Appraisal Scoop

Appraisal Foundation says appraisers are NOT responsible for altered reports!

The September 2007 USPAP Q&A has been issued by the Appraisal Foundation and covers the following questions:  Download September 2007 USPAP Q&A pdf (29.8K)

• Can I authorize someone else to sign an appraisal report for me?
• Is an appraiser required to use software that allows the user to authenticate the appraiser's signature?
• Does giving someone my signature password give up "sole personal control"?
• If a software company creates signature file for use with their software, does that give up "sole personal control" of my signature?
• If a signature is stolen, am I in violation of USPAP for failing to have "sole personal control of my signature?

I'm not sure that I agree with most of the rationale of these responses but it's the last Q&A that really baffles me?!   

Question:  When I transmit my residential form report electronically I have heard that some of my clients are opening the appraisal file and removing my signature file, reformatting the data, and in other ways altering my appraisal report for the client’s use. What are my responsibilities under USPAP if I know or believe such actions are occurring after my report is delivered to the client?

Response:  USPAP does not specifically address who “owns” an appraisal report, the research necessary to produce that report or the report’s supporting documentation. Once an appraisal report is delivered to a client, a client may do a variety of things, including redacting or removing the appraiser’s signature, or converting data from the report into a format more functional to the client, etc. Once the appraisal report has been transmitted to the client, USPAP does not place further responsibility on the appraiser for the client’s use of that report.

Click here to Download September 2007 USPAP Q&A pdf (29.8K) and see if YOU agree with the latest Q&A!

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

Measuring Supportable Demand for Residential Properties

AUTHOR: Steven R. Smith, MSREA, MAI, SRA, Smith Realty Advisors, 936 San Jacinto St., Redlands, CA 92373, Real Estate Appraisals, Consulting, Expert Testimony, Forensic Reviews, Fraud Research and Analysis, Litigation Support, Fraud Training  909-798-8855, fax: 909-798-0139

In January of this year, Blanche Evans, editor of Realty Times, published a book entitled "Booms, Bubbles and Busts" which I purchased and read and challenged her about.  Her article talks about the concept of a Rolling Boom.   In that concept, recessions were dismissed, instead what happens is the boom simply rolls along to some other part of the county.

In the majority of the Metro Markets in the U.S. today, housing prices are measurably declining, even though they are being propped up by the stilts of concessions and cash back deals. Deduct 5% to 20% and in net terms (net to the Seller) they are going down.

The Case/Shiller graph of the U.S. Housing Market shows a downturn since the first Quarter of 2007 and continuing.  Projections are now floating that it may be 2011 before we know we are out of the woods. Standard & Poor's - S&P/Case-Shiller® Home Price Indices

Those areas that lagged way behind, that never experienced the 30-50% price increases per year, may still be going up.  For example, Rock, WI, where prices are still going up and where a single-family home can be purchased for less than $100/SF.

Some fundamental elements of what creates housing value, that may not be taught in pre-licensing or continuing education courses, are household incomes, market segmentation and population growth.

As housing markets across the country have gone from hot to cold, many appraisers are coming up with higher appraised values than the sales price of their subjects.

If the appraiser has not analyzed the market and verified their data, the adjustments made could be wrong and result in a misleading report.  Not on purpose, just out of a lack of knowledge or understanding.

This could lead to liabilities, civil for sure, criminal . . . probably not. The element of intent needs to be proven before fraud charges are brought. One might not intentionally mislead, but could do so out of a lack of research, knowledge or understanding about the Housing Market.

Market Segmentation:

In every market area, there are different segments of the housing stock and of the buyers for each.  While the supply side of the market may have come to a halt in many areas, with construction of new tracts of homes and condo's ceasing, there is a certain inventory level which can be analyzed by segments.

Knowing the overall inventory of a given market and knowing that of each segments, is a good thing for the Licensed Professional Appraiser. This is especially true when they are providing information for the reliance of others, upon which financial decisions will be made.

In urban markets where there is an MLS system, the appraiser can check the inventory levels by comparing the current inventory to the number of sales in the past month, and by the average number of sales per month YTD. Dividing the big number by the little one, will result in the number of months worth of inventory.

Click below to continue reading . . .

Sen. Clinton to Introduce Mortgage Reform Bill

According to the American Banker's article:  Sen. Clinton to Introduce Mortgage Reform Bill

WASHINGTON — Sen. Hillary Clinton, the frontrunner for the Democratic presidential nomination, is expected to introduce a mortgage reform bill soon that tightens underwriting standards, enhances broker regulation, and sets aside more than $2 billion towards foreclosure prevention, affordable housing and mortgage fraud prosecution.

"The bill calls for a national broker registry and requires brokers to enhance disclosures, including detailing to borrowers any fees and how a loan rate and terms affect broker compensation."

