Appraisal Scoop

Survey Finds: Dodd-Frank Appraisal Requirements Putting Strain on LO Annual Income

"The 2012 Loan Originator Survey has been released by Mortgage Daily, providing insight into issues impacting mortgage loan officers. The survey was sponsored by StreetLinks Lender Solutions and co-sponsored by Champions School of Real Estate."

"According to survey finsings, nearly 60 percent of the originators who participated in the survey indicated they earn at least $100,000 annually. Many said that they would have earned more if it weren't for the Dodd-Frank Act—though a small share has actually profited from the law. Appraisal requirements appear to be putting an even bigger dent in income." 

 Click here for the complete article on National Mortgage Professional.

ASA, NAIFA Send Letter to Appraisal Subcommittee Urging Delay in Rollout of National Appraisal Complaint Hotline

Also Meet With Representatives of ASC; Urge Delay of March 29th Go-Live Date

On February 6 ASA, along with the National Association of Independent Fee Appraisers (NAIFA), sent a letter to the Appraisal Subcommittee (ASC) urging them to delay the planned March 29th implementation of the national appraisal complaint hotline, as required by the Dodd-Frank Act.

In pushing for the delay, ASA and NAIFA pointed to several issues regarding the hotline’s formation:

• That the hotline was created in a closed process, without adequate stakeholder exposure or input;
• The hotline, as proposed, violates Congress’s intent and the clear language of Dodd-Frank;
• The hotline has morphed from a tool for appraisers to report instances of undue influence into a “catch-all” tool where anyone can file a complaint against an appraiser for any alleged violation of USPAP, regardless of whether it is legitimate; and,
• The open-ended cipher design of the hotline will greatly increase the volume of complaints against appraisers, impose undue, excessive burdens on them and on state appraiser licensing agencies, and possibly gum up the mortgage loan processing system. Ironically, the open-ended hotline is likely to increase pressure on appraisers to come up with market values that will make a mortgage transaction appear to be safely collateralized.

On February 7, government relations representatives for ASA and NAIFA met with Jim Park, Executive Director of ASC, along with senior staff, to further discuss the letter’s contents and to request an opportunity for the two organizations to be heard by the full ASC board.

You can read the full letter sent to the ASC by clicking here. 

Scott A. Austin, IFA sent along these excerpts: 

The bottom line: 

“What is almost certain to happen – if the hotline website and system permit complaints involving alleged violations of any and all USPAP provisions – is an influx of large numbers of complaints that are spurious or fundamentally mistaken – complaints which will, nevertheless, raise questions about the professionalism of the appraiser complained against, occupy his or her time and attention and force state or federal agencies to review them. These are likely, but very unwelcome, outcomes that
the ASC should want to avoid..."

“While our organizations strongly support the hotline system for the purpose intended by Congress, we do not support a complaint system that permits individuals to trigger an investigative process that is unrelated to appraiser independence matters. We also do not support a process which excludes stakeholders from having a say in the implementation of a unique federal program, like the hotline program, which impacts our members in vital ways.  Congress unambiguously intended the hotline to concern itself solely with appraiser independence issues; and the complaint system designed by the agencies should clearly reflect that fact.”

 

Appraisal Institute’s New Guidance Helps Real Estate Appraisers Analyze Exposure Time

CHICAGO (Feb. 12, 2013) – The Appraisal Institute, the nation’s largest professional association of real estate appraisers, published guidance today to help appraisers understand exposure time and how to incorporate its analysis into an appraisal.

The Appraisal Institute’s “Guide Note 14: Concept of Exposure Time” addresses how appraisers should link exposure time to their value opinion and comply with the Uniform Standards of Professional Appraisal Practice. Exposure time refers to the time a property remains on the market.

The Guide Note states, “An analysis and opinion of Exposure Time is required for appraisals where the definition of value is tied to a reasonable or stipulated exposure time. A discussion of Exposure Time
allows the intended user(s) to put the appraiser’s value opinion into context.  It also serves as the foundation on which appraisers describe market conditions, analyze comparable sales, and reconcile an opinion of value to the actual sale price.”

