Appraisal Scoop

FREE Valuation Tools and Webinar - Upcoming Hands-On Regression Seminars

You are invited to the second of two FREE regression webinars hosted by David Braun, MAI of AVT.  

It will be August 25th at 2:00 EST.  Click here to register.

To watch the video of Webinar 1: “Introduction to Regression Analysis” 

1) Load the required Webex viewer (click run to load): http://automatedvaluationtools.com/media/nbr2player.msi

 2) Click the following link to watch the video: http://automatedvaluationtools.com/media/Introduction_Regression_Analysis.arf  This webinar is about 40 minutes long.

FUSION, a low end USPAP compliant appraisal and report will be posted on the site very soon.  It is free, but it utilizes updated verions of the Regression+ and the USL Documenter for it to run.  If you purchased either of these products in the past year the updates are free.  If you purchased over a year ago the update will only be $25.00 plus S&H.

Also, an updated Total Solution will posted the week of August 16th.  This will meet the recent FANNIE MAE required changes.  This most recent Fannie requirement is better than using the cumulative listing count, but statistically has some issues.  One sample from each period for the number of listings may produce unreliable results.  The Total Solution for the 1004mc form is now a FREE download.  I guess you will just have buy something else (ha ha). 

 Upcoming Regression Analysis Seminar Chicago, Illinois (October 21-22, 2010) Directions and Hotels Here 

 Two day seminar (14 hours with test, 12 hours without test) Prerequisites: This seminar requires that attendees have basic (beginner) knowledge of MS Excel®. 

This seminar is taught in a computer-lab setting. It presents a unique blend of theoretical knowledge and hands-on case study training. No need to bring your laptop or any software. Your computer will be provided as well as MS Excel® spreadsheet and a demonstration copy of “Regression+ for real estate professionals©” software. 

 At the end of this seminar participants will be able to: 

• Understand how “least squares, straight-line” regression analysis works. 
• Demonstrate an understanding of relevant statistical terminology. 
• Understand how regression analysis relates to appraising and where traditional appraisal techniques and regression analysis overlap. 
• Prepare data for analysis by “scrubbing” it in an Excel spreadsheet. 
• Perform regression analysis of sales data to form an opinion of market value and extract adjustment values. o Utilizing the “Stepwise” method o Utilizing “Dummy Fields” o And, much more. · 
• Recognize the weakness (unreliability) of trending one property component at a time (such as sales price or sales price per square foot). 
• Able to understand the underlying “assumptions” of regression and how to test that these assumptions have not been violated. 
• Able to understand the reliability of the regression analysis results. · Decide if adding regression analysis to your appraisal practice is right for you. 
• If you are a user of appraisals; determine if regression analysis can meet your valuation needs.

Click here for more information.

Fannie Mae Photo Requirements - Effective Sept. 1

Fannie Mae’s post-purchase reviews of mortgage loan files have identified issues with appraisals. As a result of those reviews, new policy requirements and clarifications concerning existing lender requirements are being added to a number of appraisal sections of the Selling Guide, including:

• Inclusion of interior photographs in the appraisal report 
• Lender changes to the appraised value and guidance on addressing appraisal deficiencies 
• Appraiser selection criteria 
• Sources of comparable market data 
• Selection of comparable sales 
• Communication under the HVCC 
• Seller concessions 
• Treatment of personal property 
• Market Conditions Addendum to the Appraisal Report (Form 1004MC) 

Fannie Mae is requiring that interior photographs of specific rooms and areas be included in appraisal reports whenever an interior inspection is performed. 

 The minimum requirements for the interior photographs are described in the topic noted below. 

Updated Selling Guide Topic B4-1.2-06, Appraisal Forms and Report Exhibits 

Download Fannie SEL 2010-09 06.30.2010 released on June 30, 2010 requires that on all interior appraisals contain at a minimum the following photos:

• kitchen(s); 
• all bathrooms; 
• main living area; 
• examples of physical deterioration, if present; and 
• examples of recent updates, such as restoration, remodeling, and renovation, if present

Updated Selling Guide Topic B4-1.2-06, Appraisal Forms and Report Exhibits

Geographic Competence Not Clearly Understood

GUEST AUTHOR: Micheal W. Armentrout, VP AM Appraisals, Inc. Mike has been involved in full time real estate valuation since early 1992 and has experience in numerous Central Ohio markets.

