Appraisal Scoop

URARS Sidebar - Focus on the "Common Ground"

The Right Start was about the "possibilities", collective action to move the profession ahead as opposed to going backwards or standing still. That led to The URARS, ways to convey the message, enlist the support of appraisers and get the process started. While I anticipated debate, I also expected a spirit of cooperation. After all, the URARS was about "improving our lot in life" so to speak something all would benefit from.

 After witnessing (and participating in) a conversation on the WinTotal User's Group regarding "effective age", I had to take a step back and rethink our course of action. While the discussion was (for the most part) constructive, a simple question prompted 80+ responses. To be honest, I don't think there was a clear consensus in the end, although I do believe most involved (and those lurking) have a far better comprehension of the issues surrounding effective age and the use of the term in the URAR.

Having watched Brian Davis, Lee Hill and others "get busy" with the topic, my observations led to a few fundamental conclusions. Appraisers are in the "opinion business", so like other things, we all have one (or more), often we are quick to give it (asked for or not) and when we do, we defend it vigorously (right or wrong). 

What starts as a simple question or observation can quickly become "sport" and in doing so, all bets are off and we lose perspective. This is a key point for the URARS and the state of the appraisal profession. At times, we are so quick to take a position that we lose objectivity and become indifferent to the views of others.

Click here to continue reading . . .

The URARS Part 5: Making the List: Key Reference Sources of Appraisal Procedures Definitions and Techniques

Have you read a few good books lately? Perhaps all of us should read a little more. When I was teaching the Housing Market Analysis class at the "a la mode regional conventions", I would ask the audience, "how many of you have read The Appraisal of Real Estate"? To my surprise (and shock) at several locations, only a few hands were in the air.

For the many years I have been in this profession, most I know have always considered "The Appraisal of Real Estate" as the "bible of appraising" and perhaps the most definitive and authoritative source on appraising currently in print. That's not to say that there aren't other good appraisal books out there, only to make a point. Many of those in the profession have yet to read and study the most widely referenced book on appraising.

If that is the case (and I have no reason at this point to believe otherwise) would appraisers have a better understanding of the principles, techniques, applications, etc. (outlined within The Appraisal of Real Estate) if they did? If The Appraisal of Real Estate was "required reading" for appraisers, users of appraisal services, underwriters, loan offices, agents and others, would some of the issues fade away?

For the URARS addendum, should we have a section that lists key references by title and edition? If so (and given the number of books and publications available), how much is enough? Should we limit the list to several that are comprehensive or should a few specialty references be added? Listed below are a few of my choices. What other publications (they must be in print and widely available) would you suggest or is this list adequate?

Click here to continue reading . . . .

URARS Part 4: Three Basic Rules - Patience Persistence and Compromise

Getting back to the original story, Dorothy, the Tin Man, Scarecrow and Lion arrived at OZ with great expectations. After all, the Wizard was known for his powers, however they quickly discovered that he wasn’t about to grant their wishes without some showing of worthiness on their part. He gave them a test to measure their patience; their persistence and in the end, their willingness to compromise.

The same holds true for us. To be successful, we will need patience with others (and trust on both sides), we will need to be persistent (continue to get appraisers involved) and we will need to recognize that in the end, compromise will be necessary to develop a version of the URARS that will be acceptable to a widespread group of professionals. 

The Basic Setup

The original intent of the URARS was to compliment the URAR – Uniform Residential Appraisal Report by specifically addressing reporting requirements related to residential mortgage transactions as opposed to a more comprehensive addendum that would cover a wide range of issues related to residential appraising in general.

To get us started and as a general direction to take, the focus here will be on Fannie Mae, Freddie Mac, HUD and VA appraisal guidelines along with USPAP, to develop both the URARS addendum and to create the URARS.org website.

• The URARS addendum can serve as a general outline of what the appraiser did and did not do (clarifying the scope of work), cite general definitions and reference material used in development of the report and direct the reader to the URARS.org website for more specific and definitive references (along with examples, publications, etc.), to provide the users of appraisal reports with "the actions of our peers" and "generally accepted appraisal practices" that are "verifiable and measurable"

Click here to continue reading . . .

The URARS: Part three - One step back before two steps forward!

When I came up with the concept of the URARS (Uniform Residential Appraisal Reporting Standards), it was "all about communication", between us and the clients, readers, reviewers and underwriters. I thought that if we had better communication, we would have fewer problems, so I proposed such things as "de facto standards" to replace "subjectivity with objectivity".

I also proposed that we enlist "a la mode, Inc." to once again "step up and help us help ourselves", similar to what they did with the HVCC petition. Both suggestions met with favorable responses, but with some raised eyebrows as well, as so before we take a step forward, I want to take a step backward and do what I originally set forth to do when Brian Davis and I created the "Clarification of Scope of Work Addendum" (COSOW) , "clarify what we should be doing and why". 

