Appraisal Scoop

You Want It WHEN!? - How Long Does it Take To Complete An Appraisal?

How Long Does It Take to Complete the Development of an URAR USPAP Compliant Appraisal After the Assignment is Accepted?

Guest Post: The author, Edd Gillespie, is a Certified General Appraiser from Pueblo, CO that specializes in litigation support, 1031 exchanges, estate appraisals, and commercial mortgage work. 

And the answer of course is, “It depends.” Appraisers have different amounts of the necessary information needed to complete any given assignment, but let’s look at a situation where the appraiser deems it necessary to investigate and analyze everything about a non-complex assignment.

USPAP Standards Rule SR 1-4 lays out the required process to develop the appraisal. “In developing a real property appraisal, an appraiser MUST collect, verify, and analyze ALL information necessary for credible assignment results.”

It is clear there is no option for real property appraiser to do other than as SR 1-4 says. The real property appraiser MUST follow the rule with respect to ALL of the information necessary for a credible result.

1. Collection of Information: 6 hours

Where do you collect the initial information and how long does it take? The tax assessor usually describes most of what the appraiser needs to know about the subject in order to begin the development of the appraisal. That information is downloaded. The local MLS contains a wealth of information. Appraisers look there for market trend information, but most surely for comparable sales. At this point the appraiser begins to make choices since analyzing all of the sales is rarely necessary for credible assignment results. What would you do?

Many appraisers report that at this point they begin to eliminate all MLS sales that do not share some value-significant attributes with the subject. At the end of this initial research the appraiser has a handful of comparable sales identified and downloaded. I estimate the review of the MLS for collecting initial information consumes about two hours of time.

Next, additional information is collected from the public record or perhaps other proprietary sources. Assuming the subject is in one of those areas that search consumes an additional two hours. Then there is the collection of information about the subject which is most often done during inspection. The inspection of the subject consumes two hours, including driving time in inspecting the subject.

2. Verification of Information: 3 - 10 hours

Where and how does the appraiser verify the initial information and how long does it take? Even though USPAP recognizes quality, credibility and misleading in appraising it gives us no instruction about the process of verification. USPAP simply requires verification of ALL of the information that is necessary to a credible assignment result mandatory for a real property appraiser. So, what does verify mean?

In the context of the Rule, verify is a verb, it is something an appraiser MUST do. The meaning of verify is to establish the truth, accuracy, or reality of something. Although the appraiser may encounter new information while verifying, it is clear that the objective of verification is confirmation. And how is it done?

Although USPAP does not require inspection of properties employed as comparables, it is common practice for appraiser to at least drive-by, which is a form of verification. Many appraisers report that they have a standard set of questions they ask to verify the transactional and physical information they already have. Other appraisers report that if they have collected information from the MLS they verify it with the public record or vice versa.

Most likely appraisers verify information from three to five sales and that can take from three to ten hours depending on the extent of verification the appraiser completes. It takes longer to verify information with parties to the transaction or their brokers. Frequently, conflicting or additional information is collected during the verification process, which triggers the need for additional verification. Once all of the necessary information is verified and the appraiser is assured that what he or she knows actually exists or actually happened, the information is ready for analysis.

3. Analysis of Facts: 9 - 16 hours

How long does it take to analyze the necessary information? Although the principle of substitution is applied to much of appraising, real property is not homogenous and often the data is not “clean.” Because of that appraisers spend as much time analyzing the verified necessary information as they do in collecting and verifying it. Analysis in residential appraisal includes market trend study and comparison and adjustment of the information from each sale. Seldom is all of the information necessary for adjustment included in the sales selected for comparison, which creates the need to collect and verify additional information as a part of the analysis.

4. Finishing the report: 1 hour

Appraisers say that the URAR report is for the most part completed as the development proceeds. They spend additional time filling in empty blanks and proof reading and estimate that takes about 1 hour.

The amount of time spent complying with SR 1-4 ranges from 18 to 32 hours. The mid-range estimate to complete the development of a non-complex residential market value appraisal is 25 hours.

What Do YOU think?!

