Appraisal Scoop

Appraisal Institute Helps Appraisers Perform Evaluations for Lenders

CHICAGO (Nov. 14, 2012) – The nation’s largest professional association of real estate appraisers published guidance today to help appraisers learn what evaluations are, when they are used and who can prepare them.

The Appraisal Institute’s “Guide Note 13: Performing Evaluations of Real Property Collateral for Lenders” addresses how appraisers should prepare an evaluation for a lender and comply with the Uniform Standards of Professional Appraisal Practice.

The Guide Note states, “Federally insured lending institutions in the United States are subject to regulations regarding real estate appraisals. For lending transactions involving real estate, a lender must obtain an appraisal from a state licensed or certified appraiser. There are 12 exemptions from this requirement. For three of these exemptions, in lieu of an appraisal by a licensed or certified appraiser the lender may obtain an evaluation.”

Evaluations, per the Interagency Appraisal and Evaluation Guidelines, are market value opinions that may be provided by individuals who are not state licensed or certified appraisers. However, state licensed and certified appraisers may provide them, according to the Appraisal Institute’s Guide Note. The interagency guidelines also state that an evaluation must be based on a valuation method that is appropriate for a transaction rather than the method that renders the highest value, lowest cost or fastest turnaround time.

The Appraisal Institute’s Guide Note states that USPAP allows an appraiser to adjust the scope of work for a valuation assignment as long as the resultant value opinion is credible, given the intended use. When preparing an evaluation, the appraiser may consider narrowing the scope of work as appropriate. According to the interagency guidelines, a lender may obtain an evaluation in lieu of an appraisal when the loan transaction:

• has a transaction value equal to or less than $250,000;
• is a business loan with a transaction value equal to or less than the business loan threshold of $1 million, and is not dependent on the sale of, or rental income derived from, real estate and the primary source of repayment, or
• involves an existing extension of credit at the lending institution, provided that:

- there has been no obvious and material change in market conditions or physical aspects of the property that threaten the adequacy of the institution’s real estate collateral protection after the transaction, even with the advancement of new monies; or

- there is no advancement of new monies other than funds necessary to cover reasonable closing costs.

Click here to download the Appraisal Institute’s six-page “Guide Note 13: Performing Evaluations of Real Property Collateral for Lenders.”

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The Appraisal Institute is a global membership association of professional real estate appraisers, with nearly 23,000 members in nearly 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. Members 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.

NAR Adopts Broader Valuation Policy

From Appraisal Insight Blog author Jerome Nagy on Feb. 16, 2012:

The National Associaiton of REALTORS^® (NAR) continues its holistic approach to valuing real property with the adoption of its Responsible Valuation Policy. The document is the culmination of NAR’s efforts to consider all methods of valuing real property. NAR previously hosted two valuation summits and two working groups were convened. Members from across NAR’s policy structure had input in the document and included representation from the Professional Standards, Real Property Valuation/Appraisal, Federal Housing Policy, Conventional Finance and Lending, Commercial, and Business Issues Committees. Input was also provided by RPR.

The document will serve as the foundation for NAR’s policy position on the various methods of valuing and pricing real property – including appraisals, broker price opinions (BPO), and automated valuation models (AVM). The policy document also includes language from NAR’s Code of Ethics as a reminder to members that REALTORS

SOURCE: Appraisal Insight

 

Broker Price Opinion Resource (BPOR) Certification is NAR's newest certification

That's RIGHT!  NAR is now offering a "Certification" (with a pin and everything!) for BPO providers upon completion of the one-day course and the free webinar.   

Here's a blurb from their site

With the changing real estate landscape and the increased use of broker price opinions (BPOs) by market participants, the National Association of REALTORS® is offering a new certification, BPO Resource, recognizing REALTORS® who have completed NAR’s BPO education program. The new certification course provides REALTORS® with knowledge and skills to reduce risk and increase opportunities to create professional and accurate BPOs.  This one-day course will explore the multiple uses of BPOs, how they can and cannot be used, and how to filter and select comparables to create expert and precise BPOs.

Upon completion of the core course, “BPOs: The Agent’s Role in Property Valuation”, members will need to take a free webinar and pay a one-time fee to earn the BPOR certification.  Members who earn the BPOR Certification will be eligible to receive BPO orders and earn BPO revenue.