 It seems as though a recent trend with some clients (primarily AMC’s) has been a concern over the appraiser’s ability to work in certain markets. After all, if we have never or rarely worked in a specific locale then obviously we are not qualified to work there; right? Well before jumping directly into USPAP we should clear up some things.

The reason why this is a growing trend is most likely due to the level of complaints lenders and AMC’s are receiving about “low” appraisals. Homeowners and realtors have been concluding that appraisals are coming in under the true value because the appraiser was not from the area or did not know the market. In fact, many of my own realtor friends have largely based their stand against HVCC on this argument and I have consistently stated my opposition to this line of logic. There are numerous strong points against HVCC but geographic competency is not one of the stronger ones. 

If geographic competence was really a growing issue, realtors and homeowners must realize that it would not only be reflected in under-valued appraisals but inflated ones as well. A lack of competence in any market will always lead to erroneous and unreliable reports. In my opinion, HVCC has not been a good policy but I don’t believe it has caused a rise in the number of appraisers working in unfamiliar territories. Of course some rogue appraisers do occasionally violate the requirement to be knowledgeable in whatever market they are completing appraisals but no significant pressure to do this was brought about by HVCC alone. 

Rather than discussing the finer points of this debate, we do have a binding requirement that is literally recorded in black and white. The Competency Rule of USPAP is very clear on this issue.

Prior to accepting an assignment or entering into an agreement to perform any assignment, an appraiser must properly identify the problem to be addressed and have the knowledge and experience to complete the assignment competently; or alternatively, must:

1. disclose the lack of knowledge and/or experience to the client before accepting the assignment;
2. take all steps necessary or appropriate to complete the assignment competently; and 
3. describe the lack of knowledge and/or experience and the steps taken to complete the assignment competently in the report. 

Notice that it does not define competency by distance or a mile radius as is the growing standard requirement on some AMC requests. Some clients define the distance by the office location and some by where the appraiser lives. Both are faulty in premise and do not adequately qualify or disqualify the appraiser for an assignment. Conversely, just because an appraiser lives or has an office in a specific market does not automatically mean they are qualified to complete appraisals there. 

Many appraisal firms have expertise in numerous markets that may or may not be contiguous to their place of business or homes. Some may have qualified appraisers who specifically cover distant regions. For instance, our company has been working in a satellite market that is forty miles from our office and has been doing so for over fifteen years. We have weekly assignments there and are also members of that areas MLS and are well-known by many of the area realtors. Chances are that if an appraiser pays to be a member of an MLS, then they probably do enough work there to justify the ongoing expense. Some commercial appraisers do work for retail chains in different States and in addition to their individual State Certifications; they are bound by the same USPAP Competency Rule.  

Even in cases where an appraiser does not have the experience and knowledge, USPAP allows and requires that they become sufficiently knowledgeable to complete an assignment. Obviously the bigger debate would then be what the process is for obtaining that knowledge. The Competency Rule does propose several methods to accomplish this but it does not spell out an absolute protocol. 

If the trend of distance requirements continues to increase, it is possible that many affected will simply look for new ways to widen their coverage area. What is to stop appraisers from creating additional branch locations and re-registering those addresses with AMC databases? One-appraiser and home office operations who represent the largest segment of our industry could really feel a pinch if this happens. Until then, it is probably a good idea to have a statistical database of assignments to support your qualifications claims. 

Other Posts By Michael Armentrout:

• Properly Define “Declining Markets” - A Call To Mortgage Lenders
• Appraisal Independence at Crossroads, Again! 

AUTHOR: Micheal W. Armentrout, VP AM Appraisals, Inc. Mike has been involved in full time real estate valuation since early 1992 and has experience in numerous Central Ohio markets. He served as a staff appraiser at several local firms before forming AM Appraisals, Inc. with business partner J.M. Massey. e-mail: [email protected]  web address: http://www.amappraisals.com   

FDIC Announces Open Door Policy for Regulatory Reform Rulemaking

Appraisers……

You can participate with the new appraiser independence regulations that are being crafted as a result of the Dodd-Frank financial reform bill.

http://www.fdic.gov/news/news/press/2010/pr10187.html

"To seek input from the widest audience possible, the public can submit views via email on how the FDIC should implement the new law. These comments will become part of the record and will be posted on the FDIC website. The public will also be able to sign up for a subscription service for receiving notices on major developments. The FDIC has also crafted bill summaries and added a fact sheet that will be regularly updated to reflect policy decisions during the implementation process. This can all be accessed at the dedicated financial reform webpage, http://www.fdic.gov/financialreform/  "

If lots of independent appraisers provide comments, the more likely it will be that your (and our) concerns will be addressed.