It would also, " . . .set aside $20 million to support additional employment of Federal Bureau of Investigations agents and Department of Justice prosecutors to coordinate mortgage fraud prosecutions with state attorney generals."

Click here to download the Clinton Mortgage Bill.pdf (52.1K)

Marketing To Your Existing Client Base - Keys To Business Growth And Profitability

"There are only two ways to grow a business - marketing and innovation. Everything else is a cost." (Peter Drucker)

The only real opportunity most of us have to gain competitive advantage and grow our business is in marketing - there is little opportunity elsewhere.

Technology and innovation are great, but are worthless unless you can communicate the advantages they bring to your potential clients via a sound marketing program.

In marketing there is enormous opportunity to leverage your efforts. It is the one place where you truly still have infinite leverage with almost no downside risk.

Everyone does some level of advertising or marketing - it could be sending letters, calling by phone or visiting in person existing clients or new potential clients, or even in the form of making a charitable donation that includes a journal advertisement.

Think about it for a moment . . .

Doesn't it cost exactly the same amount of money (and/or time/effort) to produce and/or place an ad, letter, etc., regardless of whether that ad or letter, etc., returns one response, ten responses, one hundred responses or one thousand responses?

When you bring in a new client, it costs you the very same amount of effort, time and expense whether the new client brought in by that ad or letter, etc., orders an appraisal once, once a month, once a week, once a day or ten times a day.

You must understand that you have now, and have always had, the ability as well as the responsibility to yourself and all of those who have latched their hopes and aspirations to your star to make every action, every opportunity, every cost you expend in advertising or marketing, every initiative you undertake to produce for your efforts to reap the maximum potential return on your investment of time and money with significantly multiplied results.  Then, to have those results multiplied again and again by simply mastering how to apply easily acquired marketing skills as well as possibly altering the geometry of your practice.

The leverage inherent in marketing can allow you to become exponential in both thought and action.

Technology can certainly make you more effective, but only IF you have the work to which you can apply that technology. The real deal is learning how to effectively market yourself.  Marketing can and will, in the long run set you free.  The Appraiser does not exist who fully maximizes the real potential inherent in his/her client base.

YOUR GREATEST ASSET - YOUR CLIENTS!!

Most appraisers spend most of their marketing/advertising money, time and effort chasing after elusive new clients, while they essentially ignore their faithful client base. Sometimes new marketing efforts directed at strangers will inadvertently find their way (sometimes with a little help from your wonderful competitors) to your clients. You should always consider the "what if my best client were to see this" scenario before you launch a new effort.

Click below to continue reading . . .

H.R. 2535 "Homebuyer's Protection Act of 2007" Proposes Changes To FIRREA - Requires Appraisals On ALL "Real Estate Related Financial Transactions"!

Rep Paul W. Hodes introduced House Bill H.R.3535 to create the Homebuyer's Protection Act of 2007 on 9/14/2007:

To amend the Truth in Lending Act to require escrow accounts for the payment of property taxes and insurance for all subprime loans, and to expand the coverage of the appraisal requirements under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, and for other purposes.

The second section of the bill is MOST important to appraisers!  It would significantly change the language in FIRREA regarding when appraisals are required .

• The current language only requires appraisals on `federally related transactions'. 
• The proposed language requires appraisals on ALL `real estate related financial transactions'. 

What could that mean for AVM and BPO products?  This bill is in the first step in the legislative process. Introduced bills go first to committees that deliberate, investigate, and revise them before they go to general debate. The majority of bills never make it out of committee.

But if it were to pass . . .Would that mean that ALL real estate transactions would have to be performed by a licensed appraiser?  What do you think the chances are that a bill like this will make it out of committee?

Here's a clip from Rep. Hodes website:

This bill amends the Truth In Lending Act, or TILA, to ensure that all subprime loans have an escrow for the life of the loan, like prime loans. Because subprime loans do not require escrow accounts, borrowers can be hit with huge tax bills at the end of the year, contributing to foreclosures.

The second part of the bill would require a licensed appraiser to appraise all residential homes when a consumer seeks a mortgage. Currently, licensed appraisers are only required when a federally regulated bank originates the loan. However, with the increase in non-bank mortgages (like warehouse lenders) some loans are not "federally related" and therefore do not require a licensed appraiser.

Without an accurate appraisal, a homeowner would not know the true value of their home and could be taxed at a higher rate by the city. Additionally, if the mortgage is later purchased by an investor on the secondary market, that purchaser would not know the true value of the home either. If a foreclosure occurs, the investor who purchased the debt (mortgage) would be unable to recoup their whole loss since the property was appraised at a higher value than it was actually worth.

The bill would change federal law to require a licensed appraiser in all real estate transactions by amending Financial Institutions Reforms, Recovery, and Enforcement Act 1989, also known as FIRREA. 