The "de facto standards" I am advocating will not be similar to Wayne Brady’s Las Vegas act, "Making $%# Up", which seems to be the opinion of some. We won’t be pulling "de facto standards out of the air" so that appraisers can use them to justify actions or procedures that are contrary to good judgment or inappropriate for the requirements of the assignment.

Since I am advocating "de facto standards", let’s revisit the meaning of "de facto".

"De facto is a Latin expression that means "of the fact" or "in practice" but not ordained by law. It is commonly used in contrast to de jure (which means "by law") when referring to matters of law, governance or technique (such as standards) that are found in the common experience as created or developed without or contrary to a regulation. When discussing a legal situation, de jure designates what the law says, while de facto designates action of what happens in practice. It is analogous and similar to the expressions "for all intents and purposes" or "in fact". The term de facto may also be used when there is no relevant law or standard, but a common practice is well established, although not universal".

Click here to continue reading . . .

 

 

The URARS Part 2: What steps to take and which direction to go?

In "You've ALWAYS Had The Power! Creating Uniform Residential Appraisal Reporting Standards (URARS), I suggested we start with the "Clarification of Scope of Work Addendum" (COSOW) as a template for the URARS for several reasons. First, the Scope of Work within the URAR is broad and unspecific and second, the COSOW defines many terms and states the appraiser’s actions in a format that is "uniform".Download COSOW.pdf

Uniform implies consistency and that is what is needed for the URARS. Regardless of the property’s location, physical attributes or local custom, the URARS (and the appraiser’s action) must be the same.

Does this mean the URARS will not allow for flexibility if needed? Absolutely not, the URARS is not about being "inflexible". It is about providing a framework or standard for analysis of common as well as unusual situations.

What will make it different?

The URARS doesn’t remove the appraiser’s ability to exercise judgment for a unique assignment, only that in employing a technique, it must be consistent with the methodology that other appraisers would use in a similar appraisal problem.

Through "uniformity" your definition of urban, suburban or rural will be same as my definition. When you define a neighborhood, it will be described using the benchmarks and guidelines that I would. Uniformity removes subjectivity via "de facto standards".

Through the URARS, those that rely on the appraisal (underwriters, clients, regulators, the secondary market, etc.) will have reference to and common understanding of the same terms, techniques and applications. As a result, appraisals will be measurable and verifiable.

More importantly, the URARS will provide a defensible document, one that is representative of "the actions of our peers" and "generally accepted appraisal practice", the same standards of performance identified within USPAP and by the secondary market.

If we build it will the come?

Appraisers are skeptics by nature and given what the industry has gone through since FIRREA (the document that was to solve all of our problems) it is reasonable that they should be. FIRREA and USPAP did solve some problems, but they also created some "intended consequences".

Click here to continue reading . . . .

You've ALWAYS Had The POWER! Creating Uniform Residential Appraisal Reporting Standards (URARS)

Most of us remember The Wizard of OZ, the characters, their plights and the journey that served as a lesson to be learned. The Scarecrow wanted a brain so he could think of great things, the Tin Man desired to be more human with a heart, the Cowardly Lion needed courage to face his challenges and Dorothy was looking for a way back to Kansas.

In the end, each realized that what they wanted, they had all along. The journey merely served the purpose of letting them discover what they hadn’t to that point, similar to what appraisers haven’t discovered to this point. Like the characters in the Wizard of OZ, we have the power to effect the changes desired, we simply need to band together on a journey to discover it.

In the series "The Right Start", I wrote of things we could accomplish by working together. The theme was simple, "what if", something I borrowed from an old TV commercial. "What if" represents the possibilities when we abandon preformed conclusions, no longer seeing the glass as "half-full or half-empty" by opening our minds to possibilities.

Objectivity allows us see the glass differently, neither "half-full nor half-empty", but rather twice as big as it needs to be to hold the same amount of water, which leads to new thoughts and possibilities. We have lived with a foregone conclusion that Fannie Mae or Freddie Mac must take action or that USPAP must apply to all to resolve the issues, overlooking the possibilities of our own action to "fix that which is broken", at least to some degree.

What can or should be done?

A good place to start would be to consider appraisal fundamentals and the types of issues taken for granted by many professionals, but confusing or points of debate with others we deal with. The mortgage industry lacks consistency in application, definitions and comprehension of what we do and how it should be done.

Click here to continue reading . . .

"What if" ... Oh the Possibilities!

AUTHOR:  Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. Click on Outside The Boxes for a collection of Patrick's articles on Appraisal Scoop!

In the The Right Start I talked about a few "what ifs" and my grand scheme to change things. The real questions for many appraisers was "is this doable" and if so "why should I as an individual get involved"? Essentially, what’s in it for me since it will take a lot of "collective effort" to get it going along with perseverance and patience.

It doesn’t take much of an imagination to conjure up a "few perks" that "the association" may yield but to satisfy idle curiosities, here are a few things to think about.

Data and Map Sharing

While we have public non-disclosure rules, what are the rules for a shared database via a professional association?

