&
Reasonable =
e v e r y o n e i s ta l k i n g b u t i s a n y o n e l i s t e n i n g ?
five
perspectives
on the hot topic Everyone is talking about
=
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LVM
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JULY / AUGUST 2011
* LIVEVALMAG.COM | 3
co nten ts
table of contents
&
| contents |
Feature
28
Customary & Reasonable Everyone is talking but is anyone listening?
At first read, Dodd-Frank seems to be pointing the finger at AMCs as the culprit for low appraisal fees. But is that fair? Do AMCs share all the blame for low appraisal fees?
five
perspectives 4
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LVM
PUBLISHER’S NOTE
$
THIS WAY IN.....
Last month’s issue focused on the nuances of the Dodd-Frank bill. We went “beyond”
the customary and
trying to figure out how to maintain the status quo. But it appears as if they cannot bury their heads
in the sand and ignore customary and reasonable
fees. Regulators appeared to be awakening from a long slumber; some are turning their attention to
complaints over violations of the new Dodd-Frank
reasonable topic and
bill. The Consumer Financial Protection Bureau,
delved deep into
these thorny issues for
appraisers. This month we return to the hot
topic everyone is talking
about: customary and reasonable fees.
A letter from the Publisher
particularly change that costs money. Most are
created by Dodd-Frank, is still organizing and is
supposed to begin activities within the next three
months. That’s when I predict the rubber will meet the road.
In this issue we gather five opinions on customary
and reasonable fees. They come from very different
April 1 came and went without change on a
perspectives and divergent portions of our
systemic level. Lenders and AMCs are trying
industry. What’s interesting about these articles
to sort out their options. They are studying
Presumption One or Presumption Two, and what
their liabilities are. Obviously no one likes change,
is their diverse approaches to the problem. The
five different perspectives demonstrate the broad
spectrum of opinion on the subject. I think you will find these articles do not simply rehash the same old arguments about customary and reasonable
meet the team
fees.
1
You will certainly not agree with all of the
perspectives, as several are polar opposites. I do ask you to take time to read the articles with an
open mind. All too often we read an introductory
1. Publisher | Ernie Durbin II, SRA, CRP
paragraph and immediately assume we know
2. Editor-in-Chief | Emily Vannucci 3. Copy Editor | Kersten Wehde
2
the arguments of the author. Understanding the
arguments of your opponent is quintessential to winning any debate.
4. Creative Director | Traci Knight 5. National Sales Rep. & Marketing Coordinator | Kate Sheehan
In addition to the special section on customary Printer | Ovid Bell Press
3
Advertising Information | P : 858.832.8320 | E : kate@livevalmag.com
article by Jillian White. I recently met Jillian at an appraiser regulatory meeting. She is a vibrant,
Subscription | info@livevalmag.com
29-year-old real estate appraiser who is actually
Editorial | ernie@livevalmag.com | emily@livevalmag.com
excited about our industry. Jillian has contributed
Web | LiveValMag.com 4
an article about the average age of the appraiser
and how to attract new talent to our industry. The article is an excellent read and very encouraging.
© 2011 LiveValuation Magazine. All rights reserved. LiveValuation Magazine is a California limited liability company and is the publisher of LiveValuation Magazine. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in article and advertisement herein are not necessarily those of LiveValuation Magazine, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, LiveValuation Magazine is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only. Postmaster : Please send address changes to LiveValuation Magazine, 16745 W. Bernardo Drive Suite 450 San Diego, CA 92127
and reasonable fees, I would like to highlight an
This combined July/August issue will allow the 5
staff of LiveValuation Magazine a much-needed
breather, allowing us to regroup and concentrate on the fall issues and the upcoming valuation convention season.
See you in September! 6
| Publisher |
Ernie Durbin II, SRA, CRP JULY / AUGUST 2011
* LIVEVALMAG.COM | 5
UAD compliance to-do list Call your forms software vendor. Some of the questions to ask: t Are UAD features free? t Will you have a real-time compliance checker?
UAD is a big deal. Do you trust your vendor to get it right?
t Are you going to host traveling training courses?
While the other vendors were posting links to the GSEs and spouting their usual “we’re working on it” rhetoric, we already had a fully functional, UAD-compliant update available to our customers. While WinTOTAL Aurora and TOTAL 2011 users were downloading their free UAD updates and starting reports, other vendors were asking appraisers to pay a fee for updates that weren’t even available yet. And while we kicked off a nationwide (East Coast to West Coast and everywhere in between) UAD Workshop tour and free webinars, the other guys were next to silent on training.
This is a monumental change in the way you work. So, if you’re not 100% satisfied with their answers, call us to see how we stack up.
Appraisers deserve better. Even if you’re not ready to switch, our UAD experts can help.
t How much will it cost to deliver XML files (since PDFs are risky)? t Are the compliance areas going to be inline with the form or an intrusive pop-up? t Will I be able to call you 24x7 with questions?
Check out the GSEs’ websites. Fannie Mae and Freddie Mac have published a library of helpful FAQs and articles outlining the goals of the UAD and UMDP as a whole. Get trained and comfortable. If your software vendor’s training is sufficient, take advantage of it. If not, check out our free webinars, helpful videos, read the articles, or sign up for one of our traveling workshops. Install your software’s compliance updates. Work up a practice report or two. Download the trial of another formfiller and compare them side-by-side to make sure you’re saving the most time. Talk to your clients. Some of the questions to ask: t Are you familiar with the UAD guidelines? If not, they can call us. We have a full UAD education program for lenders and AMCs. t When will you need compliant appraisals?
Rely on us for training Regardless of which formfiller you use, our live and online UAD training courses are invaluable. Without them, you could spend days trying to sift through all the regulatory info on your own. And, our webinars are 100% free. Sign up at www.alamode.com/training.
Try a demo If your vendor’s solution is frustrating (or not available), give ours a try. We obsessed over every mouse click, keystroke, and eye movement. And we’re glad we did. Our solution is better, faster, and less intrusive than the others. Give us a call to set up a free trial and compare.
Visit the labs The labs is where we work with appraisers on new tech solutions. You’ll find an extensive library of articles written by our in-house experts. Get the facts on the Uniform Mortgage Data Program, how the UAD affects you, and how we can help. Visit www.alamode.com/labs.
Mention this ad and take 10% off any purchase
t Will you want XML files or PDFs? If “PDFs” are their answer, ask them to call us. We can help them accept XML files.
Have UAD questions? 6 | LVM Call us at 1-800-ALAMODE.
For detailed UAD info, visit www.alamode.com/labs AD CODE: MALVUAD0711 a la mode and its products are trademarks or registered trademarks of a la mode, inc. Other brand and product names are trademarks or registered trademarks of their respective owners. All prices, terms, policies, and other items are subject to change without notice. Copyright ©2011 a la mode, inc.
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your monthly valuation publication
9
LVM7&8.11
14
16
20
Inside This Month
Up Front 14
The “Superefficient” Marriage Risky business and diversification.
Customary & Reasonable Special Section
ro g er staiger III
30
Departments 5
Publisher’s Note
The Franken-Dodd Monster
16
Best Practices
br u ce f it zsimons
Dealing with scope creep by
35
pushing back.
Customary & Reasonable ... Really?
mar k ber ger , M AI, SRA
james Kirch me yer
8
Contributors 10
Staiger on Stats
20
Why Is the Average Appraiser 50? An investigation into what we’re doing wrong and how it can be rectified.
