Appraisal Scoop

Runt Rants - Dog Tag Follow Up

A very touching thing happened yesterday.  I was visiting our office in the morning and was handed a package that came in the mail. I recognized the name.  Opened the envelope to find a note of appreciation for my dog tags column a week or more ago on Appraisal Scoop.

Accompanying the note was a dog tag. This a commerative one recognizing the son of the fellow who sent it to me. A Sergeant killed in action in Iraq. The note and the gift brought tears to my eyes.

This very special dog tag is now hanging on the chain with mine, and will be worn each holiday honoring our service men and women for as long as I'm around. They serve so we may enjoy our freedom.

I wish I had thought of this idea years ago....a simple thing for veterans to do...and honors those present and past. I think I may post this Dog Tags column for each national holiday.

Such a simple thing to do, yet I suspect it might resonate with the veterans. We don't brag on that service, but we do honor it privately...at least most of us do. Kinda like the yellow ribbon idea.

Thank you for the gift and the honor Greg.

The author is the owner of Acorn Appraisal Associates, a 22 year old firm offering a wide range of quality appraisal services to the Financial and Business Communities. [email protected]

I have the right to remain silent. Anything I say will be misquoted and used against me

Editor's note:  I received a Christmas Poem from Greg and thought I'd share that (and a portion of his note) with everyone too!

Here's hoping that each of you, and all your loved ones, have the Merriest of Christmas', and the Happiest and Most Prosperous of New Years! 

I have attached a Christmas Poem that makes the internet rounds each year.  If you haven't seen it, please take the time to read it, and a few minutes to think about it.  Truer thoughts were never spoken.

If you have seen it, great!  Read it again and also spend a few minutes.  They all deserve a few contemplative minutes of our time.  Download A_Christmas_Poem.doc

LSI Memo: Documenting Declining Markets With Listings/Pendings

MEMO FROM CHIEF APPRAISER - LSI

Subject: Policy Change 

Date: 12/18/2007

DOCUMENTING DECLINING MARKETS WITH LISTINGS/PENDINGS

LSI Quality Assurance has been aware for some time that appraisers are often mistaken or confused about the correct handling of the market direction (increasing, stable or declining) of the neighborhood. It is critical that appraisers not mischaracterize the submarket direction. The best possible way to ascertain the direction is with analyzed data from the neighborhood within your report.

Please remember that in a declining market, the listings, adjusted for negotiations, will be a strong indicator of value because the Principle of Substitution suggests that the competing listings create a "ceiling" above which the value cannot go. Thus, in such a market, when listings are lower than recent historical sales, reconciling toward listings, supported by negative time adjustments in the closed sales is appropriate and correct.

This step has already been required in most markets known to be in decline for some time now by several national clients. However, in other markets, while market's driving forces have deteriorated (supply/demand, DOM, interest rates, and job market), it is not clear that the market has actually begun to decline.

One of the surest ways to know whether a market is declining is the use of listings or pending sales which (as has been suggested by many experts) the listing is the "canary in the mineshaft", or "early warning signal", that a market direction reversal has happened.

In questionable markets, appraisers have been lax about employing listings or pending sales, not employing the very technique that demonstrates the market has indeed turned.

They may mischaracterize the neighborhood as stable, a USPAP Standard Rule 1-1 error of omission.

Given this gap in the analysis, LSI has decided that until further notice, to assure appraisers are correctly gauging the market direction, it will require the analysis of a current offerings and pendings on all appraisals. This analysis is vital to proving the market direction statements are correct and consistent.

Click here to continue reading . . .

Source: Download LSI_Documenting_Declining_Markets_With_Listings_Pendings.pdf

Connecting the Dots…The Importance of Timely and Effective Suspicious Activity Reports

There is often a financial connection to crime, and Suspicious Activity Reports (SARs) play a critical role in exposing the financial links to illicit activities and fighting financial crimes. For the suspicious activity reporting system to be effective, SARs must be complete, accurate, and timely.

Download Connecting_the_Dots_SARs.pdf

This article highlights the importance of SARs, provides examples of how various agencies use SARs, discusses common deficiencies in SAR filings, and provides tips on what makes an effective SAR.

Source: Connecting the Dots…The Importance of Timely and Effective Suspicious Activity Reports

Fannie Mae Announcement 07-22: Maximum Financing in Declining Markets

Marianne E. Sullivan, Sr. VP of Fannie Mae's Single-Family Credit Polity and Risk Management division, issued a Selling Guide Announcement 07-22 on December 5, 2007. 