• Do you agree that it takes 25 hours to complete a USPAP compliant development of a non-complex market value residential appraisal?
• How long does it take to complete the development required by SR 1-4?
• Do you think the requirements of SR 1-4 are excessive?
• If it takes 25 hours to complete the development of a USPAP compliant market value residential appraisal, are clients allowing sufficient time and paying a sufficient fee?
• Should USPAP be amended to eliminate the stringent requirements of SR 1-4?
• Should appraisers be better trained to understand what collect, verify and analyze mean?

 

The author, Edd Gillespie, is a Certified General Appraiser from Pueblo, CO that specializes in litigation support, 1031 exchanges, estate appraisals, and commercial mortgage work.  Contact Info: 590 N. Matt Dr. Pueblo,CO 81007 Phone 719-252-7624 E-mail eddgillespie@yahoo.com  

Statement of Sheila C. Bair, Chairman, FDIC on Implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act - February 17, 2011

Statement of Sheila C. Bair, Chairman, FDIC on Implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act - February 17, 2011

Chairman Johnson, Ranking Member Shelby and members of the Committee, thank you for the opportunity to testify today on the Federal Deposit Insurance Corporation's (FDIC) progress in implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
The recent financial crisis exposed grave shortcomings in our framework for regulating the financial system. Insufficient capital at many financial institutions, misaligned incentives in securitization markets and the rise of a largely unregulated shadow banking system bred excess and instability in our financial system that led directly to the crisis of September 2008. When the crisis hit, regulatory options for responding to distress in large, non-bank financial companies left policymakers with a no-win dilemma: either prop up failing institutions with expensive bailouts or allow destabilizing liquidations through the normal bankruptcy process. The bankruptcy of Lehman Brothers Holdings Inc. (Lehman) in September 2008 triggered a liquidity crisis at AIG and other institutions that froze our system of intercompany finance and made the 2007-09 recession the most severe since the 1930s.

The landmark Dodd-Frank Act enacted last year created a comprehensive new regulatory and resolution regime that is designed to protect the American people from the severe economic consequences of financial instability. The Dodd-Frank Act gave regulators tools to limit risk in individual financial institutions and transactions, enhance the supervision of large non-bank financial companies, and facilitate the orderly closing and liquidation of large banking organizations and non-bank financial companies in the event of failure. Recognizing the urgent need for reform and the importance of a deliberative process, the Act directed the FDIC and the other regulatory agencies to promulgate implementing regulations under a notice and comment process and to do so within specified timeframes. The FDIC is required or authorized to implement some 44 regulations, including 18 independent and 26 joint rulemakings. The Dodd-Frank Act also grants the FDIC new or enhanced enforcement authorities, new reporting requirements, and responsibility for numerous other actions.

We are now in the process of implementing the provisions of the Dodd-Frank Act as expeditiously and transparently as possible. The lessons of history – recent and distant – remind us that financial markets cannot function for long in an efficient and stable manner without strong, clear regulatory guidelines. We know all too well that the market structures in place prior to the crisis led to misaligned incentives, a lack of transparency, insufficient capital, and excessive risk taking. As a result, the U.S. and global economies suffered a grievous blow. Millions of Americans lost their jobs, their homes, or both, even as almost all of our largest financial institutions received assistance from the government that enabled them to survive and recover. Memories of such events tend to be short once a crisis has passed, but we as regulators must never forget the enormous economic costs of the inadequate regulatory framework that allowed the crisis to occur in the first place. At the same time, our approach must also account for the potential high cost of needless or ill-conceived regulation – particularly to those in the vital community banking sector whose lending to creditworthy borrowers is necessary for a sustained economic recovery.

My testimony will review the FDIC's efforts to date to implement the provisions of Dodd-Frank and highlight what we see as issues of particular importance . . . .  Click here to continue reading

New and Updated Resources Available to Help with Implementing the Uniform Appraisal Dataset

The following is from the Freddie Mac Update dated February 23, 2011:

In December 2010, Freddie Mac and Fannie Mae (the GSEs) published the full details of the Uniform Appraisal Dataset (UAD). The publication of the UAD, which defines all fields required for an appraisal submission for specific appraisal forms and standardizes definitions and responses for a key subset of fields, marked a major milestone in our effort to improve the quality and consistency of appraisal data delivered to the GSEs.  

