Appraisal Scoop

Value of White House Drops by More Than $15 Million

It just goes to show you, not even the president is immune to the real-estate slump.

According to Cindy Perman, writer for the CNBC Blog,

"As analysts slice, dice, mince and wedge the president's first year in office, Zillow.com decided to take a look at his property's performance, and found that the value of 1600 Pennsylvania Avenue has dropped by $15.6 million, or 5.1 percent in the past year."

Click here to view the Zillow Listing!

Thanks to Sue Camp, Bloomington, IL for the source article!

Disclosing Appraisal Services For Prior 3 Years - See Changes in the January 2010 USPAP Q&A

The Appraisal Standards Board (ASB) has issued their January 2010 USPAP Q&A

Download January 2010 USPAP QA.pdf

2010-01: ETHICS RULE – CONDUCT
Question: If I have appraised a property multiple times within the previous three years, do I have to disclose the number of appraisal services? (e.g., “I have appraised the subject property three times during the previous three years.”)

2010-02: ETHICS RULE – CONDUCT
Question: If I have performed a service other than appraisal practice, such as acting as a general contractor within the prior three years, do I have to describe the specific service or merely state a service was performed?

2010-03: ETHICS RULE – CONDUCT
Question: The Comment to the Conduct section of the ETHICS RULE states, in part, “If an appraiser has agreed with a client not to disclose that he or she has appraised a property, the appraiser must decline all subsequent assignments that fall within the three-year period.” Does this really mean that the appraiser could not be engaged by this same client, on this property, within the three-year period?

2010-04: ETHICS RULE – CONDUCT
Question: I am a staff appraiser for a company and only complete appraisals for my employer’s (the company’s) internal use. Am I required to inform the company that I have previously completed an appraisal within the three-year period when the company is already aware of it?

2010-05: ETHICS RULE – CONDUCT
Question: I am aware of the new disclosure requirements in the Conduct section of the ETHICS RULE for the 2010-11 edition of USPAP that requires me to disclose any services I performed regarding the subject property within the prior three years. If I have not performed any such services, am I required to make that disclosure as well?

Click here for the answers:  Download January 2010 USPAP Q&A

See Also - Five changes in the 2010-2011 USPAP you should know about

Selling Prices Searching For Value

The January 11, 2009 USA Today article "Critics say new home-appraisal rules drive down values" by Stephanie Armour says,

"But organizations such as the National Association of Realtors (NAR) and the Appraisal Institute say the change, along with other efforts to reform the appraisal industry, is hurting consumers and appraisers.

They say new rules that swept through the appraisal industry in 2009 — rules designed to ensure appraisals are impartial — are resulting in excessively low home values, because chosen appraisers aren't as experienced or as familiar with local markets. They also say the appraisers take more time, causing delays in getting appraisals done."

In response, Jim Plante, Certified General Appraiser from Jackson, TN has provided Appraisal Scoop with this response:

This article mirrors much of the sentiment of a blog article by an Atlanta broker named Tracy Anderson in July, 2009, about the adverse effects of the HVCC on home values. Find it here.

The Memphis Chapter of the TIAAO asked our AI chapter to provide a speaker to address this article at their chapter meeting, and I volunteered.

In contrast to Tracy Anderson's blog article, this one deals with FHA's adoption in principle of several of HVCC's provisions. One thing that I emphasized about the HVCC article was that at present, what one is seeing is selling prices searching for value.

Four things create value: Desire (and ability to participate), utility, scarcity, and transferability. In July 2008, the slamming shut of the subprime window removed from the market the ability of thousands of people to participate in it. Value, by definition, immediately plummeted to some point south of where it had been. We don't know exactly how far south, because there is no way of measuring value directly; instead, we use selling prices as evidence of value.

Right now, prices are still searching for values in many areas. In others, they've stabilized and are bouncing along the bottom of the graph. Complicating the matter is the fact that lenders are extremely cautious in this climate, and take a much longer time to process a mortgage application. Therefore there are fewer closed sales in any given sector, and consequently less evidence of value.

The quality of that evidence is not what it once was. The few selling prices that we do have are often clouded by foreclosures and short sales, and many of the sales may be difficult to verify. In some areas, foreclosures and short-sales provide the only indicators of value. These conditions force value conclusions to low levels; remember, price is the only firm evidence of value we have.

These conditions wouldn't exist if people bought houses with their own money like they do commodities.

The appraisal's conclusion of value does not say, "These poor people cannot have the house they so richly deserve." They can have it, but they have to use their money instead of someone else’s.

Instead, our reports say, "Mr. Bank, if this loan defaults, you're not going to be able to recover the money you lent." What uses our clients make of that conclusion is not a concern. Risk management and assessment is their job; market value is ours.

