Appraisal Scoop

Illinois "Appraisal Bill" HB 1015 Passes Unanimously

After three years of trying, it finally took a new Governor and a persistent ICAP to get Appraisal Bill - HB1015 passed. The Bill passed in the Senate yesterday unanimously! It will now go to Governor for signature.

This is not a new law, but an amendment to the existing law.  Brian Weaver will be covering many of the changes the new law brings to the appraisal industry in Illinois at ICAP's summer seminar.

You can read the bill as introduced here: http://tinyurl.com/oh9ec4

The following is a brief Synopsis of some of the changes.

Synopsis As Introduced Amends the Real Estate Appraiser Licensing Act of 2002.

• Makes changes throughout the Act that mark the transfer of authority to administer and enforce the Act to the Department of Financial and Professional Regulation (rather than the Office of Banks and Real Estate).
• Makes appraiser licensing/certification MANDATORY in Illinois, rather than voluntary.  Previously, licensing/certification was only mandatory in connection with federally related transactions.  It will now be mandatory for any appraisal service.
• Replaces "associate real estate appraiser" with "associate real estate trainee appraiser" throughout the Act.
• Changes the Real Estate Appraisal Board to the Real Estate Appraisal Administration and Disciplinary Board.
• Provides that a person who violates certain licensure provisions for a second or any subsequent time is guilty of a Class 4 felony.
• Sets forth additional education requirements for licensure under the Act.
• Removes a provision allowing a person who holds a valid license as a licensed real estate appraiser, issued pursuant to a predecessor Act, to convert that license to an associate real estate appraiser license.
• Removes a provision concerning licensed real estate appraiser's licenses issued pursuant to a predecessor Act and provides that an associate real estate trainee appraiser license may not be renewed more than 2 times.
• Adds a provision concerning temporary license suspension.
• Provides that an education provider may use an instructor who is a faculty member in good standing with an accredited college or university or community college or who is an approved appraisal instructor from an appraisal organization that is a member of the Appraisal Foundation. Imposes conditions on any rulemaking authority.
• Makes other changes.
• Repeals a Section concerning identifying a client. Effective Immediately

Source: http://www.ICAPweb.com

Approved Bill (Mark-up) Download IL Real Estate Appraiser Licensing Act HB1015

 

Back To Basics - How Do We Make Appraisals More Reliable?

In the wake of the mortgage meltdown, new policies and requlations aimed at enhancing the reliability of appraisal reports, are being leveled primarily at real estate appraisers. Some of the changes that are being suggested are:

• Creating a so called “middleman” or "firewall" between the appraiser and the mortgage broker that will eliminate pressure and fraud. Hence the HVCC
• I have heard some talk that HUD will increase the licensing requirements for appraisers that want to provide FHA appraisals.
• Increase on the so called education level of the appraiser.
• Increasing license requirements

I would like to remind everyone that appraisers have been around longer than there have been licensing requirements and USPAP. Although there has always been pressure on the appraiser to come to a predetermined value we had this level of a problem before now.

So the question is: How do we make an appraisal more reliable?

Some of the more seasoned appraisers can look at the changes over the years and see that two things have been happening.

• We are getting about the same fee we got 20 years ago
• We are doing less work than we did 20 years ago

What has happen? Have we changed our priorities from being concerned with determining an accurate fair market value to meeting the minimal requirements of USPAP?

Meeting minimal USPAP requirements is just that, meeting minimal requirements.

For this discussion, I propose extending our analysis beyond these minimal requirements, which will increase the reliability and there for the final conclusion.

There are several other factors that I feel are important to recognize and justify this statement.

1. I believe that appraisers that have obtained their license over the 10 years are getting less and less training before they go out on their own. The grapevine mythology of teaching you pupil less than you know continues to escalate the lack of knowledge each proceeding appraiser gets.
2. Meeting minimal standards for providing an appraisal is fine for ethical appraisers but fraudulent appraisers can take advantage of these minimal requirements.
3. The industry has been consumed by fast and cheap services.
4. Appraisal organizations have not stepped up to the plate to substantiate what they teach actually has merit.
5. Politics got involved in something politian’s know nothing about.

Click here to continue reading . . . .