"Current home price trends indicate that home values continue to decline in many markets across the country. As a result, and based on our continued monitoring of loan performance, Fannie Mae is reinstating a policy to restrict the maximum loan-to-value (LTV) ratio and combined loan-to-value (CLTV) ratio for properties located within a declining market to five percentage points less than the maximum permitted for the selected mortgage product."

"The reinstatement of the maximum financing policy and the other changes outlined in this Announcement are necessary in light of current market conditions. These policies are effective for all loans delivered with application dates on or after January 15, 2008."

This Announcement:

• Establishes restrictions on the maximum financing for properties located in declining markets;
• Encourages lenders to employ additional tools and processes to validate housing trends; and
• Establishes criteria for exceptions to the maximum financing policy.

Fannie Mae says:

Fannie Mae strongly encourages lenders to use supplemental sources and tools to independently assess current housing trends, unless the appraisal indicates that the subject property is located within a declining market.

When the appraisal notes that the subject property is in a declining market, the maximum financing policy must be applied. 

Fannie Mae strongly urges lenders to implement processes and apply supplemental sources and tools to validate current housing trends and not rely solely on the information reflected in the appraisal.

Download 07_22_FNMA_Max_Financing_Declining_Market.pdf

Click here for additional excerpts . . .

Outside the Boxes: Part 3 "Down Cycling" - Trends at the neighborhood and subject property level

In part two, we looked at cycles and trends in the collective housing market. In part three, we'll down shift to the neighborhood and subject property to answer questions in the "one unit housing trends." 

"Down-cycling" – trends at the neighborhood and subject property level.

While providing a "snapshot" of the market and economy at the community or regional level is important for the reader to gain perspective of the housing market and factors influencing it, FNMA is asking for neighborhood trends and therefore it's important to understand the difference between a neighborhood and a market area

Simply stated, a neighborhood is a group of complimentary land uses that are influenced by the four forces (social, economic, governmental and environmental) in the same way. The neighborhood can be comprised of a single subdivision or a grouping of subdivisions that are similar in price range, physical character, profiles of residents, etc.

In contrast to the neighborhood, the market area is a collection of neighborhoods that may have similar governmental influences, but often have varying economic and social characteristics. Since the URAR is "neighborhood specific" it is important that the neighborhood is clearly defined and that the characteristics, one unit housing trends, land uses, price ranges, etc., are based on the neighborhood and not the "market area".

In a fluctuating market you can get mixed signals at the market area and neighborhood levels. There can be a shortage of entry-level housing (with increasing prices) while higher-priced properties are experiencing declining price points?  Clarifying the trends is critical to advising the client of the risks inherent in the neighborhood and the subject property.   

Making your points – plotting data

Analyzing sales data over the "short real estate cycle" (SREC - 3 to 6 years) for the neighborhood will give you a good read on neighborhood trends, that can be compared to market area and regional trends. The key is to clean the data (remove concessions, non-market sales, etc.) and observe shifts in values within the neighborhood.

Click here to continue reading . . .

FNC Releases Automated Appraisal Tool - Collateral Headquarters

According to Broker Universe:  Oxford, Miss.-based FNC Inc. has announced the release of Collateral Headquarters as a desktop tool to enable regional and community lenders and appraisal management companies to automate appraisal ordering, assignment, tracking, and review from a single centralized platform.

The system captures best practices in a user-configurable out-of-the-box solution that offers to cut turn times, lower costs, address regulatory compliance, and track performance.  Collateral Headquarters also gives lenders an administrative dashboard.

Users can assign appraisals automatically to their pre-approved list of vendors; manage jobs by vendor, status, or due date; use a time-and-date stamped record that tracks the progress of each loan in production; and immediately verify completed orders.

An FNC spokesman said inquiries about the new service have largely come from mortgage industry players eager to head off regulatory scrutiny along the lines of the New York lawsuit alleging that First American's eAppraiseIT unit inflated appraisals on behalf of Washington Mutual.

Click here to see how it works . . .

Video: Lighthearted look at "misleading" property descriptions

Need a little break on a Friday?  Take a couple of minutes to watch this short video of a property inspection and how it MIGHT be described in a sale flyer or inflated appraisal report.  Thanks to Steve Smith, MAI for sending me this video!   Download FixerUpperVideo.wmv

VA Circular 26-07-4: Valuing Properties During Periods of Declining Market

Facing a declining housing market, the U.S. Department of Veterans Affairs (VA) distributed a document (Thursday, December 06, 2007) reaffirming that the agency requires appraisals at fair market value for properties used as security for a VA loan.  Download Circular 26-07-4 -Valuing Properties During Periods of Declining Market.pdf

In a document signed by Judith Caden, Director of the VA's Loan Guaranty Service, the VA provides the following guidance to appraisers (Chapter 11, Section 8, Lender's Handbook):

A summary of market trend indicators to consider when performing an appraisal is provided below.