38
Pointing Fingers ernie du rbin II, sra, crp
Jil l ian whit e
41 46
Voices of Valuation 48
CoreLogic Stats
The Cornerstones of Customary & Reasonable Fees
24
The Hot Seat Featuring George Opelka
pat rick spicu zza
Senior V ice Presiden t, Sales and Marketing of AC I july/august 2011
49
cover
Directory
Customary & Reasonable
50
For What It’s Worth
&
Reasonable
=
Everyone is talking but is anyone listening?
28
JULY / AUGUST 2011
e v e r y o n e i s ta l k i n g b u t i s a n y o n e l i s t e n i n g ?
=
five
perspectives
on the hot topic of customary and reasonable fees
* LIVEVALMAG.COM | 7
CONTRIBUTORS
?
16
mark berger, mai, sra
Mark Berger, is semi-retired with more than 30 years of professional experience in real estate appraisal. Berger holds a B.S. in business from San Diego State University with an emphasis on marketing and also attended law school in San Diego. Berger has appraised over $1.5 billion in commercial and residential properties. Berger is an experienced expert witness and a member of Relocation Appraisers and Consultants. thebergercompany.com 619.225.2225
38
ernie durbin II, sra, crp
Ernie Durbin began his career in the real estate appraisal business in 1982 and earned the SRA designation from the Appraisal Institute. Specializing in Relocation, Durbin holds the CRP designation from Worldwide ERCŠ. At the national level, he serves on the Industry Advisory Council (IAC) of the Appraisal Foundation and is also a member of the Collateral Risk Network (CRN). As publisher of LiveValuation Magazine, Durbin focuses the publication on the concerns of the local appraiser, enhancing existing methodologies and advancing new valuation solutions.
30
bruce fitzsimons
Bruce Fitzsimons is a Certified Residential Appraiser whose career includes over 19 years as Chief Appraiser of a national bank and over 39 years’ experience in mortgage lending. Fitzsimons is currently a consultant providing valuation solution services to lenders, AMCs and appraisers. Fitzsimons is the immediate past president of AARO, member and past chair of the Kansas Real Estate Appraisal Board, member of The Appraisal Foundation State Regulatory Advisory Group, and member of the Appraisal Institute Client Advisory Board.
contr tors | contributors |
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50
don kelly
Don Kelly, Executive Director for REVAA, manages the operations of the Association: an alliance of real estate companies involved in the development and delivery of real estate valuation products and services. Kelly is an author and contributor on industry panels and a member of the Board of the Bollinger Foundation, a non profit dedicated to helping families in need. don.kelly@revaa.org
35
james Kirchmeyer
James Kirchmeyer is Founder and CEO of Kirchmeyer & Associates, a real estate appraisal and consulting company and Real-Info Inc., a real estate data and valuation company based in Buffalo, NY. Kirchmeyer’s experience spans nearly 30 years in the real estate valuation industry. As a veteran and leading authority on real estate valuations, tools and technologies, he authored two books providing proven guidance to the industry. AVMs 101: A Guide to Automated Valuation Models and AVMs 201: A Practical Guide to the Implementation of Automated Valuation Models.
24
george opelka
George Opelka is the Senior Vice President of sales and marketing for ACI, a Verisk Analytics Company. ACI is a pioneer in crafting technology whose client base features many of North America’s premier lenders, national appraisal companies, and real estate brokerage firms. Opelka has more than 25 years of experience in the mortgage services industry and is a recognized authority in valuation technology. Opelka’s personal ties to the valuation industry date back to his father, F. Gregory Opelka, former International President of the SREA (1980).
ribu-
41
patrick spicuzza
Patrick Spicuzza is a Senior Vice President responsible for overseeing the appraisal management operations for Dwellworks, LLC. Prior to joining Dwellworks in 2008, he spent 12 years with SIRVA Relocation. Spicuzza served as Controller, Director of Finance and eventually designed, developed and created SIRVA Settlement, a licensed title and closing coordination company. Previously, he was with Ernst & Young, LLC as an Audit Manager and Certified Public Accountant. Spicuzza earned a bachelor’s degree in accounting and business administration from John Carroll University.
ROGER STAIGER III
10, 14
Roger Staiger III is Managing Director for Stage Capital, LLC. His areas of expertise are commercial and residential real estate portfolio investing, corporate business; and strategic planning, forecasting, valuation, financial modeling, asset repositioning and risk mitigation through financial hedging for physical assets. He holds positions at Johns Hopkins, Georgetown, and Loyola universities. rstaiger@gwmail.gwu.edu
jillian white
20
Jillian White is the Principal of White Picket Fence Appraisals, Inc., which is a New York-based residential real estate appraisal company. They provide local appraisal services and nationwide value reconciliations. White is a member of the New York State Board of Real Estate Appraisers. White graduated from Columbia University in 2002 with a degree in neuroscience and in 2007 was named the Young Entrepreneur of the Year by the Small Business Administration. JULY / AUGUST 2011
* LIVEVALMAG.COM | 9
STATS
STAIGER on STATS
When I worked for a real estate portfolio fund and was in the home office (which was rare), the junior portfolio managers always went out for coffee – which, as agreed, was on me. The Marine, as I always called
Adam, was a brusque veteran of the Iraq War who had a “Don’t
Industry’s latest stats
Roger Staiger III
Tread on Me” attitude toward life. We instantly bonded. The Marine, who was supporting a wife and
young child, always jumped at the
opportunity to get my coffee – from respect, I believe – and probably
because I paid. Further, for reasons that were unknown to me at the
time, the coffee always tasted better
10
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LVM
when the Marine brought it back. Hence, the Marine had secured for himself a free coffee supply whenever I was in the office.
Several years after leaving the portfolio, I had another junior
portfolio manager from the fund in one of my classes and we
reminisced. He commented about hating to get the senior portfolio
manager’s coffee but commended
me on always paying. I commented
on how the coffee was always better when the Marine brought it back and Guy, the student and former
junior portfolio manager, asked if
I knew why. Fearing the answer, I
“soldiered” onward and asked. Guy
see text on page 12
indicated that while I always requested
project today (as if operational with
real estate pricing has increased on an
loaded on heavy cream and sugared
inflation. This was a reasonable and
When calculating expected future
skim milk and Sweet’N Low, the Marine flavors. The answer shed light on two
realistic assumptions) and escalate at defendable approach for future pricing.
despite an expanding waistline and
The question that remained after the conversation: “Are capitalization rates a dead and archaic concept?”
that the Marine could somehow create
The quarterly commercial real
mysteries: (1) why the Marine’s coffee always tasted better than other coffee;
and (2) why my attempt to lose weight had failed miserably during that time
period. What is interesting is the blind
acceptance of the superior-tasting coffee naivete about what did not make sense: better-tasting coffee.
estate pricing index for March 2011
The Marine has moved on to more
underperformed inflation from fourth
underwriting a complicated deal. Last
cap rate forecast for a sales price in
the cap rate for a nonstandard real
rate exceeding inflation would have
demonstrated that commercial products
senior positions but still calls when
quarter 2000 to present. Therefore, any
week he called asking how to determine
today’s market that forecasted a growth
estate project. Not knowing where or
been incorrect. Historically, residential
annual average of close to inflation. pricing of a real estate asset over a
longer period, i.e., 10 years or greater, is it better to pro forma forecast the net operating income and apply a
forecasted cap rate, or simply to price
(value) the asset at present using known metrics and escalate at inflation? Of
course a commercial property will have tangible free cash flow (NOI less debt
payments), which must be discounted
back to determine final value. However, should the final sale price for a
commercial or residential property
be quantified using a capitalization
approach or inflation-escalated value
from purchase? A thought to ponder. >>
how to direct him, I responded that
forecasting cap rates was like his coffee, i.e., a fallacy. I told him to value the
For an industry where leverage is the normal, more properties are in negative equity positions and will struggle for refinancing from now until 2015. JULY / AUGUST 2011
* LIVEVALMAG.COM | 11
Residential raw pricing (see chart on
estate pricing performance. What is
The month-over-month pricing for
the contention that real estate pricing
rate of growth since January 2000 is
bright spots including D.C., Seattle,
page 11), like commercial, supports increases over the long-term, at the
rate of inflation, i.e. commercial and residential real estate over the longterm are inflation hedges and not
opportunistic investments. Even with the futures pricing included with the
residential to extend the outlook, price increases tend to follow the rate of
consumer inflation. The exception to this, as indicated in the graph, is the
DC-MSA, which continues to dominate the news due to its outstanding real
unique about the DC-MSA is that the twice the rate of the inflation, double the rate of the national composite index as
well, and D.C. is 10 percent higher than the previous low point in the middle
of 2009. The national composite-20, not shown in the graph, and the Chicago MSA have both double-dipped – my
double-dip prediction is now a reality!