Calculating the Gross Square Footage of Living Area: Simple, Right?!

As appraisers we analyze everything, including how the square footage of a property is measured and calculated.   In most cases, we’re providing an appraisal to meet secondary market guidelines, and most commonly Fannie Mae and Freddie Mac.

So let’s look at how Fannie Mae guidelines define GLA, or Gross Living Area.

XI, 405.05: Gross Living Area (11/01/05)

Then there is Gross Building Area or GBA: Gross Building Area sometimes can be the same as GLA (Gross Living Area) and is especially true for single family homes. However, in a multi-family residence there maybe common areas that would not be considered living areas, but part of the size of the structure.

Fannie Mae Guidelines define GBA or Gross Building Area as:

XI, 405.06: Gross Building Area (11/01/05)

The major difference between single-family GLA and GBA in a multi-family is what is actually used as living space (or rented out GLA) and how big the building is (or GBA).

So that is pretty simple, not tough at all.

Click here to continue reading . . .

Quick Turn-Around Times Will Be Essential When the HVCC Agreement Becomes Active

Author: Aaron O. Thomas, Certified Residential Appraiser.  Aaron is owner of San Diego Appraisers,  a real estate appraisal service provider specializing in residential properties located in the greater San Diego County area. San Diego Appraisers service mortgage brokers, CPAs, lawyers, businesses and homeowners.

The HVCC has been forestalled by numerous months, but it looks as though the agreement will never the less become active. If the agreement goes through and if the emphasis is still focused on appraisal management companies, are you prepared? I am sure that you have read numerous "scare tactic" articles about HVCC, but I assure you this one is helpful.

This will undoubtedly have some implications; the biggest one that I might point out is that we might actually have to deal with the much-despised appraisal management companies. For many of us, there are issues that need to be resolved before putting our energy towards a fruitless venture such as making half as much income by working for AMC's. The first issue obviously is that we would get paid less.

This means we would need to produce more appraisals (faster) in order to make-up for the lost income we are accustomed to making.

Understandably, it seems like most appraisers are not willing to do this; mostly because there is a general belief in the industry that the quality of the appraisal product would diminish from cutting the corners needed in order to close the gap on the turn-around times. Such as: not driving by the comps or calling real estate agents to confirm sales (or simply sitting down and thinking).

First, let me explain that I already felt competition becoming tougher and the fees were declining, almost similar to that of getting financially strangled. Well, that was until I learned about this new little thing called HVCC, and then I felt like I was getting stabbed (yes, in the back).

I initially panicked and then came to my senses and realized that in life, there are always solutions (and no, it is not always fair). I challenged myself to test common beliefs and I have come to other solutions. These solutions may not always be in the form that may be perfect, but in most cases they are solutions that do in fact work.

"I think we can all agree that we need to cut corners in order to survive, but we need to first solve the ethical issue of cutting the wrong corners by not doing the required work needed to provide credible results. And why not consider cutting other corners that would not be so unethical?"

Click here to continue reading . . .

Making the Most of Your Appraisal Continuing Ed Dollars

The following article is by Steven R. Smith, MSREA, MAI, SRA, Smith Realty Advisors,  The opinions expressed are the author's and do not necessarily represent those of the Appraisal Scoop blog.

Somewhere along my path, it dawned on me that if I was going to have to spend money taking classes or seminars to keep a license in force; that it would make sense to spend the money on the ones with the most legs. That is, to spend the money on courses that count for something, like a degree, designation or certification.

Dollar for dollar, the 1-day continuing education (CE) seminar is the most expensive way to accumulate credits. And, for the most part, they do not have legs. That is, they only count for one thing, renewing an appraisal license. Those I see offered in my area range from about $125 to $175 per seven-hour seminar. This translates into $17.86 to $25 per hour of CE credit.

After licensing, I began taking courses, not seminars, courses that counted either for a professional appraisal designation or a degree. Since 1989 when the license law was passed, using my system, I completed two college degrees and two appraisal designations. All for less money than most have spent on CE seminars that did not count except to renew their license.