Click here to continue reading . .

The Appraisal Foundation Celebrates 20 Years of Setting Professionalism Standards

The Appraisal Foundation, a congressionally-authorized nonprofit organization that fosters professionalism in the valuation profession by setting qualifications and standards, is celebrating its 20-year anniversary this year.

“It is exciting to see how far we have come as an organization that was originally the brain child of a few appraisal groups that wanted a stronger professional reputation as well as a way of sharing ideas with each other,” said David S. Bunton, president of The Foundation. “We have representation from all the different specialties in the appraisal profession and that gives us a lot of valuable resources from which to draw.”

The Foundation was started by eight valuation organizations to promote professionalism in appraising. Now, there are more than 110 affiliate organizations that include professional societies representing appraisers and users of appraisal services, government agencies, corporations with an interest in valuation and many organizations outside the United States.

In 1989 Congress authorized The Foundation as the source of real property standards and qualifications. Since then, the U.S. government has considered The Foundation an independent, objective source of valuation expertise. Representatives from The Foundation have testified during congressional hearings and provided evaluations of the appraisal operations of six government agencies.

Declining Market, Sales Concessions, Extended Marketing Times, and Price Ranges: Guidance From RELS

RELS Valuation's Quality Assurance Department sent out a notification to its appraisers today, and the letter promply hit some of the larger appraisal forums.  According to their memo:

Over the past year or so Valuation Support Services (VSS) has become aware of numerous "problem" markets and we have concluded that VSS must develop guidelines to address "Declining Markets" and markets with an "Over Supply" of housing inventory. While both of these topics can be discussed independently, it is believed that the discussion is best approached by jointly discussing the topics.

Their memo discusses these major topics:

• Industry Tools and Data to Monitor Current Market Conditions
• Sales Concessions
• Extended Marketing Times
• Comparable Sales Price Range and Number of Listings

Click below to continue reading . . .

Flip Video: Simple Video Capture and Sharing - Blogging, Virtual Tours, VideoCasting

Are you looking for a simple way to record video field notes, a marketing Videocast, or add a video to your blog?  This may be the device for you.  The price is right ($150-$180) and it's bundled with a nice collection of built-in software.

Pure Digital Technologies, on Sept. 12, introduced the Flip Video™ Ultra Series.  This new category of camcorder that allows one to instantly capture, edit and share video.

The Flip Video Ultra Series is available nationwide starting September 12, 2007. The 60-minute (2GB) model is priced at $179.99, while the 30-minute (1GB) model is $149.99. Flip Video accessories include a pouch, tripod, action mount, and USB extension cables.

The built-in software allows people to share videos as easily as they would digital photos. In addition to instant emailing, the program allows videos to be uploaded directly to popular Internet video sharing sites, including YouTube. Creative users can also edit their clips, make custom movie mixes, add their own music, and capture still photos from video.

The Flip Video Ultra Series incorporates a 1.5 inch transflective, no-glare display screen for clear viewing in even the brightest sunlight, next-generation video processing, and increased on-board memory (2 GB of for the 60-minute model and 1 GB for the 30-minute model).

Features include:

• One-touch recording with 2x digital zoom
• Instant on-camera playback and delete
• High-speed video sharing from any PC or Mac
• One-click emailing of videos and video greeting cards
• One-click emailing of videos and video greeting cards
• Custom editing of movie mixes, with the option to set them to your own music
• Capture of still photos from video
• Built-in tripod mount
• Convenient DVD processing option at over 9,400 one hour labs nationwide

Additional Resources:

The Wall Street Journal
September 12, 2007
An Easier Way to Make and Share Videos

USA Today
September 12, 2007
Fun Flip wows camcorder crowd

Video: Real Estate Appraisal - Excel Regression Analysis Add-on Module (Beta)

The concept of regression might sound strange because the term is normally associated with movement backward, whereas in the world of statistics, regression is often used to predict the future. Simply put, regression is a statistical technique that finds a mathematical expression that best describes a set of data.

David Braun's excellent article Market Modeling and the Real Property Appraiser on a la mode's Labs site, part I of II, has garnered a lot of interest and feedback. Included with the article is a downloadable Excel utility (please right click and download to your computer to use) and an instruction sheet.

David has also produced a new three-part video tutorial that can be viewed right here. Each part is around 5-6 minutes long.

Part 1 of the introduction to Regression Analysis, starts off with MLS data exported to a standard Excel spreadsheet.  Once the appraiser has the download, he or she, would open up David's application to import the data into a "Raw Sales" workbook and then "Scrub" the data in preparation for analysis. 

The appraiser can then designate which sales they want to work with and which columns of property characteristics.  Once that is done, you load the sheet for analysis and manually clean up any blank fields.  The model will help identify them if any are missed. 

Part 2 will pickup with running the model.

Click here to continue  . . . .