The futures pricing continues to support a residential bottom of mid-2012 with a recovery not occurring until 2014/’15.
residential demonstrated several
New York (condominium) and San
Francisco (condominium). The 200bp spread in performance remained consistent between D.C. and the
composite-20. Most concerning in
the month-over-month data is the
performance of the commercial sector, which lost approximately 500bps in value. If the commercial asset class
is valued at approximately $6,000bn,
the 4.25 percent reduction in value is
approximately $255bn, which represents
The national composite-20, not shown in the graph, and the Chicago MSA have both double-dipped – my double-dip prediction is now a reality! The futures pricing continues to support a residential bottom of mid-2012 with a recovery not occurring until 2014/’15. 12
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close to 32 percent of the total CMBS
reversion, i.e., compounded growth
multifamily (at the expense of
syndicates and structured products stop
D.C. to the nation as D.C. was before
capital cushion erodes monthly. The
market. When the commercial bankers, extending and pretending in order to
face reality, there will be considerable
opportunities for buyers in commercial asset class for those with cash. The year-over-year pricing for
residential continues to be horrific,
at inflation, and the “recoupling” of January 2008. As indicated by the
month-over-month data, the year-
over-year strongly supports bearish
sentiment for the commercial sector.
While the commercial asset “darling” is
residential homes), commercial’s thin year-over-year price loss in commercial was 850bps. For an industry where
leverage is the normal, more properties
are in negative equity positions and will struggle for refinancing from now until 2015.
with the continued exception of
Whether it is sweet-tasting coffee or
MSA. The decoupling of D.C. from
the excess without an eventual belt-
America’s Versailles, i.e., the DC-
the nation is more pronounced by the
spread between the two performances. Recently it was steady at 600bps but
for March 2011 it widened to 700bps.
The stimulus packages, budget bandaids and future debt level increases
continue to benefit the DC-MSA to a significantly greater extent than the nation. I continue to believe there
will be a major market correction in
the DC-MSA over the next few years
real estate pricing, one never enjoys
tightening. I blame the Marine for my
expanded waistline because it is easier than admitting the reality that I was
ignorant to future diet requirements. The U.S. populace can blame Wall Street and easy credit for the
current situation but the reality is, we ignored fiscal discipline in favor of past
consumption. 6
due to the simple basics of mean-
JULY / AUGUST 2011
* LIVEVALMAG.COM | 13
U
up front One consideration is that as
when enough assets are
partners) are introduced to
only with systematic risk,
the number of assets (i.e.,
the marriage, diversification
increases. As diversification increases, risk decreases exponentially in a
portfolio. Of course, this is not without limit. At
approximately 30 assets
the risk level is asymptotic to the systemic level (i.e., market risk). Perhaps
portfolio theory suggests
that polygamy is efficient?! Could certain sects of the
Mormon faith be correct? Risk in a marriage (i.e., business) is separated
into two distinct classes:
Systematic (market) and unsystematic (unique).
combined, will be left
i.e., normal risk. General
portfolio theory suggests that the combination of 30 assets held together is enough to eliminate
virtually all unsystematic
risk. Anecdotal data taken from viewing 60 Minutes as a child suggests that
six wives in a polygamist marriage eliminates
all unsystematic risk.
Regardless of portfolio
theory and/or polygamist examples, the more assets held, the greater the
reduction of unsystematic
risk through diversification. Presumably Bill Clinton’s
marriage to
Hillary was
efficient. After
The
“Superefficient”
Marriage
all, they did
both graduate from Yale
Law School
Rhodes Scholar. Could there
as scheduling conflicts,
However, being a Rhodes
life disagreement such financial constraints
and basic personality
mismatches. Unsystematic risk is specific risk
Risky business and diversification.
(unique) to an asset, i.e.,
roger s tai ger II I
of individual risks are a
Y
ou have found efficiency (i.e., love) and married your opposite, so life simply could not be better, right? If so, how does portfolio
theory describe the behavior of Bill Clinton and Tiger
Woods? Did neither marry his opposite, or were their unions
inefficient? Possibly, but it’s more probable that each was seeking a higher level of efficiency than found in their marriage. 14
|
LVM
and Bill is a
Systematic risk is normal
individual risk. Examples
be a more perfect marriage? Scholar, Bill most likely
sought points of efficiency greater than those found
on the efficient frontier, i.e., Bill sought alpha, returns greater than market.
troublesome parent-in-law,
Further, was Tiger Woods’
psychological imbalances.
not efficient? Could a
previous financial debt, and By combining multiple
partners within a marriage, portfolio theory contends
the individual risks will be muted. Thus the marriage,
marriage to Elin Nordegren greater efficiency be
achieved than one formed by the combination of the
world’s greatest golfer and a supermodel?
of publication is problematic. Libor is published daily at 1100 GMT, several hours
before the New York markets
WALL
open. While several years ago there was discussion of the
creation of a NYBOR (New Tobin defined the capital market line to be points
above the efficient frontier
upon which greater efficiency is achieved. This line, the
capital market line (CML), is characterized with the y-intercept equal to the
risk-free asset and tangential to the efficient frontier, as
defined by Markowitz. The
point of tangency is defined as the “superefficient”
portfolio. The only point on the efficient frontier where greater levels of efficiency cannot be achieved is the
“superefficient” portfolio. Perhaps this helps explains Bill Clinton’s actions: His marriage to Hillary was
“increasing” his efficiency.
Portfolios along the capital market lines achieve the
higher levels of efficiency by using leverage, both lending
and borrowing at the risk-free rate. By using leverage within a portfolio, more efficient portfolios can be created.
Of course, Tobin assumed that a portfolio manager
could borrow and lend at the risk-free rate, a dangerous assumption when placed in practice. This begs the
obvious question, “What is
the risk-free rate?” Obviously, the correct risk-free asset (i.e., rate) is critical in achieving
a portfolio along the capital markets line.
efficient, it just was not
In finance, the risk-free rate is
Rhodes Scholar, Bill was
indices, Fed Funds Rate and
“superefficient”. Being a genetically wired to seek the highest levels of efficiency! Perhaps this helps explain
Tiger Woods’ actions as he
was constantly surrounded by a bevy of beautiful
women, all of whom were eager to assist Tiger in
contentious. The two leading
Libor, are highly debated. Fed Funds rate is U.S.-focused
and lacks fluidity as the rate
is set by the Federal Reserve at regular intervals. Libor
is more continuous, being
updated daily from a survey of 16 banks, but the timing
York Bank Offering Rate), the idea has been largely shelved due to the current financial
turmoil and the need to focus on larger issues in finance,
i.e., systematic risk failures. Unfortunately for Bill Clinton and Tiger Woods, defining the risk-free asset in their
marriages was just as elusive
as defining the risk-free asset in finance. Clearly White House interns and high-
SHAME We know you’ve been there – do stupid requests leave you pulling out your hair!? Well feel free to let loose on our Wall of Shame. Everyone remains nameless so no one gets hurt - it’s just a good ol’ venting session.