If you think direct client ordering of appraisals can be implemented, provide specific methods to do that which will preserve your independence but still allow business relationships.

If you don’t like that idea, then aspects of the current HVCC may be mandated – which will not help your business environment. Remember, the ‘commerce’ section of the HVCC actually had its beginning with FIRREA in 1989. Times change.

AUTHOR: Dave Towne Towne Appraisals & Appraiser Education Service, Mount Vernon, WA

When are Usual and Customary Fees’ applicable to appraisal assignments?

Appraisers…….

I spent time Wednesday 8/04/10 discussing the Dodd-Frank law, and the “Usual and Customary Fee” mandate within it, with an experienced appraiser on the east coast. Also Wednesday, two e-mails arrived which ask appraisers to fill out a ‘fee survey.’

The basic question is ‘when are Usual and Customary Fees’ applicable to our assignments? The actual answer is July 22, the day after the President signed the bill. That fee implementation language is contained in the bill and is separate from Appraisal Independence issues that regulators will define up to 90 days later.

Some people are under the impression that there is a 90 day waiting period before fee implementation. In my opinion, that is incorrect, because the ‘up to 90 days’ as mentioned in the bill applies to the Appraisal Independence aspects of appraisal ordering only, not to fees. It is designed to allow the new “Bureau” time to write and distribute their new Interim Final Regulations (which is an oxymoron!) concerning independence issues. Those probably will be very similar to FIRREA, HVCC, FHA, and other regulators’ policies.

So what are “Usual and Customary Fees?” The answer: It Depends. There is NO one mandated fee that must be charged by the appraiser. “U&C” fees vary by region, and frankly, between appraisers in the same region.

The bill does say that “U&C” fees “may” be based on ‘evidence…established by objective third-party information, such as government agency fee schedules, academic studies, and independent private sector surveys. Fee studies SHALL EXCLUDE assignments ordered by known appraisal management companies.’ The bill says ‘lenders and agents SHALL compensate fee appraisers at a rate that is customary and reasonable….in the market area…’ Complex assignments can have a higher fee than a typical basic assignment based on difficulty and additional scope of work requirements.

So, in my opinion, appraisers are free to consult various fee schedules, and decide for themselves what they will charge any client for a particular service. But I will tell you (from personal experience since July 22) that AMC’s are still ‘shopping’ appraisers to find the lowest fee.

For 20+ years, the agent business model for assignment fees has been ‘mandated’ by lender agents – for those assignments in which an agent is involved. In effect, it’s been price fixing, which is illegal. But nobody had the gonads (or desire) to seriously challenge this, and individual appraisers were powerless to reject it if they wanted to continue working for particular lenders who were using agents. Now, with the Dodd-Frank law, that model has been overturned. And with it, if the agent or lender refuses to pay a “U&C” fee to the appraiser, they can be heavily fined.

As a result of this legislation, agents and lenders are renegotiating their contracts now, anticipating that appraisers will begin asking for fees more in line with what they would normally charge local clients that don’t use agents for order placement.

There are currently two ways to research “U&C” fees in your area…VA fee tables and the alamode anonymous survey for the entire country, broken out by county.

Two other established companies are also attempting to collect fee info. One is entirely anonymous, but based on an entire state only.

The other is designed to collect contact info of the survey participant and you cannot fill out the fee survey until you provide contact info….but the survey drills down to the county level in each state and includes several different report types. I don’t appreciate this data collection aspect used to promote the sponsoring company. You can decide for yourself how accurate of required contact info you want to provide, but it may be interesting to see what kind of fee data they obtain. The other aspect of this survey is a ‘subscription’ feature which will allow lenders and agents to gain access to the data……..and possibly the contact info of the survey participants who provide the fee data. That makes me very uncomfortable.

AUTHOR: Dave Towne Towne Appraisals [email protected] Washington State 360-708-1196 & Appraiser Education Service