In my State, a related college course can be approved with a copy of the course description and syllabus. Some of the courses I have taken since finishing my degrees have included Environmental Site Inspections, Subdivision Law, and Environmental Takings. All were approved for 40 hours. Each cost $395 or $9.87 per CE hour.

My most expensive college courses were at a private university graduate school, and cost $1,200 each or $30 per CE hour. More expensive, yes, but in the end, they added up to an MS in Real Estate Appraisal, which lasts forever.

My most expensive appraisal course through the AI was $500 for 40 hours or $12.50 per CE hour.

As this non-recession we are in, continues and housing issues remain in the forefront; it is my notion that those with more skills, and yes, credentials will better survive the next three years.

Click here to continue reading . . .

HUD Goes Paperless! - New On-Line Procedures for Applying for Placement on the FHA Appraiser Roster

On May 5, 2008 FHA plans to launch an online appraiser application process that will replace the existing paper applications. In preparation for the transition, the cut off date for submitting paper applications is April 22, 2008. Applications postmarked or time dated by other delivery services after April 22 will not be processed.

Currently, processing of paper applications takes 7 to 8 weeks from the time the application is received.

Therefore, appraisers are encouraged to wait until May 5 to apply online to the Roster rather than rush to submit a paper application prior to the April 22 cutoff.

Appraisers who have already submitted paper applications do not need to reapply online.

Interested parties are encouraged to check in the coming weeks for updates that will be posted on FHA’s web pages at:

• http://www.hud.gov/groups/appraisers.cfm and
• http://www.hud.gov/offices/hsg/sfh/appr/apr_rost.cfm

If you have questions about the application process, please call 202-402-2041and leave a message stating your name, phone number and a brief message with your question.

If you are currently on the FHA Appraiser Roster and have a question, please spell your last name and clearly state your license or certification number along with your message. Calls are answered in the order in which they are received.

Thanks to Ann O'Rourke of Appraisal Today for the story tip!

• For additional FHA/HUD stories - Click Here.
• Related Newsletter from OurAppraisal.com - Click Here

2008 National Uniform Licensing and Certification Examinations

The Appraisal Foundation has published some very helpful information on their website (click here) regarding the effectiveness of the examinations used for state licensing and certification purposes.

The AQB made minor enhancements to the Criteria over the years, but the revisions that will become effective on January 1, 2008, significantly increase the hours and the specificity of education required to become a state licensed or certified appraiser. Appraisal education, beginning in 2008, will require, for the first time that the total hours be attributable to specific topic areas, known as a Required Core Curriculum. And each educational topic area in the Required Core Curriculum requires successful completion of an exam.

Since specific appraisal topics will be taught and tested within the education requirement, the 2008 state licensing and certification examinations can focus on a candidate’s ability to apply the knowledge learned rather than simply testing a candidate’s ability to recall information learned in coursework.

State appraiser licensing and certification examinations offered prior to January 1, 2008, essentially test a candidate’s ability to recall information learned in qualifying educational offerings. The National Uniform Licensing and Certification Examinations offered as of January 1, 2008, will test a candidate’s ability to apply the knowledge (and possibly experience) they have obtained.

This difference may be best illustrated by looking at examples of the type of questions that could appear under each exam (Click Here)

Runt Rants Rejected? Why?! - Musings

Rejected for the first time!  My heartless editor couldn't determine what I was trying to say when I first sent him the post below, so he gave the musing back to me and suggested I add clarification! Now how's that for an example of your favorite blog looking out for you interests!?  Appraisal Scoop won't allow your precious time to be wasted.  You should make Appraisal Scoop your daily must read!

Biding time while waiting to leave for an annual golf game with old friends at a particularly scenic course...The Falls in New Ulm.

Katherine Hepburn is a favorite of mine.  Always admired the lady for her independent spirit, her willingness to to things her own way.  That's what we entrepreneurs are....independent spirits.

An article in the NY Times today on some papers of her's being cataloged.  Read here.

Here's the anecdote that caught my eye, capsulizing why I like the lady. 

"There was a speech Hepburn delivered after a May 1970 performance asking for a moment of silence in memory of the four students shot by Ohio National Guardsmen at Kent State University: "Now, you may call them rebels or rabble rousers or anything you please," Hepburn wrote. "Nevertheless, they were our kids and our responsibility. Our generation are responsible, and we must take time to pause and reflect and do something." After asking for a moment of silence, she added, "If any of you wish to leave, you are free to do so, for if you do, I know you will still think about it."