M
priced prostitutes are not risk-free!
What have we learned
from the interpretation
of Tobin and Markowitz
by Bill Clinton and Tiger Woods? It is not enough
to find efficiency and get married, thus forming a
two-asset efficient portfolio.
Had a client want me to write a letter stating that the subject property had not sold within past year. The report clearly stated that the property had not sold in past 12 months, so I had to send them a letter explaining that 12 months equals 1 year.
Rather, as educated persons, we all must seek a mate that not only creates an efficient portfolio but
is “superefficient”. The marriage’s efficiency
cannot be increased with
an additional risk-free asset (such as an intern), i.e., the
marriage is “superefficient” (perfect). Therefore, when
you are holding that special someone, it is not enough
to simply say, “You are my
Submit your Wall of Shameworthy comments to info@livevalmag.com. We promise, you’ll feel better after you do!
efficiency,” but rather, “You
make me ‘superefficient!’” 6
JULY / AUGUST 2011
* LIVEVALMAG.COM | 15
U
up front AMCs have employment
appraising is to ask if the
appraiser to do whatever
or an underwriter. This
contracts that require the is requested, frequently
increasing the scope of
the work. The contact is
usually with a clerk that is following a guideline
that was dictated by
a supervisor, corporate
attorney, government
rules or the AMC policy.
It is necessary to develop
strategies to address these situations, which I call pushing back.
This can range from
repeatedly educating
the clerks in a tactful
way as to what your
business allows; why
the fee requested is for a
complex research project; or how the industry is
Best Practices Dealing with scope creep by pushing back.
T
Mar k Ber ger , M A I , S R A
he process of operating a small business necessitates a level of confidence, authority, and willingness to keep your principles. The opportunity to work directly with the client has changed with the HVCC and its subsequent manifestations. Many times clients will try to demand a compliance that is excessive, intrusive, irrelevant, more work for the same pay or just plain obnoxious. 16
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request is from a reviewer is significant because it
determines whether the
requested task comes from
a reviewer who has looked
at the market and may want more information found or unexplained in the report. The request may be from
an underwriter who knows little about the appraisal
but wants better data and
is, in a way, justifying their job. The obvious answer
would be that if there were better data it would have been used in the report. Sometimes the data or
market explanation is in
the report and that location can simply be called to the underwriter’s attention.
changing and you are
adapting. (For example,
“This is going to cost you more because it requires
more work.�) Your response needs to be reasonable for the situation.
Over time, these
interactions can create
severe stress, lead to anger that is inappropriate for the situation and create
exhaustion and burnout of the service provider.
Pushing with Professionalism Pushing back can come
through membership in professional appraisal
organizations. Many of
these have active lobbyists and yet they are, for the
most part, underfunded. The appraisers in this
country do not have a
union to represent them against the big lenders
Pushing with Inquiry Sometimes a useful way of
pushing back in residential
in the industry. The
banking community has
a long history of a divideand-conquer approach,
which has directed work
to unqualified licensed
the next few months and
This process of informing and
cheaply, fast and with
to inspect my new minority
or review the appraisals can
appraisers who will work adequate accuracy. Many appraisers have felt a
common voice is needed to
represent the industry. This could manifest in a union
they would be invited over status. Needless to say, we
did not get the job, but I got a good laugh and felt better about being disqualified.
and would require strong
In another example an
exert some protection and
same minority question and
national representation to
help the individuals in this profession. Considering how independent most
appraisers are, this option
would be a huge undertaking for the estimated 100,000
professionals in the country. This possible membership
would be reduced because
it would be of no interest to the appraisal staffs of local governments that work in
county tax assessments, rightof-way appraising, probate
and estate tax appraisers and state real estate departments.
appraiser was asked the
responded with a push-back
situation was a request many years ago from a federal
government agency asking
that my office be a minority business in order to do the
work. My office was in fact not minority-owned and I
informed them that I would be getting a sex change in
does not know how much
experience or knowledge the
client’s representative has. In some cases it appears they were hired last week and
their prior job was in sales at
told the appraiser that his
For example, more
Sometimes the push-back
are required to be included
is paying for the extra work.
example of scope creep. The
client can be an enormous
or reviewer to the federal
know would not produce
client clerk that this is an
this by outlining the number
is pushing back. The federal
tasks that are involved in
fee is based on and if the
time necessary to complete
must be willing to pay for
being microscopic in detail),
analysis and research.
where to send the bill. Or,
If enough professionals
contact the client to see if
reasonable compensation for
additional work.” Or inform
users of the work products
is complete as ordered and
get what they need and they
additional work, analysis, or
combat veteran. He had
made the lowest bid, was work. The government agent veteran status did not count and they would get back to him. The agent never did. Sometimes the push-back
simply feels good and could be considered the market
response to an annoying and seemingly unfair demand.
Pushing by Educating the Client/Reviewer/ Clerk On occasion the situation is
One example of a push-back
happens frequently. One
qualified and needed the
that he was a wounded
appraisal organizations and
Pushing with Humor
Sometimes a useful way of pushing back in residential appraising is
Macy’s. In other cases they
the national level with the
states.
be a stressful experience that
to ask if the request is from a reviewer or an underwriter.
Push-back is happening at
it has to happen in all the
educating those that order
one of education. The process of pushing back can be as
simple as knowing what the federal appraisal guidelines are for the appraisal form
being used. The details of the requirements for each data
box will determine what has
to be done and the appraiser
have been in the industry for many years. It is best to be
humble, careful, courteous and polite.
comparable sales or listings
can come in the form of who
in a report. This can be an
A simple request by a clerk/
appraiser can refer the clerk
research job, or a job that you
guidelines. Informing the
any results. I have handled
example of scope creep and
and size of all the research
requirements are what the
meeting this request and the
client wants more, they
these additional tasks (while
that additional time, work,
and then politely asking
one can say, “I will need to
are willing to request a
they want to pay for all this
the additional work, then the
the clerk that the appraisal
will understand that they will
remind the client that the
must pay for it.
exhibits were not what they
bargained for when they >>
will know when a request
for something more is made.
Push-back is happening at the national level with the appraisal organizations and it has to happen in all the states. JULY / AUGUST 2011
* LIVEVALMAG.COM | 17
negotiated a brief report.
He wanted terms, condition
be adjusted? The change in
only cover the work that
client was not happy but the
property, how long it had
some enthusiasm to expand
while any indemnification
In the example above, the request was dropped.
of property, any personal been on the market and
comments on the transaction. The data requested pertained to the sale of the subject
property five years prior.
Pushing with Professional Judgment Another way of pushing back is by using your professional judgment on the request.
An incident that comes to
mind is a review of a small,
single-family appraisal. The reviewer requested a large
list of additional data of the earlier sale of the property.
This was from a reviewer
that claimed to have been in the business 15 years. The
push-back was a response
listing all these items and the professional judgment that
they were all irrelevant to the present estimate of market
perspective can generate your knowledge and be
of more service. The next
opportunity that comes from such a request is a way to
better your relationship with
the client and show them you are a professional and keep your integrity. This shows
confidence in what you are
doing as well as the analysis of data pertinent to the valuation task at hand.
value. It was a reasonable
The client accepted this.
