visit www.RuizAppraising.com/Radio .

 Download the recorded interview!  You can download or stream Thursday's show with George Dodd, SRA from the list of recorded shows - click here.

Are YOU interested in being on the show?  Get hold of Marco and pitch your ideas and area of expertise.

Are you a POTENTIAL sponsor?  This is a UNIQUE venue for appraisal companies and service providers to reach a target market.  Click here for more information.

Appraisal Institute Calls on Bank Regulators to Revisit Appraisal Regulations - Designations, BPOs, AVMs, and more!

The Appraisal Institute issued a public comment letter on the proposed Interagency Appraisal and Evaluation Guidelines January 20, calling on the federal bank regulatory agencies to revisit the underlying appraisal regulations, while advancing the importance of competency to the appraisal process and expressing concern regarding ongoing misuse of broker opinions of price.

The comment letter provides many technical suggestions to the proposed guidelines, as well. The comment letter can be found on the AI Web site. Click here!

Questions can be sent to Brian Rodgers, Director of Federal Affairs, at 202-298-5597, brodgers@appraisalinstitute.org .

Related Post - IL Responds to Proposed Interagency Appraisal and Evaluation Guidelines - Docket OCC-2008-0021

"Old School Appraising" - Are you STILL searching for the BEST comps?!

Re-blogged ActiveRain article "Great News For Appraisers", with permission from Mike Lay

I am very excited today because I found out that we NO LONGER NEED TO FIND AND USE THE "BEST" COMPS IN OUR REPORTS! Nope, it looks like that old, outdated method of choosing the most comparable sales is going the way of the woolly mammoth. From now on, the only important attribute of a comparable is that it MUST HAVE SOLD IN THE PAST THREE MONTHS.

Think of how much easier our life is going to be now! We don't have to worry about stupid little things like proximity, or similarity of quality, age, condition, lot size, age, or even size. So feel free to go off the charts with your adjustments, because that is okay now! As long as they sold in the past three months, they are automatically now your best comps.

  Of course you are thinking, "Mike, you're losing it. The most recent sales are not automatically the best sales. That's crazy talk! Often sales that are older are much more similar and much better indicators of value. Who would think that a 3,000sf house built last year is the best comp for a 60 year old 1,900sf home just because it was a recent sale? You just need to make sure that the area has not experienced a decline in values, or is experiencing extended marketing times which may adversely affect the Subject as compared to those older sales."

That, unfortunately, is 2008 thinking. You need to bring yourselves up to date! There is a new paradigm now! At least according to the underwriters I have been dealing with lately, who refuse to accept an appraisal with 2 recent sales and three over 6 months (but less than 9 months) that were the EXACT SAME FLOOR PLAN, and after I had provided extensive data that sales were increasing, sale prices were stable, average cost/sf was stable, etc. (I've now had this discussion about 4 different appraisal reports with 3 different lenders.)

There I was, stuck in my old ways of picking the most similar comps and providing statistical analysis to show why they should be given most consideration. All I had to do was stick in 2 more sales that sold in the past 3 months, regardless of size and age differences, and everything was fine and the file was through underwriting!

Fortunately, I am now enlightened to the new ways, and am looking forward to just searching an ever-expanding search area without regard to similarity until I can capture 3 or 4 sales that occurred within the past 3 months. It will be so much easier, I now look forward to each new day with such enthusiasm I can hardly stay in bed! No more dreary old research and analysis for me! Join the wave!!!!

PS - For those of you unable to recognize rampant sarcasm when you read it, I am just kidding. There is no new method, no new paradigm, just me venting a little. Sorry to have gotten your hopes up...

AUTHOR: Mike Lay, Appraisal House - Austin Office: Serving Austin, San Antonio, Houston, and Dallas/Ft. Worth.  (800) 497-2660 X-3  Cell - (512) 785-5149

Appraisal Standards Board issues January 2009 USPAP Q&A's

The Appraisal Standards Board (ASB) has issued their January 2009 USPAP Q&A - 

Download January 2009 USPAP QA.pdf

Question: I was contacted by a sworn peace officer who simply requested the workfile of an assignment I had previously completed. The officer made this request without a subpoena or any form of court order. If the workfile contains confidential information, does USPAP allow me to comply with the officer’s request? 

Question: Does USPAP require an appraiser to sign the letter of transmittal?

Question: I’ve been engaged for a real property appraisal review assignment and have a question about the appraisal report under review. Does USPAP require the date of value to be cited each time the opinion of value is stated in the appraisal report?

Click here for the answers:  Download January 2009 USPAP QA.pdf

BusinessWeek: "Appraisers rubber-stamped inflated home prices"

BusinessWeek - January 18, 2009 - "The appraisal industry has justifiably come under fire for its role in the great housing bust. Property appraisals, required by lenders before a loan is made, are supposed to provide an independent assessment of the home's value. But during the boom, appraisers routinely signed off on a doubling or tripling of home values, sometimes racked up in just a matter of months. Investment properties were appraised at prices that made no investment sense. And homeowners were charged a pretty penny for what often amounted to rubber-stamp service."

  Click here for the complete BusinessWeek article

Wells Fargo and Rels Valuation's Home Appraisal Practices and Inflated Fees Under Investigation

SEATTLE, Jan 16, 2009 (BUSINESS WIRE) -- Hagens Berman is investigating Wells Fargo and its appraisal subsidiary, Rels Valuation, based on reports the companies allegedly engaged in a rigged appraisal process designed to boost profits at the expense of homeowners and independent appraisers.

The firm is investigating claims that the company forces homeowners to use its appraisal firm, Rels Valuation, which then turns around and subcontracts the work to independent appraisers while charging homeowners an inflated fee for the work.

The practice, if proven, damages homeowners as Wells Fargo and Rels Valuation control the appraisal market, a profit-boosting move that allows the companies to control third-party appraisers.

"The real estate industry and lending practices in this country put homeowners at the mercy of companies like Well Fargo and others controlling the marketplace," said Steve Berman, managing partner of Hagens Berman Sobol Shapiro.

"We recently filed a lawsuit against Countrywide claiming the giant rigged its appraisal process and it's not surprising to us that other lenders may mirror Countrywide's practices."

The firm is investigating additional claims against Wells Fargo, including the use of strong-arming tactics with independent appraisers, pushing them into low-ball pricing guidelines. Some claim if appraisers don't comply with Wells Fargo's fee structure, the company adds them to a blacklist and refuses business with them in the future.

"If the claims are correct and Wells Fargo and others inflate appraisal fees the damage to homeowners could run into the hundreds of millions of dollars," said Berman. "That doesn't even take into account the abuse and loss of business independent appraisers may be experiencing."

Hagens Berman is looking for anyone who's purchased or refinanced their home through Wells Fargo and Rels Valuation. You can contact attorneys at wfc@hbsslaw.com. You can learn more about this investigation at www.hbsslaw.com/WFCappraisals.

Join the Wells Fargo Home Appraisals Investigation!