As defined in The Dictionary of Real Estate, 5th Edition (Appraisal Institute, 2009), exposure time is “the estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based on an analysis of past events assuming a competitive and open market.”

According to the Appraisal Institute’s Guide Note, USPAP requires that “when an opinion of reasonable exposure time has been developed in compliance with Standards Rule 1-2(c), the opinion must be stated in the report.”

The Guide Note states that exposure time is not a fixed period and can differ for various types of property and under diverse market conditions. It is a function of price, market conditions and property characteristics, and the basis for an opinion of exposure time should include one or more of the following:

• statistical information about days on market for similar types of property;
• information gathered through sales verification;
• interviews of market participants;
• market information from data collection services.

 

Click here to download the Appraisal Institute’s seven-page “Guide Note 14: Concept of Exposure Time.”

Subscribe to the Appraisal Institute’s RSS feed  to stay connected with the latest news from the Appraisal Institute, and follow us on Facebook, Twitter, LinkedIn, YouTube and our blog, Opinions of
Value.

The Appraisal Institute is a global professional association of real estate appraisers, with nearly 23,000
professionals in almost 60 countries throughout the world. Its mission is to advance professionalism and ethics, global standards, methodologies, and practices through the professional development of property economics worldwide. Organized in 1932, the Appraisal Institute advocates equal opportunity and nondiscrimination in the appraisal profession and conducts its activities in accordance with applicable federal, state and local laws. Individuals of the Appraisal Institute benefit from an array of professional education and advocacy programs, and may hold the prestigious MAI, SRPA and SRA designations.
Learn more at www.appraisalinstitute.org.

AMC Declares Bankruptcy: What Appraisers Need To Know

GUEST AUTHOR: Ramir Rodriguez is a business development officer for Treasure Valley Factors.  He helps real estate appraisers understand what factoring is and how it can help grow their business.  He has a B.S. in Business Administration with an emphasis in Management from Eastern Oregon University. For more questions about factoring accounts receivables, please email him at [email protected] or visit our blog www.factoringhelps.wordpress.com or our website www.treasurevalleyfactors.com

 

You received a letter in the mail informing you that your client has filed for bankruptcy.  It is this moment you realize that this bad news just became your problem.

Many of us are familiar with the recent bankruptcy filings of Evaluation Solutions and its subsidiary ES Appraisal Services.  Peter Christensen, attorney and general counsel to LIA Administrators & Insurance Services, shared in his blog that the total unpaid fees to appraisers, agents, and brokers as listed in bankruptcy documents is $11,048,411.97!  This is a remarkable amount.  Evaluation Solutions’ bankruptcy documents accounted for $9,349,612.97 of the total amount and a separate filing of its
subsidiary was for $1,698,799.

I Received A Notice… Now What?

If you received a notice regarding Evaluation Solutions/ES Appraisal Services’ (I will refer to them as ES) bankruptcy you may be wondering what the next step is to try and recover money owed to you.  Yes, a client’s bankruptcy can be costly for you, but most importantly, not adhering to the rules of the bankruptcy process can cost you significantly more.

Knowing the types of bankruptcy, how to play by the rules, and what you can (or can’t do) will help you understand the scope of your problem and ensure you don’t get in trouble. 

Types of Bankruptcy

There are lots of information you can gather from the bankruptcy notice from ES to help you understand the nature of this problem.  But first you must recognize the type of bankruptcy ES is filing.

Chapter 7 – This type of bankruptcy is the liquidation of remaining assets to distribute among its creditors.

Chapter 11 – This a financial reorganization of a business, which allows your client to function while they follow court ordered debt repayment plans.

Chapter 13 – Similar to Chapter 11, but rather than a business filing bankruptcy it is the individual reorganizing and following a debt repayment plan.

Ideally, it’s more favorable on your end if your client files for either Chapter 11 or 13.  These types of bankruptcy give your client a breather until they figure out how to repay.

If your client however files for Chapter 7, which is what ES filed, not only will your chances of getting
paid be reduced, but also you may be waiting a long time (even years) for this type of case to be completed.

Take A Number

At this point you are probably frustrated and would like to call someone to attempt to collect your money.  Stop right there!  Your actions can get you in deep waters.  If you attempt to make phone calls to ES’s accounting department, send nasty letters, or try to file a lien (which some appraisers have done in other instances and is not recommended), you will face penalties.