Conclusion It is up to the appraiser to
choose the most appropriate push-back to the situation. Establish some reasonable
If enough professionals are willing to request a reasonable compensation for the additional work, then the users of the work products will understand that they will get what they need and they must pay for it. 18
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Pushing by Making It a Creative Exercise This creative exercise
opportunity could change your perspective of the
process by asking questions on what or why the
request was made with the
understanding that you have completed the research and did a thorough job.
How does this additional information add more
validity to the conclusion? Or if you needed additional data (beyond what is normally
included) before the report was ordered, why was it
not included in the initial request so the fee could
appraiser being named by anyone in the transaction who files a lawsuit and
includes the AMC. This could happen years from when
the appraisal was made. At
the present time the FDIC is becoming the largest player in the lending litigation arena. This is seldom
negotiable and an important business decision that could the appraisal.
information would have
estimate of value whatsoever.
expands the liability to the
have ramifications years from
decision; researching all this made no change in the final
is done on the appraisal,
boundaries and a wholesome sense of confidence to
push back. At the same
time, recognize the need
for following the USPAP
guidelines as well as your own liability boundaries. This would mean not
agreeing to an employment contract that places you in greater liability, such as in
the case of AMCs requesting indemnification contracts
that increase your liability.
The answer has to consider how much you want the
work. How much do you
stand to lose? Is the stress going to cause health
problems? Your E&O will
A typical response to a pushback is the client informing
you, “Our appraisers do that for us for free.� This is an
attempt to coerce you into
compliance. It is disrespectful of your professional time and expertise. It does
not take into account the
research, analysis and data sources that you use, nor does it recognize your
training, ethics, experience and license. Information is
what you sell to the public
for a living. Providing data free-of-cost with hopes of getting more business is
many times a one-way street from the appraiser to the client. Pushing back has
to be completed tactfully, truthfully, and with the
acceptance that this client
may seek services elsewhere.
In the final analysis, that may be a good thing. 6
Pushing back has to be completed tactfully, truthfully and with the acceptance that this client may seek services elsewhere.
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t Appraiser to appraiser communication: Only our staff appraisers communicate on items related to the appraisal process. Additionally, our staff appraisers are easily accessible to our panel.
By providing an experienced staff of appraisers for communication, we help to ensure our network of appraisers are treated fairly, and within all state and regulatory guidelines. Our valuation management team is comprised of professionals with an average of 20 years of experience within the mortgage industry.
t Twice monthly pay cycles: Appraisers are paid for all completed assignments twice monthly. t Appraiser independence hotline: To report any potential violations of appraiser independence. t Zero overseas outsourcing: All business is conducted and processed in the US. t Geographical order clustering: Helps with appraiser efficiency and competency.
Contact Urban Lending Solutions Appraisals and Sign Up Today email: appraiserapplications@urban-lsa.com | call: 888-996-8060 JULY / AUGUST 2011 LIVEVALMAG.COM | 19 www.urban-lsa.com *
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up front I’ve always known this
position because I wanted
statistics made me chuckle
mean, I really wanted to
intuitively but seeing the because they brought
back a slew of memories. I remember during my
first two years appraising, I’d often get a quizzical look that said, “You’re the appraiser?” Most
appraisers don’t engage the
homeowner in conversation for fear they’ll ask for a
value. My big fear was that
they’d ask my age, or worse yet, how many years I had in the business.
At the start of my career I was 21 and just out of
college. I had never bought a house or even a car, and
yet I was valuing someone’s home. It felt incongruous. My training did not leave
Why Is the Average Appraiser 50? An investigation into what we’re doing wrong and how it can be rectified. Jil lian W hi t e
I
am a 29-year-old residential real estate appraiser. I’ve been appraising for eight years and according to The Appraisal Institute, I’m a bit of an anomaly. Less than 12 percent of all real estate appraisers in the country are under the age of 35. 20
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me feeling empowered or
confident to take on such a
to become an appraiser. I
become an appraiser. I had just graduated from an Ivy
League school with a degree in neuroscience and could have done anything, but I
chose appraising. The idea of getting paid to look at
people’s homes thrilled me because it was something I
already did for free. For my 14th birthday I didn’t ask
for presents; I asked to be taken to an open house.
So despite the commute and the long hours, I accepted the position. They had a
ton of volume. Each of their appraisers was completing four to five orders a day. I would have loved to help
out with the workload but since I hadn’t taken the
high level of responsibility. Plus the homeowners’
skepticism about my being so young only heightened my insecurities. I had
taken some courses, passed some tests, mailed a few
documents to the state and
then got a piece of paper in the mail that said I was an
appraiser in training. A few months later I was out in
the field and didn’t know what I was doing.
Six months before
inspecting my first house I took a job working in a
large appraisal office. I had a 90-minute commute and
was asked to work 12-hour days but I accepted the
At the start of my career I was 21 and just out of college. I had never bought a house or even a car, and yet I was valuing someone’s home. It felt incongruous.
coursework yet and everyone
who were entrusting me
energy before any of the
point: The first one dropped
anything, I handled the
largest investment, I felt
not as though 20-somethings
me on because they were so
was too busy to teach me status updates. They had
me answering phones, filing papers and the gentleman
who was supposed to be my supervisor had only been appraising for six weeks
himself. I quit after 20 days
and still knew nothing about
how to complete an appraisal report. I thought to myself,
“Well, once I get my license, finding a mentor should be easier.” Little did I know that my journey was just beginning.
For the next three months
I sent out resumes to every appraiser in my county.
When that didn’t work I sent out resumes to appraisers in
the five neighboring counties. Finally, I found someone who
to attach a value to their
ill-equipped. It wasn’t that I
was young; it was that I still had lots of questions that
hadn’t been answered. If a
homeowner keeps bragging about brass doorknobs,
should I make an adjustment for them? Which is better: a recent comp that’s far
away or a nearby comp
that’s dated? Is there ever an instance where cost equals contribution? Eventually, all of my questions were
answered and my confidence grew. However, I wish my training had been more intentional. The
because he was just too busy. Back to the drawing board I went.
him, I was out in the field
on my own. And so when I
stood in front of homeowners
they didn’t because they wanted to help out the
next generation. Their only
incentives to take on a trainee
percent
of all real estate appraisers in the country are under the age of 35.
the appraisal industry that I believe is the greatest deterrent to attracting
were a desire to help and an
overflow of work. However, leaving the training of new
appraisers up to volume and altruism isn’t working. New appraisers are getting stuck
in the pipeline and allowing their licenses to expire
because they can’t get their
hours. Prospective appraisers aren’t even getting started
younger appraisers. The
training and development of new appraisers is left up to
because what’s the point of becoming a trainee if you can’t get trained?
Supervisory appraisers are
capital. Nearly half of all
greatly benefited from
or even incentive to train the
should have. I would have formalized field training.
become appraisers. The
after I started working with
12
or certified appraisers but
remained longer than they
appraiser who was willing and train me. Two weeks
help them carry the load…
The appraisal industry is
There are many reasons
to take me out in the field
they needed someone to
decide for themselves.
gaps in my understanding
I followed up with a few
prospects, and found another
bombarded with work that
taken on experienced trainees
each supervisory appraiser to
proper consideration. The
me. These appraisers took
and fast. They could have
Less than
missing or had not given the
for two weeks and then he continue with my training
pre-HVCC. However, there
is one intrinsic flaw within
what important factors I was
told me that he could not
were dominating the field
“baptism by fire” approach works well with some things, but fieldwork is just too important to be handled in that way. I never knew
was willing to take me on.