Benefits:

• Eligibility to receive BPO orders
• Usage of the BPOR letters after your name and in your marketing materials.
• BPOR digital certificate.
• Differentiation as a BPOR in the Realtor.org Online directory
• Logo files that can be used on business cards, email signatures and print ads
• BPOR pins available for purchase
• No annual certification dues (must maintain membership in NAR to use BPOR)
• Differentiation as a BPOR on Realtor.com® (to come)
• Elective course for the ABR® designation

Check out their FAQ page for "How Many" and "How Soon" they can start receiving orders!

For a little BPO-Humor - Check out this video!

 

APPRAISALS vs. BPOs: Can we please put an end to this insanity? (Active Rain)

GUEST AUTHOR: Patty Da Silva, CDPE - Davie REALTOR® - Certified Distressed Property Expert BROKER of Green Realty Properties® - 12555 Orange Drive, Davie, FL

Today I want to address a question that I have long wondered about and have no good answer for, and that is why are BPOs ordered by lenders for short sales instead of appraisals?

Let’s think about this, and look at a few examples. When an investor, such as Fannie Mae, "invests" in a mortgage loan, they won’t accept a loan without an appraisal. Similarly, before a lender approves a loan, they don’t order a BPO, they order an appraisal. The most puzzling and irrational example is when the buyer and seller have the same lender...which is common with the larger lenders. I have seen the same lender, in the same transaction, order a BPO on the seller’s side, and then turn around and order an appraisal on the buyer’s side. Of course the BPO is always inflated, and somehow the same property has suddenly lost $50,000 in value in the weeks it took for that lender to approve the short sale. Why do BPOs even exist as the deciding factor on a short sale transaction?? Why can’t appraisals be ordered by all sides? Some can argue because they save time and money, but do they really?

For argument’s sake let’s say it costs $100 to hire a BPO agent to do a BPO, and roughly $400 to hire an appraiser to do a proper appraisal. It costs $100 to hire someone who isn’t necessarily licensed (and definitely not regulated), to spend less than 5 minutes in a house, and to not take into account all the factors an appraiser would. I have heard BPO agents say that they do 500-600 BPOs a month. That’s impossible for ONE person to do! We have all heard that some of these BPO agents hire (unlicensed) people to drive around and take pictures of the outside of the property, and I have actually seen BPO agents recruiting these drive-by photographers on Craigslist.

Now let’s juxtapose the BPO agent against the appraiser. An appraiser is a qualified professional who goes through serious training, and then is supervised for two years before being able to work on their own. Plus the appraiser’s sole objective is to appraise the property; they don’t do it in hopes of getting REO listings from the banks. Appraisers are qualified to appraise, take the time to take all factors into consideration, and generally speaking, give fair market values. They are regulated and are subject to consequences if they don’t do their job right.

Don’t get me wrong, I know that there are bad appraisers and great BPO agents, but that’s not the norm. We are in a serious mess and its being exasperated for what? Lenders think that they are saving time and $300 per property, but in reality, thousands of hours are wasted disputing BPO values and getting nowhere. There is rarely a file that I don’t have to dispute the value on, and sometimes it takes months to resolve the issue with the lender…months that the property sits on the lender’s books, the sellers and buyers are left in limbo, and the values continue to drop.

Can’t we put an end to this insanity? Please! Lenders/Investors are losing thousands and thousands of dollars on short sales and foreclosures, yet they are worried over a $400 appraisal? Am I the only one who is confused about this lack of common sense?

Lender and Investors: PLEASE…JUST ORDER AN APPRAISAL AND HELP US HELP YOU!

Source Blog: Green Realty Properties® Blog

GUEST AUTHOR: Patty Da Silva, CDPE - Davie REALTOR® - Certified Distressed Property Expert BROKER of Green Realty Properties® - 954-667-7253 Address: 12555 Orange Drive, Davie, FL, 33330 Office Phone: 954 667-SALE

Video: Appraisers Hurting Housing Market? - Fox Business News

Prudential Douglas Elliman Real Estate Vice Chairman Dolly Lenz discusses why appraisers' low-ball offers are hampering the growth of the housing market with David Asman on Fox - America's Nightly Scoreboard.

Watch this video and let us (and them) know what you think of this story!!?  

Dolly says . . "Nobody wants things low and slow." referring to appraisers' impact on the real estate transaction.