Now, we’re focusing our efforts on providing resources to assist lenders and the appraisers they work with to prepare to implement the UAD. To help prepare your underwriting and property valuation staff, as well as the appraisers you work with, the following new and updated resources are now available on FreddieMac.com:

• New Using the Uniform Appraisal Dataset Tutorial and Interactive
  Reference Manual: This helpful training tool introduces lender staff, appraisers, and industry professionals to the requirements and instructions necessary to complete appraisal report forms in accordance with the UAD.
• Updated Questions & Answers: We’ve posted new Q&As tailored specifically to address UAD-related questions we’ve received from appraisers. We’ll be updating the Q&As frequently, so please check back on a regular basis to make sure you have reviewed the latest updates.
• Updated Field-Specific Standardization Requirements
  document: We’ve also renamed and made minor updates to the previously published Field-Specific Standardization Requirements for Lenders document. The updated document, now called Field-Specific Standardization Requirements,can be used to educate your staff, as well as the appraisers you work with, on the standardized definitions and responses for a key subset of fields on the four UAD appraisal report forms.

We are also sharing these resources with a number of appraiser trade organizations, appraisal software forms vendors, and education providers to aid in the adoption of the UAD.

In addition to providing these resources, we’ve also updated the UAD Technical
Specification to address issues identified with the required XPaths for mapping the data on the appraisal forms and minor changes to our formatting requirements. These changes are most relevant to lenders who will be extracting the data from the appraisal report form electronically and are noted in the updated documents available on FreddieMac.com.

For More Information
Over the coming months, we will provide additional job aids, training opportunities, and other resources to assist you in implementing the UAD requirements, as well as more details on the use of the Uniform Collateral Data Portal (UCDP).  For additional information, visit our Uniform Appraisal Dataset Web page or contact your Freddie Mac representative.

Visit our Single-Family News Center
for the latest news, information, and critical alerts.

The New Threat to Appraiser Independence

Guest Post: Charles R. (Chuck) Dettling is a Certified Residential Real Property Appraiser licensed in Alabama and Florida. Chuck and his son, Seth, also a Certified Residential Real Property Appraiser, operate a small firm, Dettling & Associates, covering seven counties in Southwest Alabama and the Florida panhandle. Their practice includes single family, small commercial, condo, and land, with a specialization in REO assignments. Email: dettling@frontiernet.net  

As most appraisers and mortgage market participants are aware, the Board of Governors of the Federal Reserve published an Interim Final Rule in the Federal Register on October 28 2010, Volume 75, Number 208, Pages 66554 through 66587, that implements Section 129E of the Truth in Lending Act (TILA) U.S.C. 1601, which was enacted on July 21, 2010 as Section 1472 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Rule is to take full effect on April 1, 2011, and among other things, intends to establish new requirements for appraiser independence, and better consumer protection in all finance transactions that involve their principal residence.

As appraisers, we generally applaud the efforts of Congress and the Federal Reserve to implement rules and procedures that enhance appraiser independence, help to protect the integrity of our profession and increase public trust in the appraisal process. From the appraisers’ point of view, some of the more popular provisions of the Rule include the elimination of the HVCC, and mandated payment of “reasonable and customary compensation” to the appraiser. Other provisions attempt to strengthen already existing ethics rules and regulations. As with many extremely complex federal regulations, there are often unintended consequences. In this appraiser’s view, the mandate that “… parties involved in the transaction report appraiser misconduct to state appraiser licensing authorities” could lead to a new breed of pressure on appraisers, i.e., the threat of a board complaint. Most of us would agree there are unethical and poorly trained appraisers out there competing with the rest of us, and those should be reported when warranted. But, what unintended consequences could result from enactment this provision?