We went out on inspections
market changes began. It’s
why people my age don’t turmoil within the real estate market in general – and
the appraisal industry in
particular – is aggravating
the problem. However, there was a shortage of youthful
given no guidance, support, next generation. Trainees are trained by whoever
hemorrhaging intellectual appraisers are over 50. Many are retiring or just getting
out of the business due to
frustration and there are no
is certified and willing.
There is no vetting process, and a supervisor’s work
fresh faces to replace them.
Appraisers are going extinct.
situation does not have to
The lack of an organized
a novice. I was fortunate
all new appraisers but it
be conducive to teaching
mentorship program affects
enough to be trained by two
excellent appraisers but they had no time for me. Case in
is most detrimental to the
younger demographic. >>
The appraisal industry is hemorrhaging intellectual capital ... Many appraisers are retiring or just getting out of the business due to frustration and there are no fresh faces to replace them. Appraisers are going extinct.
JULY / AUGUST 2011
The
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* LIVEVALMAG.COM | 21
appraisal industry needs to
would have to be very
as though I am a salesperson
educated due to the new
become an appraiser before
I gently correct them
attract those who are college-
certain that they wanted to
education requirements, and also those who are young so
that they can have longevity in the business. Therefore,
recent college graduates are the ideal group to target.
However, appraising is not appealing to this group.
Most college graduates have been funneled through the
school system since the age of 5. They may have had
some choice in the schools they attended and in their coursework but these
choices were always within the confines of a clearly
delineated path: elementary school, then middle school, then high school, and then college. Finding a job after
college is often the first time in a young person’s life
when he/she has a plethora of options. The possibilities
they’d be willing to make
However, there is one intrinsic flaw within the appraisal industry that I believe is the greatest deterrent to attracting younger appraisers. The training and development of new appraisers is left up to each supervisory appraiser to decide for themselves.
are limitless and can be overwhelming.
Very common advice for a
recent graduate is to find a company or industry with a good training program
where they can be nurtured
and developed. It’s a way of being out in the world with clearly defined parameters of one’s own choosing. It’s what I longed for when I graduated and what I
thought I would find when
such a large investment of
time and money. Attracting
young college graduates is a
competition. The objective is to find the smartest students and woo them to your industry.
As it stands right now, the
appraisal industry is losing recent college grads to
other fields that offer more guarantees and a more
clearly defined path. Older
office. However, the way the industry is designed now,
you have to jump through so many hoops in order
to even inspect your first
house. There is the upfront cost of the coursework, the
upfront cost of software and equipment, no guarantee of ever finding a supervisory appraiser and uncertain income potential. One
and educate them on the
differences between a real
estate salesperson and a real estate appraiser. However, the message is clear: They
don’t know what I do. Within my sphere of influence I am the only appraiser that my
friends and family know. In general, there is not much
opportunity to bump into an appraiser considering there are only 90,500 of us out there.
individuals who have already
Appraisers have not done
financial flexibility are in a
the industry. There are no
had careers or have greater
better position to make such a leap. For someone who
is fresh out of college and exploring lots of options,
appraising may not make the cut.
You will notice I have
not focused on low fees, working for a large appraisal
who sells and lists homes.
changing regulations or increased educational
requirements as deterrents to young individuals becoming appraisers. This is because
most people my age have no
idea what an appraiser does, let alone the intimate details
of what we as an industry are
a good job of promoting
appraisal TV commercials, no appraiser characters in TV or film, and no reality TV shows showcasing
attractive appraisers as they inspect houses. We, as an
industry, can learn a lot from Realtors. They are excellent
at getting the word out that they exist and are ready for
business. Realtors advertise because real estate sales are
a consumer-driven business. However, as a result of their advertising, Realtors are at the top of mind when you mention real estate.
facing.
Appraisers can use the same
When I tell people what I
demographic. The more
do, 90 percent of the time
they begin speaking to me
tactics to attract a younger 20-somethings that know
Appraisers can use the same tactics to attract a younger demographic. The more 20-somethings that know about real estate appraising, the greater the likelihood that more will be inclined to appraise. 22
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^
about real estate appraising, the greater the likelihood
that more will be inclined to appraise.
Nearly half of all
I believe if we make
appraisers
young people aware of the opportunities within real
estate appraising via media outlets such as Facebook, Twitter and YouTube, we
can capture their attention
are over
greater number of interested individuals.
to play an integral role in
revamped the process for
the rebuilding of the U.S.
training new appraisers,
more 20-somethings would see appraising as a viable in the pipeline would be more likely to get their
hours and become certified. I suggest including field
career option they didn’t
training in the coursework
know existed. We can attract
to give each trainee a strong
those who have an intrinsic
foundation in inspecting
interest in valuations, and out
properties, or having
of that group select the best and brightest. If those with network with people their
more opportunities for those entering. As a whole, we
are looking to re-engineer our processes, rectify the
mistakes of the past, and
increase professionalism.
What a perfect time for fresh ideas and new perspectives.
mark. Let’s make it known
cool and every new graduate
questions, we could retain a
out of the industry there are
train and develop new talent. going for it. What we do is
the field and can answer their
appraisers are transitioning
Young appraisers have an
Appraising has so much
own age who are already in
housing market. As older
designated supervisory
appraisers in each county to
piqued interest were able to
live, we get to work with technology, and we get
Additionally, if appraisers
career path and those already
and shine a spotlight on a
We get to see how people
wants to do something cool.
opportunity to make their that we are out here and
welcome them into the field with open arms. 6
I take the same route to work every single day. My clients like that. Yep, I’m predictable. When it comes to property appraisals, no one likes surprises. That’s why I maintain a reliable fee schedule and consistent turn time, so that my clients know what to expect every time. And that’s what you can expect from IRR-Residential appraisers nationwide. A commitment that ensures consistency in an industry that can be full of uncertainty. At IRR-Residential, we’re working together to make sure your biggest surprise is, well, not getting one.
Predictability is a good thing. 866.538.8935 liveval@irr-residential.com irr-residential.com
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up front
THE HOT SEAT
20 questions - things you need to know or may have been wondering JUly / august 2011
the hot seat From the best job he has ever had to the one thing he would change about the valuation industry, we get the personal and professional facts from George Opelka, Senior Vice President, Sales and Marketing of ACI, in our monthly edition of The Hot Seat. 24
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george
opelka
PERSONAL
AC I
Senior Vice President of Sales and marketing
>
Ten years from now I want to be the next Simon Cowell.
>
My favorite website is Google – it’s a lot easier to use than the card catalog. If you don’t
know what a card catalog is then you don’t have any gray hair.
>
I can’t go without shaving before I leave the house in the morning – a pet peeve of mine.
>
When I was a kid I used to love to ride with my dad on inspections just so I could peel away the film paper from the
picture after he used his high-tech Polaroid Land camera. Google that!
>
I’ll never forget Walter Payton and the 1985 Chicago Bears. Da Bears!
>
The best job I’ve ever had was a baker at a cake boutique in Chicago when I was 14. I have fond memories of
frosting wars in the kitchen.
>
I’ve never watched a single episode of Seinfeld. Really.
>
The best lesson I’ve ever learned was constitutionally, after the “first,” everything else is second … dedicated to
Appraisers’ Freedom of Speech by F. Gregory Opelka, MAI, SRA.
>
The worst purchase I’ve ever made was my first home.
>
The best purchase I’ve ever made was my first home.
I’ve never watched a single episode of Seinfeld. Really.
PROFESSIONAL >
The biggest challenge to the appraisal/valuation community is understanding the new landscape, maintaining
>
The biggest technological leap for appraisers was rub-on arrows, one-hour photo booth, the Polaroid instant
compliance and operating at a profit.
camera, the fax machine, forms software, the cell phone, the digital camera, electronic delivery, email and the Internet.