When asked what could be done to fix the problems she says:

"I think for one, they should have to provide comparable sales.  So an appraiser saying this property is worth $300,000  . . .you have to provide numbers why.  Not when "requested".  Should "have to provide"."

Where in the world has Dolly been for the past 40-50 years?!  Does she REALLY think that appraisers aren't providing support for their values?

 

Appraisal Organizations Respond to Nevada’s Allowance of a BPO in Foreclosure Mediation Program

Dear Chief Justice Parraguirre:

On behalf of the 35,000 members of our respective professional appraisal organizations, including several hundred members in Nevada, we are writing to oppose the proposed change to Rule 7(2.) of the Nevada Foreclosure Mediation Program (FMP) which would allow the beneficiary of a deed of trust to submit a broker price opinion (BPO) in lieu of an appraisal as part of mediation. We strongly believe that allowing for the use of BPOs in the property valuation component in mediation will not adequately protect the public interest (consumer, borrowers, and others) or the interests of the various parties to the loan. We strongly urge you to retain Rule 7(2.) in its current form.

The current requirement under Rule 7(2.) is that "the beneficiary of a deed of trust or its representative shall produce an appraisal done no more than 60 days before the commencement date of the mediation". These appraisals must be performed by licensed and certified appraisers who meet minimum education and experience requirements, and the valuation assignments must be performed in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP). In addition, the preparers of appraisals are overseen by the Nevada Commission of Appraisers of Real Estate, and could lose their license to practice if the value reported in an appraisal is developed in a fraudulent or negligent manner. Because of these stringent requirements, professional appraisals are widely recognized as by far the most reliable indicators of the market value of real estate.

Generally speaking, real estate agents and brokers are not independent or properly trained valuation specialists. They have an inherent bias towards quick results and action which produces a fee for themselves irrespective of whether the loan modification is fair to the lender/services/investor/property owner/borrower. The preparers of BPOs have virtually no governmental oversight, little or no valuation training requirements or any generally-accepted valuation standards and guidelines by which the BPOs must be prepared. As a result, BPO price estimates vary widely and are far less reliable than professionally prepared real estate appraisals. Moreover, real estate agents and brokers who provide broker price opinions can have a direct or indirect financial interest in the outcome of a short sale mediation.

Understanding the market value of the underlying collateral is an essential element to any successful mediation program, as it empowers all parties with a basic understanding of the position of the collateral in question. Because of its importance, valuation objectivity, competency, and independence are of central importance, and here, appraisals prepared by certified appraisers in accordance with the Uniform Standards of Professional Appraisal Practice are best suited for the Court. It is for these reasons that the housing agencies of the federal government (FHA; VA; Fannie Mae and Freddie Mac) require the use of professional appraisals and disallow the use of BPOs to value property in mortgage originations and modifications for loans owned or serviced by these agencies and Government Sponsored Enterprises.

Further, disclosure of documents is critical to the success of foreclosure mediation programs, according to a leading consumer law organization that has reviewed such programs. A report issued late last year identified the lack of produced documentation, including appraisals, as one of the biggest obstacles facing homeowners in foreclosure mediation. The report notes that most homeowners will be appearing for mediations without counsel of their own, and that one of the biggest complaints of consumers participating in these programs is the lack of documenta- tion provided by the servicer. It further recommends that such programs require publication of a clear checklist of documents that servicers must produce, including a current appraisal.1

We strongly urge the Nevada Supreme Court to retain Rule 7(2.) in its current form as it will benefit all parties involved, including the Court, the borrower, the lender, and taxpayers; as well as the administration of justice. There is an ample number of qualified real estate appraisers – over 1,200 licensed or certified in Nevada - to perform these valuation services. 

If you should have any questions, please do not hesitate to contact Scott DiBiasio, Appraisal Institute Manager of State & Industry Affairs at (202) 298-5593 or [email protected], or Peter Barash, Government Relations Consultant, American Society of Appraisers at (202) 466-2221 or [email protected]. Thank you for your consideration of our position.

1 Walsh, J. (2009, September). State and Local Foreclosure Mediation Programs. National Consumer Law Center. Available at http://www.consumerlaw.org/issues/foreclosure_mediation/content/ReportS-Sept09.pdf  

Sincerely,

Appraisal Institute American

Society of Appraisers

American Society of Farm Managers & Rural Appraisers

National Association of Independent Fee Appraisers

Source Document: http://bit.ly/aA4zaS