Over the course of the past several years, I have found the relationships between appraisers and real estate brokers, agents and sales staff to be increasingly strained. One need only recall the visceral reaction by the real estate sales profession after the implementation of HVCC. The national news media was filled with so-called ‘horror stories” of appraisers “low-balling” appraisals in order to avoid liability in what was (and is) clearly a tragically devastated real estate market. Agents complained bitterly that they could not get their deals done because those naughty appraisers were intentionally valuing their pending sales too low. One of the more obnoxious examples was a report on Fox Business News wherein David Asman interviewed Dolly Lentz, the Real Estate Vice Chairman of Prudential Douglas Elliman. Asman asked Lenz what needed to be done to “fix the problem” and incredibly she replied, “…I think for one, they should have to provide comparable sales.” Earth to Dolly!!

Section 226.42 42(g) Mandatory Reporting “TILA Section 129E(e) requires certain persons to report an appraiser to the applicable state appraiser certifying and licensing agency if the person has a reasonable basis to believe the appraiser is failing to comply with USPAP, is violating applicable laws, or is otherwise engaging in unethical or unprofessional conduct. 15 U.S.C. 1639e(e). This provision applies to creditors, mortgage brokers, real estate brokers, appraisal management companies, and any other persons providing a service for a covered transaction.”

By the way, notice how the new law is strangely silent on the responsibilities and professional conduct of real estate sales professionals. Could it be that the massive National Association of Realtors lobby was able to convince congress that everything was just hunky-dory on their end. Just fix the appraisers and everything will be just fine.

So, now we have several million people described in the above code section who are required by law to report appraisers when they “have a reasonable basis to believe that an appraiser has not complied with USPAP or ethical or professional requirements…” Unfortunately, the Fed forgot to define “reasonable.” Question. With (hopefully) the exception of licensed or certified appraisers, who in this group knows squat about USPAP, really? When is the last time you heard Jane Q. Public espouse the many virtues and complexities of USPAP? I had a dream the other night. I was talking to a homeowner about the appraisal process and that rascal looked over his bifocals, leaned toward me, smiled (exposing all six of his teeth), and said: “So, doesn’t the Scope of Work Rule in USPAP require you to include the research and analyses that are necessary to develop credible assignment results?” 

A couple of years ago I had a property owner file a complaint against me. The complaint letter stated rather adamantly that I had refused to consider “comparable sales” that she had provided. Those “comparables” were in another state and were so superior that it was ridiculous. I expected the case to be dismissed immediately. But according to the Board they are required by the Appraisal Standards Board to conduct a full investigation into every aspect of the appraisal assignment. Six months later and with ten years of my life eliminated, I was completely exonerated, with not even a private warning.

Armed with this new “weapon” it is easy to imagine a huge surge in complaints by irate real estate agents, unhappy property owners, and others to the state boards. What is going to happen to E&O insurance rates when over-zealous state boards launch World War III against the appraisers to protect the public (oh, yes, and raise some much-needed revenue)? Will appraisers quickly discover that simply “tweaking” the numbers to accommodate real estate sales contracts or consumers’ wishes will minimize or eliminate the risk of complaints? Will too many appraisers end up with frivolous complaints that result in fines and reprimands, tainting the valuable reputations of our colleagues, and driving the best of our lot from this profession? In short, will this codified mandate to report appraisers become the new threat to appraiser independence?

About The Author: Charles R. (Chuck) Dettling is a Certified Residential Real Property Appraiser licensed in Alabama and Florida. Chuck and his son, Seth, also a Certified Residential Real Property Appraiser, operate a small firm, Dettling & Associates, covering seven counties in Southwest Alabama and the Florida panhandle. Their practice includes single family, small commercial, condo, and land, with a specialization in REO assignments. Email: dettling@frontiernet.net  

Appraisal Independence Interim Final Rule - Effective 4/1/2011

On October 18, 2010, the Federal Reserve Board of Governors (the "Board") announced a new rule setting standards for appraisals of residences offered as security for consumer credit transactions - 12 C.F.R. § 226.42 (the "Rule" or "Section 42").