Assuming you do get some money owed to you, you will have to wait in line.  This is the second item you must understand.  Here’s the payment order:

1. Lawyers, administrative expenses, and other professional services that are involved with the work of filing the bankruptcy.
2. Secured claims, including mortgage holders.
3. Priority claims, including wages and taxes.
4. Unsecured claims, which is where you as an appraiser may be categorized.
5. Equity claims, including stockholders.

So curb your frustration because all you can do at this point is wait.

What Can You Do While You Wait

Sure you have to wait for ES’s bankruptcy process to take its course, but there are some things you can do in the interim.  Since this case can drag for a long period of time, you can do the following:

 

1. Consultwith your CPA about taking a deduction on your taxes for the bad debt.  If you manage to receive some money owed toyou after the bankruptcy case is settled you can claim it as income at thattime.  See your accountant for moredetails.
2. It doesnot apply in this case, but if you have a future instance where your client files for Chapter 11 or 13 and wants to continue a working relationship, it may be to your advantage.  Of course your immediate reaction is to quickly say “no way!”, but understand that Chapter 11 and 13 require debtors to stay current on all accounts moving forward.  This means you can add a fee to your appraisal fees to recover what was lost, stricter payment time frames, and
   maybe exclusivity as other appraisers may not take another chance.  Keep in mind that the best way to reduce or eliminate risks is to get paid up front.

Improve And Move On

Now that you’re somewhat familiar with the types of bankruptcy, payment pecking order, and what you may be able to do as the bankruptcy takes its course, it is important prepare for the future.  This means assessing your appraisal business and how to prevent this problem from happening again.

First, create a process on how to screen new clients by knowing their payment history.  There are many tools and resources you can use online that are free or for a small fee.  Second, improve your accounts receivable aging management procedures.  Just because they are still “current” doesn’t mean it does not require all of your attention.  Current receivables can quickly turn into problems if you don’t pay attention.  Last but not least, be persistent and tough but professional with your collections.

If you have an AMC bill in your state, read it and educate yourself on how it can help your appraisal
business.  There are sections in most AMC bills that require AMCs to pay by a certain time frame.  For example, Texas AMC bill requires AMCs to pay appraisers within 60 days.

Also consider resources available to you such as factoring your receivables where the risk of non-payment is transferred to the factoring company.  In this case, you can get paid quickly without the responsibility of collecting and liability of non-payments.

No small business is immune to the unexpected, but you can certainly minimize you risks as work towards a successful 2013.

GUEST AUTHOR: Ramir Rodriguez is a business development officer for Treasure Valley Factors.  He helps real estate appraisers understand what factoring is and how it can help grow their business.  He has a B.S. in Business Administration with an emphasis in Management from Eastern Oregon University. For more questions about factoring accounts receivables, please email him at [email protected] or visit our blog www.factoringhelps.wordpress.com or our website www.treasurevalleyfactors.com

 

 

NAHB Calls for Overhauling the Appraisal System

Its “blueprint” for reform focuses on streamlining standards and their enforcement, expanding education and training, and upgrading real estate data.

By John Caulfield - John Caulfield is senior editor for Builder magazine.

A “dysfunctional” appraisal system can be fixed only if its regulatory framework is streamlined, its credentialing standards are made uniform, and the criteria used to ascertain real estate valuations are based on a combination of cost, income, and sales comparisons.

Such are the findings of a white paper released by NAHB on January 24, which spells out the association's “blueprint” for appraisal reform including a host of recommendations formulated last year by a working group comprised of builders and officials from the financial and appraisal sectors.

The goal of reform, NAHB states, is to “rebuild the nation’s housing finance system …, restore confidence in the real estate market, and establish a foundation for sustainable growth in the U.S. economy.”

The working group broke down its recommendations into four areas:

• Regulatory framework and oversight.
• Data and technology.
• Professional standards.
• Practices, processes and procedures

Click HERE for the complete article

 

 

Reference:

Major Overhaul of Appraisal System Long Overdue, White Paper Says [11/7/2011]

“Reengineering the Appraisal Process Redux