So we are not seeing "lowball appraisals;" we're seeing evidence that values are lower that we'd hoped for. You can still buy a house for whatever price you think is fair. But you must do it with your own money, not someone else's.

I should add that in a couple of the areas in which I appraise, almost all the sales are cash sales. Many are over $300,000. (These are retirement and resort areas.) It is interesting to note that these two small submarkets have shown neither reduced sales levels nor falling values. From this evidence (admittedly shallow and narrow), one could conclude that appraisals aren't the problem; living on credit is

AUTHOR: Jim Plante, Certified General Appraiser, Selmer, TN:  We provide real estate consultation and investigations for legal purposes; forensic field reviews; partial interest appraisals; and the real-property portion of estate valuation for tax purposes.  Linked In Profile

Press Release: Title/Appraisal Vendor Management Association Publishes Standards of Good Practice in Appraisal Management

TAVMA Outlines Business Practices to Help Ensure Quality, Objective Appraisals -

PITTSBURGH, Jan. 13 /PRNewswire/ -- The Title/Appraisal Vendor Management Association (TAVMA) announced today that its membership has developed "Standards of Good Practices in Appraisal Management," a set of guidelines for the industry. The Standards outline best practices to help ensure that appraisal management companies (AMCs) and appraisers deliver quality, objective valuations to their common customers – financial intuitions.

The Standards take into consideration the needs of all stakeholders as well as federal interagency guidance, the new Home Valuation Code of Conduct (HVCC) and other federal and state statutes. The Standards attempt to codify long-time industry practices on a variety of issues, including local market knowledge and competency, distance appraisers travel, appraiser selection and communications, and dispute resolution.

"There has been a great deal of distortion in the press and on the Internet about the role of AMCs, the qualifications of the appraisers they work with, appraiser travel policies and the value that AMCs bring to the lending process," said Jeff Schurman, Executive Director of TAVMA. "Many of these stories are based on anecdotal complaints by third parties who don't regularly work with AMCs. In fact, AMCs are currently involved in over 60 percent of all residential transactions; over two-thirds of all licensed and certified residential appraisers work with AMCs; and preliminary results of a member survey suggest that the average AMC appraiser has 13-16 years experience."

"The Standards were drawn from the best practices of reputable AMCs and reinforce the benefits AMCs bring to the market: appraiser independence; quality control and transparency that increase lender and consumer confidence; and efficiency and logistics that support national lending," Schurman explained.

"Our new standards provide a roadmap that reputable AMCs can follow to deliver quality appraisals and to attract highly qualified appraisers. As the real estate and mortgage industries emerge from its current downturn it is vital that AMCs continue to focus on processes, systems and controls to ensure that they continue to deliver high quality, objective valuations."

Developed over the past year with input from TAVMA members, lending institutions and appraisers, the standards address nine key areas including:

• Supplier Recruitment and Coordination
• Appraisal Order Assignment
• Order Tracking and Workflow Management
• Pre- and Post-Delivery Quality Control
• Appraisal Delivery
• Customer Service, Dispute Resolution, Client Pressure
• Product and Technology Development and Utilization
• Sales, Marketing and Administration
• Training and Development

Other highlights of the standards focus on issues such as recruitment and qualifying appraisers; negotiating and setting service levels; quality reviews of completed appraisals reports and, expectations and developing a technology that permits auto assigning, tracking, reviewing and electronic delivery of reports.

Schurman said, "Like any industry, AMCs must continually update their standards to be responsive to the needs of customers and suppliers. These standards allow the industry to put some parameters around what it means to be a professional, objective, and successful AMC."

About TAVMA

TAVMA, the Title/Appraisal Vendor Management Association, is a non-profit professional organization that represents more than 75 companies including more than 40 of the largest Appraisal Management Companies (AMCs) with combined market share of 85 percent of the AMC market. TAVMA promotes the vendor management industry and presents its members' positions to government and media, protects its members' rights to do business without unfair and anticompetitive legislation and regulations and provides useful information about issues impacting the real estate settlement services industry. For more information about the organization, visit the website at www.tavma.org.

SOURCE Title/Appraisal Vendor Management Association (TAVMA)

RELATED LINKS http://www.tavma.org

Shake It Off and Step Up! - New Year's Resolutions for Appraisers

Shake It Off and Step Up! - David A. Braun, MAI, SRA

I have a 2010 New Year’s Resolution for the appraisal profession: “Shake it off and step up!”.  I have seen a lot in my 32 years as an appraiser. Take for example this tidbit from the last issue of the Tennessee Association of Realtor’s Newsletter: “A licensed real estate agent can by Tennessee law testify to the value of property for court purposes.” I watched for 10 years as lenders relied on millions of AVMs and Tax cards which did not meet the minimum federal lending regulations. I often feel like I have fallen down the same hole as Alice, and am now in Wonderland. I agree that things are more than a little skewed in the world of the appraiser. However, I continue to say that the little guy (or gal, just a figure of speech) should only worry about what they can change, and not worry about what they cannot change.