The Rule amends the Board's Regulation Z, which implements the Truth in Lending Act ("TILA"). The Rule prohibits (i) undue influence on appraisers, (ii) mischaracterization of value in appraisals, and (iii) certain appraiser conflicts of interest. Section 42 also sets forth requirements for (i) compensation for licensed/certified appraisers and (ii) reporting of appraiser misconduct. Notably, the Rule places stringent requirements on creditors that employ in-house appraisers, so as to avoid conflicts of interest. (source: Mondaq)

Background: The new rules regarding appraisal independence adds a new section under Part 226 (Regulation Z), Subpart E (Special Rules for Certain Home Transactions), as Section 226.42 (titled as – Valuation Independence). These provisions were issued as an interim final rule with comment period due to the limited time frame the Act provided for issuance of this rule under the statutory deadline. 

This rule eliminates the current appraiser independence rules in Reg Z at 226.36(b) that were added last year, but those rules will stay in effective until April 1, 2011, at which time compliance with this rule will be mandatory. Through March 31, 2011, you may comply with either 12 CFR 226.36(b) or new 12 CFR 226.42.  (federal register)

"The Federal Reserve Board on Monday [October 18, 2010] announced an interim final rule to ensure that real estate appraisers are free to use their independent professional judgment in assigning home values without influence or pressure from those with interests in the transactions. The rule also seeks to ensure that appraisers receive customary and reasonable payments for their services."

The interim final rule includes several provisions that protect the integrity of the appraisal process when a consumer's home is securing the loan. The interim final rule:

• Prohibits coercion and other similar actions designed to cause appraisers to base the appraised value of properties on factors other than their independent judgment;
• Prohibits appraisers and appraisal management companies hired by lenders from having financial or other interests in the properties or the credit transactions;
• Prohibits creditors from extending credit based on appraisals if they know beforehand of violations involving appraiser coercion or conflicts of interest, unless the creditors determine that the values of the properties are not materially misstated;
• Requires that creditors or settlement service providers that have information about appraiser misconduct file reports with the appropriate state licensing authorities; and
• Requires the payment of reasonable and customary compensation to appraisers who are not employees of the creditors or of the appraisal management companies hired by the creditors.

The interim final rule is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Compliance will be mandatory on April 1, 2011.

Source: Federal Reserve Press Release

Federal Register notice: HTML | 271 KB PDF

Federal Register notice, technical correction: HTML | 53 KB PDF

2010 Banking and Consumer Regulatory Policy

 

Veros White Paper Highlights Interagency Appraisal and Evaluation Guidelines

The FDIC, the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision have come together for the first time since 1994 and issued a revised set of guidelines for all regulated institutions involved with real estate lending. Certified General Appraiser Dave Brown says, "This is a HUGE deal, if only for the fact that the first major guidance has not been revised in almost 15 years!"

Veros, a provider of collateral valuation technology, enterprise risk management and predictive analytics, has announced the release of a white paper entitled "Interagency Appraisal & Evaluation Guidelines: Insights into Understanding and Integrating the New Guidance." The white paper seeks to bring clarity to the expanded language in the Interagency Appraisal & Evaluation Guidelines (Guidelines) surrounding the concepts of appraisal requirements and appropriate use of evaluations including automated valuation model (AVM) usage and tools for other research. Originally written and published in 1994 and then revised in 2010, the Guidelines seek to maintain the integrity of appropriate standards of safety, due diligence and proper consideration in real transactions.

“The real estate and mortgage industries have experienced a constant evolution of technology development and legislative change that directly impact how appraisers do business, as well as how the value of residential properties are assessed,” said William E. King, director of valuation initiatives at Veros Real Estate Solutions. “It is critical that professionals have an accurate understanding of the new regulations to ensure compliance so that these industries can continue to function at optimum levels.”

At the core of the white paper is a reminder to readers that the five basic requirements established in the original 1994 Guidelines remain unchanged. The 2010 revisions to these requirements are for the purpose of broadening the knowledge base for industry professionals and increasing compliance. Additionally, the paper reiterates the importance of appraisal and evaluation independence by outlining how regulated institutions can achieve and maintain this independence for their collateral valuation programs.

Click here to download a copy of "Interagency Appraisal & Evaluation Guidelines: Insights into Understanding and Integrating the New Guidance."

Additional Reference: Download Highlights of the 2010 Interagency Appraisal Guidelines

For more information, visit www.veros.com.