>
The greatest setback for appraisers was appraiser licensing and the market demand for better, faster and cheaper.
>
Ten years from now the valuation industry will be completely different because crisis will give birth to
opportunity through innovation. Advancements in technology and reform are changing the industry right now. Imagine what it will look like in 2021.
>
The most ridiculous thing about the valuation industry is the current ostrich mentality toward customary and
reasonable fees.
>
The most fascinating thing about the valuation industry is the diversity, the drive and all the people that make up
this great industry.
>
If I could change one thing about the valuation industry it would be to raise the standards for the appraisal
profession, establish a mentoring program that will preserve those standards and establish a pay scale commensurate with the level of service provided.
>
Dodd-Frank is like a box of chocolates.
>
I entered the valuation industry because my father was an industry pioneer who provided me with exposure to
technology and thousands of appraisers that were excited and proud to be associated with the profession.
>
Before I entered the valuation industry I was a student at the University of Alabama. Roll Tide!
JULY / AUGUST 2011
* LIVEVALMAG.COM | 25
An Appraisal Report So Good You’ll Want To Frame It! REAL ESTATE COLLATERAL VALUATION REPORT SUMMARY APPRAISAL REPORT CLIENT
Executive Summary. The Collateral Valuation Report was designed so that the first page presents an executive summary of your market analysis and value conclusion.
4811 Kingston Avenue
Borrower James Rogers
Address 2445 Septimus Drive
ST CO Zip
City Littleton
Contact Sample Appraiser
Phone (303) 875-5677
Address 4811 Kingston Avenue
City Highlands Ranch
Owner Kim Jones
STCO
Zip 80126
County Douglas
APN 2231-18-2-10-013
R.E. Taxes $ 1,960.41
Property Interest Appraised:
Fee Simple
Tax Year 2008
Other
Highest and Best Use: Legal Description LOT 392 HIGHLANDS RANCH # 120C 0.093 AM/L
SUBJECT
Photo Date and Source The date and source of the photo is indicated to ensure relevancy and reduce fraud.
File No.
Ref No. 00001563
Client TerraForma Lending
Year Built 1998
Total Rooms 3 Bedrooms 3
Design (Style) 2-Story
Stories 2+B
Baths 3
Car Storage G2
GLA 1680
Basement 464
Site Area 3920
Appraiser Source Pictometry
PhotoDate 03/15/2009
Bsmnt Finished
Comments: The subject property is a typical improvement for the neighborhood. Given the diversity of the Highland's Ranch neighborhood, it represents a newer home within this area.
Market Trends. The trends for sales and listings for the market area are graphically shown for easy and better interpretation of the activity in the market area.
Neighborhood Name Highlands Location Built-Up Growth
Urban
Suburban
Over 75% Rapid
25-75% Stable
NEIGHBORHOOD
Tr en d s Median List Price Median Sale Price List to Sale Ratio
Last 3 Mos. 299,900 235,000
Rural Under 25% Slow Property Values Increasing Stable Declining
96.25
Price($000) 185
Low 3
450
High 35
Neighborhood Boundaries
Age (Yrs)
Pred 12 380 Demand/Supply Marketing Time Shortage < 3 Mos In Balance 3-6 mths Over Supply
Appraiser’s Opinion of Value. The appraiser’s opinion of value and the effective date of the value are indicated.
Over 6 mths
Sales Prices Listings Price
300,000 250,000 10-12 Mos
7-9 Mos
4-6 Mos
0-3 Mos
Fe Drive in the southern tier of the Denver Metropolitan area. The neighborhood consists of more than 20,000 housing units and is considered to represent one of the more desirable neighborhoods in the area. Housing stock varies widely in this neighborhood, with home prices ranging from $200,000 to more than $1,000,000.
Neighborhood Sales Price Range: $
185,000
Average Neighborhood Sale Price: $
380,000
to $
450,000
249,576 Indicated Value from Regression: $ 249,574 to $ 249,579 Indicated Value Range from Regression: $ Based on the defined Scope of Work, Statement of Assumptions and Limiting Conditions, and Appraiser's Certification, my opinion of the 12/01/2009 , which is the effective date of this appraisal, is $ 252,500 market value of the subject as of .
% Change
FORECAST
0
-2.22 3 Mos -3.33 6 Mos -4.44 9 Mos -5.55 12 Mos
-2 -4 -6 -8
$ $ $
3 Mos
6 Mos
Forecast Source Veros
9 Mos
12 Mos
$
Market Value 252,500 Next 3 Months 246894.5 Next 6 Months 244091.75 Next 9 Months 241289 Next 12 Months 238486.25
Comments: The forecast for the suject market is for continued declines.
Date 02/05/2010
Appraiser Identity and Data Authentication by
Appraisal Sentry (TM)
Date 02/11/2010
Name Sample Appraiser Company Bradford Technologies Address 302 Piercy Rd City San Jose State License #
CA
Zip 95138
CA5778
Certification # Other # Expiration Date 01/01/2011
Identity Authentication. The identity of all CVR Certified appraisers has been authenticated by Appraisal Sentry using “out of pocket” credentials.
$
Inspection:
No Inspection
CVR Executive Summary
State CA Exterior Only
Interior and Exterior
Date
Copyright 2009-2010 AppraisalWorld, Inc. 866-445-8367 All Rights Reserved
Page2 of 12
The New Collateral Valuation Report Produced by appraisers trained in real estate regression analysis Learn how you can profit with this new report.
26
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12-Month Value Forecast. Using economic data, the value of the collateral is forecasted for 90,180, 270 and 360 days out. A trend chart for a better understanding of the anticipated values is shown.
Signature
APPRAISER
Value Reconciliation. The value ranges in the market area, the indicated value by regression and the range are show in one place for easy reconciliation of the overall values in the market area.
Market Area Graphically Illustrated. The market area is graphically illustrated on a map showing the subject and surrounding area
Neighborhood Description and Market Conditions: The Highlands Ranch neighborhood is located proximate to Highway C-470, between Interstate 25 and Santa
VALUATION
Neighborhood Demographics. The standard neighborhood demographic information typically found on a 1004 is also found on the CVR.
Property Photo. The subject photo is on the front page. Makes it easy to view and ensure it’s the correct property being used for collateral.
Call Today 866-445-8308 CompCruncher, AppraisalWorld, CVR are trademarks of Bradford Technologies, Inc.; Other brand and product names are trademrks of their respective owners.
Report Fraud Prevention Using “On Document Verification” technology, this data matrix contains all the pertinent data about the appraiser and the report. This is similar to technology used by the postal service to prevent mail fraud.
Statistically Supported Appraisals. Distinguish Yourself and Profit. Local Market Analysis File No. 4811 Kingston Avenue Ref No. 00001563
NEIGHBORHOOD DESCRIPTION AND TRENDS Property Address
4811 Kingston Avenue
City Highlands Ranch
County Douglas
State CO
Area Location Map
Zip Code 80126
Neighborhood Boundary
Area: 14.815 sq miles Sq Miles
Market Area. Graphically defined on a map to visually illustrate the market boundaries and surrounding landmarks..
Regression Analysis File No. 4811 Kingston Avenue Ref No. 00001563
REGRESSION STATISTICS DETAIL Property Address
4811 Kingston Avenue
City Highlands Ranch
County Douglas
State CO
Zip Code 80126
Predicted Values to Actual Sale Prices 340,000
Neighborhood Name Highland Location
Census Tract 0141.18 Suburban
Rural
Built-Up
Over 75%
25-75%
Under 25% south-central Denver Metropolitan area. This planned neighborhood provides excellent
Growth
Rapid
Stable
In Last:
Description:
linkage to employment centers, retail/shopping and other amenities.