• Could key data from appraisals be shared among members of the association?
• Would verified data in non-disclosure and disclosure states make a difference in your everyday work?
• What other information could be shared such as market graphs, map mash-ups (see Windows Live Maps) with data overlays for neighborhoods where members could link and share map data, builder brochures, hazard locations, etc.?

Does a national level database make sense?

If say, 25,000 appraisers join "the association" and contribute data, maps, etc., are there users outside of the association for parts of these products?

• Verified sales data base.
• Shared graphs on neighborhoods trends, etc.
• Market reports sold to real estate agents.
• Real estate maps with hazard layers, neighborhood information, graphed trends, etc.

There are many websites providing market data that is misleading. Does a "realty reality" based website make more sense to those looking to finance purchase or sell a home?

Click here to continue reading . . .

The "Right Start" - Epilogue

AUTHOR:  Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. Click on Outside The Boxes for a collection of Patrick's articles on Appraisal Scoop!

To some, "The Right Start" represented good ideas and to others, well, it was just Patrick on his soapbox again. Both have merit. I do not have all of the answers. Most of the time, "its just me thinking out loud" and you being polite enough to listen.

The Appraisal Scoop and various forums, serve as "quasi-mentors", providing news, commentary and direction to appraisers. With Web 2.0, we found a "missing link", one lost when the profession left the financial institutions to become a cottage industry of sorts.

While the quasi-mentors serve appraisers, there is still a "disconnect" and as a result, we still have "blind men describing the elephant differently".  We all have views and opinions. After all we are in the opinion business. The problem (one that generates the "but my other appraisers don’t do that") is that while we have a "uniform appraisal report" we lack a "uniform perspective and application". [Blind Men and an Elephant]

Where do we go from here?

I began with "what if" and it will end with the same thought. "What if" does not represent the questions; it represents the possibilities and the answers. "What if" is an exercise for the mind imagination and spirit, designed to recognize the problem, conceive a solution, while developing enthusiasm to energize thought into action.

I suggested "a la mode, inc." as an ally in our quest to shift direction and control (to some degree) our destiny. Some have written, suggesting that I am drinking "a la mode’s kool aide", far from it. Dave Biggers and a la mode "stepped up and took a swing", when the others we not even on the field.

Click here to continue reading . . .

The "Right Start" - Step 5 - Touchstones

AUTHOR:  Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. Click on Outside The Boxes for a collection of Patrick's articles on Appraisal Scoop!

From Merriam-Webster, "Touchstone is a noun that can be a test or criterion for determining the quality or genuineness of a thing, a fundamental or quintessential part or feature.

From Wikipedia, "the metaphorical use of touchstone means any physical or intellectual measure by which the validity of a concept can be tested, akin to "acid test, litmus test, etc."

I like both of these because they embody "testing and fundamentals", something many appraisers never learned because their mentors never taught or stressed them. From my viewpoint, touchstones are benchmarks and "benchmarks are fundamental to appraising".

In my "grand scheme" of things, no plan would be perfect without a series benchmarks to measure where we have been, where we are and project, where we could be, in the market and our profession. Touchstones serve as "road signs", forming a map that all can read and understand. 

What "touchstones" should we have?

In part one, I referred to touchstones in the form of standards and I believe that would be a good place to start. Other areas would include providing "market measures" in a uniform format (the Housing Market Addendum) or what we did in the form of a "Clarification to the Scope of Work" addendum, that provides the client and readers with a reference, common to all appraisal reports.

What should we mandate for all residential appraisal reports (that would provide the "actions of our peers" and define "generally accepted appraisal practice"), to impart a new standard of care? Wachovia and RELS have "Housing Market Conditions" addendum's. Are they adequate, too much, too little? Could we improve them and in doing so, better communicate with clients?   

Click here to continue reading . . .

The "Right Start" - Step 4 - Reviews

AUTHOR:  Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. Click on Outside The Boxes for a collection of Patrick's articles on Appraisal Scoop!

Most appraisals are for home loans that involve some form of Federal underwriting (purchase or sponsorship by Fannie, Freddie, HUD, VA, regulated lenders, etc.) and therefore, the taxpayers underwrite the risks. As such, it would only seem logical that taxpayers should get something in return.

The argument is the GSEs and others provide the taxpayers with “loan availability” and that is true, however when those same taxpayers continuously have to foot the bill for bailouts, I am not sure that this is such a good deal. In this morning’s news, “Fannie & Freddie bailout expected to be $100-Billion”. I do not think “America” had that in mind.

No one expected housing to lose money, including Congress, when the GSEs were authorized. That was then and this is now, so we need to look at this more as a taxpayer’s investment. We want “return on” and “return of” of our money, so what else should we be getting if not our money back?

Since County Assessors are “government sponsored” as well, why not give them “some help” in the form of a copy of each appraisal completed? I have heard the arguments that appraising for assessment purposes is “way different than for loan purposes”, but we share basic value principles and techniques. Essentially, the elements of valuation are the same, the applications slightly different. Even if we stock county assessor offices with “reviewers”, it would be a step in the right direction.

Click here to continue reading . . .