1. Determine whether sales or financing concessions are being offered in the subject property’s market area. If so, determine the effect on the sales price of comparable properties.
2. Consider the supply and demand for available housing in the subject market and compare the average listing price to the sales price ratio in the subject market area.
3. Consider the marketing time trend (increasing or decreasing) in the subject marketing area.
4. Analyze sales listings, contract offers, and unsettled sales to determine if market conditions changed between the date each comparable sold and the date of the subject property appraisal. Provide an addendum if a significant market transition is indicated due to changes in employment opportunity, housing supply/demand, average marketing time, seller concessions, etc. However, appraisers should certify in the appraisal report,

“I have considered relevant competitive listings/contract offerings in performing this appraisal, and any trend indicated by that data is supported by the listings/offering information included in this report.”

General Guidance: Certain areas around the country are experiencing what is frequently referred to as a "declining market." We recognize that some lenders may object to receiving appraisal reports that contain comments or analyses of negative market conditions and, consequently, may request that such items be removed. VA expects appraisal reports to contain negative comments when they accurately reflect market conditions.

Be assured that VA has no objection to guaranteeing a VA loan in a declining market area as long as the appraiser has properly documented the facts of the case. Furthermore, secondary market sources have indicated that they will purchase VA loans in declining markets as long as the appraisal analysis is proper and complete.

Download Circular 26-07-4 -Valuing Properties During Periods of Declining Market.pdf

It's CONTAGIOUS! 10 Tips For Getting Started With VIRAL Appraiser Marketing

What's YOUR "Marketing Plan"?  If it's like most appraisers', it's "aggressively waiting by the telephone or fax machine waiting for it to ring!"   

A few months back (click here) I announced that I planned to take a look at many of the viral marketing options that appraisers have available today.   Those options range from simple eMail forums and blogging to targeted newsletters, videos, and podcasting.  Today's post is a basic list of some of the topics that I hope to discuss in more detail over the coming year.   I hope you'll follow this series and join in with YOUR "Success Stories"!

1. Offer free services and information delivered via email

Free email newsletters, market reports and notifications are a great opt-in way of staying in contact with clients and property owners.  If you're like me, you've probably set up a folder or two in Outlook just to save quality newsletters from Appraisal Today, Realty Times, and Inman News.  Do you think your clients do that too?  Sure they do!  Wouldn't it be great if they were saving, and passing on, YOUR newsletter?

2. Feature free personalized RSS subscriptions

RSS stands for Really Simple Syndication.  As you're reading blogs and surfing websites (Yahoo!® News, Inman®, The New York Times®, Appraisal Scoop) you've probably seen the orange RSS logo and wondered what the heck is that? For most of us, RSS allows us to pull their content into our website or blog. 

Have you ever considered syndicating your web site's or blog's content?  What if you could push your news stories, blog posts, podcasts, and video blogs to other appraisal, lender, and vendor websites automatically?  They'd benefit because they'd always have highly targeted, current content.  You'll win because RSS keeps your company's name in front of clients.   Click here for a How-To article on RSS 

RSS feeds will keep your visitors on your site longer, and will keep them coming back.  Plus, if you have a specialty (divorce, tax appeal, pre-listing) your RSS feed updates will remind visitors automatically that you’re the unrivaled expert in your area. 

3. Use eMail and eMail forums to spread the word

Your eMails can carry a consistent message about you and your commitment to the profession and your community.  Always, always, always sign your eMail correspondence with your contact information and Web or blog URL!

You want readers of your email to be just one-click away from being able to place and order with you.  Learn to use the hyperlink feature of Outlook so that readers can easily get follow-up information on topics they may not understand or need additional information on. 

If you have a page or document that you frequently send out, consider uploading it to the Web, rather than "attaching" it to your eMail.  They'll appreciate the ability to share that link and not having their yet another attachment filling up their hard drive.  Example: Comp Checks

4. "Lunch & Learn" Presentations

My friend and Appraisal Scoop author, Patrick Egger, is a master of the "Lunch & Learn" program for educating real estate professionals and keeping them focused on his message.  If you have a favorite topic that you're an authority on, let your clients know that you're available to speak to their group. 

Realtors in my area are a fantastic source of referrals and probably in your area too.  Contact the lead broker and offer to put on a 20-30 minute talk on "How to accurately measure a home", "How to prepare better BPO's" or "How to use the County GIS data".  You'll become an known as an expert and will likely be on their short-list when asked - "Who should I get to appraise my home?"

Click here to continue reading . . .

Video: Protect Yourself From Mortgage Fraud - Freddie Mac