Comics are on my daily reading list. They are today's poetry.  Brief, concise, points made to make you think and chuckle.

I like ladies of class.  One new edition to my list is Cheryl Hines, the female lead in the HBO series "Curb Your Enthusiasm".  Came across this interview this morning.  Now I know why she caught my eye....

Each of these little references have, in my opinion, relevance to your appraisal business, lessons to learn to make your business better.  I'll leave it to you to pick them up.

......................................................................................................................................

Astute readers will note a time lapse in the musings above.  There's a reason for that.

I was rejected...click here to continue reading:

State Appraisal Experience Enforcement: ASC Policy Statement 10G

Earlier this year the ASC, (Appraisal Sub Committee), ordered all states to comply with their Policy Statement 10: The Scope of State Agency Enforcement Programs.  This statement requires every state to perform a work product review on every licensee issued a Certified Residential or Certified General license since January 1, 2005.  Download ASC Policy Statement Paragraph 10G.pdf (39.3K)

T.J. McCarthy of the Illinois Coalition of Appraisal Professionals (ICAP) said: "Needless to say, this is a huge task for the IL Appraisal Division of the Department of Professional Regulation."

In an effort to facilitate the process for people upgrading before the January 1, 2008 AQB licensing criteria change, the state of IL will only be auditing work product on new applications for certified licenses from now until December 31, 2007.

Illinois will begin the process of reviewing the work product for all licensees issued a Certified Residential or Certified General license from January 2005 through August 2007 after the first of the year.

Illinois began sending out audit letters on new applications in early August.  The audit letter directs the applicant to send in copies of three appraisals selected by the state of IL from their experience log.

T.J. McCarthy (ICAP) offers these tips:

• Send in a complete copy of the report including all addenda.
• The reports need to have a signed certification page.
• DO NOT attempt to make changes to the reports in an effort to clean them up. It has to be a true copy.
• Respond to the state within the requested two week time frame.
• DO NOT send in your workfile.
• The appraisals have to meet USPAP reporting requirements and be compliant with Illinois Appraisal Law and the Administrative Rules.

Based on the audit, the state will either;

1. approve your application, defer your application pending additional clarification of the work product submitted,
2. defer your application pending review of additional work product selected from your log by the state, or
3. deny your application for non compliance.

The IL Board is working on policies and parameters for an applicant to reapply to the state if their initial application is denied based on non compliance of the applicants work product. In the meantime, Brian Weaver has posted a Q & A on the ILDPR website to help answer many of the questions appraisers have been asking regarding the audit.

You can read the Illinois Q & A here:  The Illinois Appraisal Experience Audit

Click here for the complete ASC document: Letter to All States Transmitting ASC Policy Statement Amendment re Experience Validation and USPAP Compliance, Comment Summary, and Policy Statement 10 G 08.13.07

Appraisal Report Writing: Finding your own style!

The other day, in response to a question on the WinTOTAL Users Group (WTUG) forum, I posted a Jing video showing how I build a text addendum in my residential appraisal reports.  Critical to that process is a collection of small paragraphs that can be selected on-the-fly and applied when needed.  That process eliminates the one-size-fits-all boilerplate addendum that is so common in residential form reports.

Having seen that video, one of the forum members contacted me privately.  Here's part of his question:

As I watched your Jing video I was especially impressed with the amount of comments you have acquired over time.  I wanted to ask if it would be possible to review or look at some of the comments you have come up with for different situations.  This would not be a situation of simply copying your comments but I would mainly use them as an aid to help inspire me to come up with good comments to help fit my particular area and market.  As a junior appraiser I think I would find it beneficial to review good comments from an honest and ethical appraiser with verbiage that not only sounds professional but adequately explains certain situations.

My response:  YOU my friend have a WONDERFUL writing style . . . .and honestly I wouldn’t want to ruin it with my old-timey appraisal writing style! 

Rather then just doing a “dump” of my text comments let me offer these suggestions (it’s what I do) - Click here.