Source: National Mortgage Professional and Veros.com

ConsumerWatch ( Video) : Homeowners With Low Appraisals Fight Back

ALAMO (CBS 5) – Jun Yang doesn’t take disappointment sitting down. An appraiser hired by Bank of America pegged the value of Yang’s home in Alamo at $200,000 less than he expected.

Yang then did his own appraisal. The orthopedic surgeon compared the prices of similar homes sold in his area to the value the B of A appraiser assigned to his home.

Source: CBS San Franscisco

 

Real Info, Inc. Launches AVM Plus Property Condition Report to Meet Interagency Guidelines

BUFFALO, N.Y.--(BUSINESS WIRE)--Real Info, Inc. a national technology provider of real estate data and automated valuation models (AVM’s) announced its offering of automated valuation models (AVM’s) with property condition reports designed to meet new regulatory appraisal and evaluation guidelines. Real Info, Inc. has contracted with Cleveland, OH–based, Safeguard Properties, the nation’s largest privately held mortgage field services company, as their provider for third party condition inspection reporting with full photo documentation.

The recently published Download Interagency Appraisal and Evaluation Guidelines recommend that lenders should consider obtaining verification of a property’s current physical condition when utilizing AVMs.  By supplementing its existing AVMs with external property condition reports and subject photos, Real Info, Inc. is assisting lenders in achieving compliance with the new requirements and ensuring accurate results. The process is seamless and provides the end user the opportunity to request a condition report as a stand alone product to accompany any AVM, including Real Info’s i-ValTM and realAssessmentTM reports.

"Property condition reports are conducted by a qualified real estate professional to determine subject location and condition, which include photos along with an AVM. The offering includes tier-based pricing based upon expected turnaround times, giving the user affordable and time sensitive options to meet the demands of their current workload in as fast as two days."

“Safeguard and Real Info share common goals to help improve and stabilize the mortgage industry,” said Alan Jaffa, CEO of Safeguard Properties. “With property condition reports, we are able to meet industry guidelines and improve the quality of property data for lenders.”

“Our collaboration with Safeguard Properties enables lenders to not only meet, but exceed valuation guidelines in as little as two days,” said Jim Kirchmeyer, founder and CEO of Real Info, Inc. “By using a condition report in conjunction with an AVM, any potential issues are caught early in the process which makes an accurate valuation much more credible. By working with the leading provider of inspections, Safeguard understands the importance of up-to-date information so that users can properly verify the physical condition of a property quickly and efficiently.”

Real-Info provides three proprietary AVM's: i-ValTM, realAssessmentTM, and Q-ValTM, which utilize the knowledge database through rules-based, expert system models to arrive at a predicted market value for a particular residential property. The company's licensing partnerships with nationally recognized AVM developers provide an extensive menu of valuation products for clients.

Source Permalink: http://www.businesswire.com/news/home/20110215007239/en/Real-Info-Launches-AVM-Property-Condition-Report.

 

New HUD Portal and Appraiser Newsletter

FHA has started publishing their own appraiser newsletter.  I will begin to monitor their appraiser homepage in an effort to notify our readers when a new edition comes out.

Here is the link to the FHA Roster Appraisers Homepage:

http://portal.hud.gov/hudportal/HUD?src=/groups/appraisers

All FHA appraisers should put this page under their favorites.  It's a quick and easy way to keep up with numerous FHA appraisal requirements including Mortgagee Letters, Handbooks, FAQ's and now their newsletter.

Here is the link to the Winter 2011 Newsletter: http://www.hud.gov/offices/hsg/sfh/appr/newsletter01_13_2011.pdf

Soure: ICAP eMail

 

Barney Frank Interview About Fannie, Freddie Overhaul (Video)

U.S. Representative Barney Frank of Massachusetts, the top Democrat on the House Financial Services Committee, talks about the outlook for agreement on an overhaul of government-owned mortgage companies Fannie Mae and Freddie Mac. Treasury Secretary Timothy F. Geithner will present Congress with three options for reducing the government's role in the nation’s housing finance system and shrinking the footprint of the mortgage companies, according to two people familiar with the plan. Frank talks with Peter Cook on Bloomberg Television's "Street Smart." Bloomberg's Carol Massar also speaks. ...

 

Source: National Mortage Professional