I wrote and presented a white paper at the Appraisal Institute National Summer Conference that took place in Washington DC. This paper addressed the shift in lender use from comprehensive appraisals to less costly and quicker collateral assessment products. Here is a small portion of that paper which addresses the appraisal industry’s inability to produce a competitive low cost appraisal product:

"The appraisal industry must never be inept again. Whatever the cost, we must be able to serve our market. If we are to achieve this goal, four objectives must be reached by each appraisal company over the next three years: (1 our work product must improve, (2 the dollar cost per appraisal must be reduced, (3 our turn-around time must be shortened, and (4 we must be able to handle more volume."

This seems quite timely, don’t you think? Did I mention that this conference took place in 1997- over a dozen years ago? It would take a major world recession that started with a housing crash to change the system- No wait that did happen two years ago and lenders are still using BPOs.

Premise Number 1: Our political system is so inefficient that the illogical structure that appraisers work in is not likely to fix itself any time soon. So, if change is to occur it will have to be from within the profession not from without. Appraisers will have to simply shake it off and step up.

My suggestion is for each and every appraiser is to embrace and improve on the proven categories of appraisal best practices:

• Strong Moral & Business Ethics
• Good Judgment
• Professionalism
• Hard Work Ethics
• Knowledge & Training, and
• Automation

The AQB has made a great start for the profession by increasing both the qualifying and continuing education requirements. Each of us can improve on most of the best practices listed above. The good news is that a career is like a long journey, it is not judged by the first few miles. While each of these best practices is important, I feel that the automation of the valuation process and the related knowledge and training continues to be the weakest link in the appraisal profession today. This is not to be confused with modern form filling which has become very efficient over the past decade. It appears the profession is beginning to move in this direction as many appraisers are beginning to learn how to use a spreadsheet.

Click here to continue reading . . .

Of FHA, pizza, appraisal reports and your worth

There’s an old adage…you get what you pay for.

Generally speaking, if one desires quality, one is willing to pay a bit more to assure that the product or service meets the purchase criteria.  And quality generally demands more time and expense to be met.

Nearly every product starts with a 3 sided equilateral triangle with the points being - quality…time (speed)…cost.  Pick any two you want to dominate and the third point is compromised.  The triangle is now lopsided.  You say you want quality…then it takes time and a decent income in about the same proportions.  You say you want speed…then quality probably will be sacrificed, and maybe the price.  You want it cheap…then time will be shortened and quality may be substandard.

It seems in recent years, the concept of quality in appraisal reports has eroded due to the decline in fees paid to the appraiser.  This is borne out when report reviews are done by qualified and experienced review appraisers, and the conditions demanded by the assignment client is evaluated.  Quick ‘n cheap has resulted in reports that are not USPAP compliant.  And appraisers are not really earning what they should be worth.

So…pizza in relationships to reports, and income?  It’s puzzling at first bite.  But it makes sense.  In today’s society, we are accustomed to instant gratification.  “Just give me the report…quick.”  That’s the mantra of mortgage lending.  Quality…the tastiest ingredients…takes a back seat to cheaper products and details.  Quality details in their entirety get dropped out of reports in place of boiler plate generic comments that are not specific to a particular property.  Quality has diminished, as had potential earnings.

We are so accustomed to ‘making’ a pizza by going to the store and buying a product in a box that we forget what it takes to actually produce that product. It all starts with the ingredients carefully tended by farmers over many months.  Then those ingredients are assembled by the pizza maker into a tasty pie we all enjoy.  There are individual items that when combined properly bring us an enjoyable meal.  But we all know that cheaper ingredients make for a lousy pizza.  And cheaper, less detailed reports leads to indigestion both for the lender and the appraiser at some point in the future.

Appraisal reports are no different than a quality pizza.  But many clients and lenders think that a quality report is similar to the pizza they ‘make’ with no effort.  Go to the store (inspect), choose the boxed pizza (research the data), stick it into the oven for 20 minutes (write the report), and wa-la, it’s ready to eat (submit the report).  What they conveniently forget is the assembling of the report ingredients starts way back on the ‘farm,’ and takes much time to nurture properly to insure quality.  

So it comes down to ‘what kind of pizza maker are you?’  And ‘what quality of pizza do you want to produce?’

Click here to continue reading . . .