Slow
3 Mos.
4-6 Mos.
7-9 Mos.
10-12 Mos.
Total Listings
266
224
112
89
Median List Price
299,900
259,900
239,900
229,900
Total Sales
53
74
36
44
Median Sale Price
235,000
243,000
229,900
265,000
Days on Market
2
6
34
2
Sale Price / SqFt
146.1
145.06
131.26
137.81
Low Sale Price
195,000
193,000
209,500
204,000
High Sale Price
450,000
387,500
385,000
385,000
Absorption Rate
17.67
Months of Supply
4.33
List/Sale Price Ratio
96.25
96.63
94.68
94.55
Supply/Demand
Shortage
Marketing Time 3.0
Sales and Listings Prices
Increasing
Stable
Decreasing
Sales Prices Listings Price
300,000 250,000 10-12 Mos
7-9 Mos
4-6 Mos
0-3 Mos
Increasing
Total Sales and Listings
Stable
Decreasing
100 0 10-12 Mos
In-Balance
Over-Supply
Months
Market Conditions: Given the nature of this neighborhood, market conditions have remained stable with sales and listings generally in balance.
7-9 Mos
4-6 Mos
Days on Market (Sales)
0-3 Mos
Increasing
Stable
40 30 20 10
Decreasing
2 10-12 Mos 34 7-9 Mos 6 4-6 Mos 2 0-3 Mos
10-12 Mos
7-9 Mos
4-6 Mos
0-3 Mos
Increasing
Listings to Sales Ratio
Stable
Decreasing
94.55 10-12 Mos 94.68 7-9 Mos 96.63 4-6 Mos 96.25 0-3 Mos
110 100 90 80 10-12 Mos
7-9 Mos
4-6 Mos
0-3 Mos
NEIGHBORHOOD VALUE TREND % Change
0
-2.22 3 Mos -3.33 6 Mos -4.44 9 Mos -5.55 12 Mos
-2 -4 -6
Value Trend Forecast Next 3 Mos -2.22% $ 246894.5 Next 6 Mos -3.33% $ 244091.75 241289 Next 9 Mos -4.44% $ Next 12 Mos -5.55% $ 238486.25
-8 3 Mos
12-Month Market Trends Sales and listing activity for the last 12 months is graphically displayed.
Total Sales Total Listings
200
Increasing 6 Mos
9 Mos
Neighborhood Value Trend and Impact on Subject Property:
12 Mos
Source
Stable
Decreasing
300,000 280,000 260,000 240,000 220,000 200,000 180,000 195,048
227,556
Components of Value. Appraiser driven regression can identify the components of a property that contribute to its overall value. The value, its significance and whether its acceptable is indicated in the table.
260,064
292,572
325,079
357,587
Actual Sale Price
249,576
Indicated Value from Regression: $
Regression Output Statistics Statistical Measure
Total Properties Sold within Boundary 207
The subject is located within the Highlands Ranch neighborhood, in the
Urban
320,000
Predicted Value
Regression Metrics and Scatter Plot. The measure of accuracy is shown in the table. The correlation of actual to predicted sales is illustrated in the scatter plot.
Model Output
Confidence
R Squared
41.34%
Acceptable
Adjusted R Squared
39.48% 6.94% 5.67% 5.16%
Acceptable Very Good Very Good Very Good
COV COD Standard Error
Components of Value Component
Most Likely Value
Sale Price
Acceptance of Variable $185,417.34to$ $19.92to$27.63 $3,809.84to$ $.20to$1.19
Accepted Accepted Accepted Accepted Excluded Insufficient Data Accepted Insufficient Data Accepted Accepted Insufficient Data Insufficient Data Accepted
High Medium Low
Medium Medium Low
Low
Top 10 Sales Address
(Most relevant to Subject and Market)
Significance of Variable
$194,659.64 $23.77 $6,344.95 $.7 Excluded Insufficient Data $12.57 Insufficient Data -$1,096.78 $668.6 Insufficient Data Insufficient Data -$135.47
Base Neighborhood Value GLA Total Baths Site Area SF Garage Spaces Carport Basement Area Basement Finished Year Built Fireplaces Pool Spa Sale Date (Monthly)
$8.14to$17.00 -$1,314.59to-$4,900.71to$
-$379.28to$108.34
(Most relevant to Subject and Market)
Date of Sal e
GLA
Site Area
Bdrms Baths Distance
10081 MACKAY Dr , 80130 4849 Kingston Ave , 80130
$240,000 $250,000
11/16/2009 09/30/2009
1,677 1,691
5,662 SqFt 3,920 SqFt
3 3
3.00 3.00
0.27 mi 0.03 mi
9689 Adelaide Cir , 80130 10086 Cairns Ct , 80130
$258,000 $279,000
09/29/2009 09/25/2009
1,678 1,707
5,662 SqFt 6,098 SqFt
3 3
3.00 3.00
0.37 mi 0.11 mi
4916 Waldenwood Dr , 80130 4914 Collingswood Dr , 80130 4851 Collinsville Pl , 80130 10338 Rotherwood Cir , 80130 5559 E Wickerdale Ln , 80130 9882 Aftonwood St , 80126
$252,500 $249,900 $243,000 $273,000 $268,000 $232,300
10/05/2009 08/31/2009 08/24/2009 09/17/2009 08/26/2009 10/15/2009
1,649 1,677 1,708 1,768 1,678 1,513
8,276 SqFt 6,534 SqFt 4,356 SqFt 5,662 SqFt 6,969 SqFt 4,791 SqFt
3 3 3 3 3 3
3.00 3.00 3.00 3.00 3.00 4.00
0.34 mi 0.41 mi 0.11 mi 0.37 mi 0.86 mi 0.39 mi
Evaluation of Data and Analysis Number of Observations Very Good (228) Data Quality Acceptable Comparison of Subject to Dataset Acceptable Overall Agreement with Model Output High Overall Agreement with Model Accuracy Acceptable
Veros
The forecast for the subject market is for continued declines.
Co m m en t s : There was a sufficiency of sale data to produce an appropriate indication of value from the regression analysis. With 177 sales, this dataset was appropriate and rich enough to provide ample evidence of value. The R squared and Adjusted R squared were both
CVR Neighborhood Summary
Copyright 2009-2010 AppraisalWorld, Inc. 866-445-8367 All Rights Reserved
Page 3 of 12
12-Month Value Forecast Using economic data, the value of properties in the market are forecasted.
adequate for a well-designed model. The measures of dispersion in the COV and COD, in tandem with the Standard Error at 5.16% were both determined to represent a highly predictive valuation with minor error.
Copyright 2009-2010 AppraisalWorld, Inc. 866-445-8367 All Rights Reserved
Page 4 of 12
Let There Be No Doubt Who The Valuation Expert Is Introducing CompCruncherTM and the New CVRTM Appraisal Report Now you can profit in the billion dollar alternative valuation market
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* LIVEVALMAG.COM | 27
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&
Reasonable =
e v e r y o n e i s ta l k i n g b u t i s a n y o n e l i s t e n i n g ?
=
five
perspectives
on the hot topic everyone is talking about JULY / AUGUST 2011
* LIVEVALMAG.COM | 29
the
Frankendodd
Monster
Br uce Fitzsim ons
The scary truth about customary and reasonable fees.
Customary & Reasonable
first
perspective
special section
The Dodd-Frank Wall Street Reform and Consumer Protection Act that was enacted into law July 21, 2010, appeared to be the panacea appraisers were yearning for to protect the integrity and viability of the residential real estate appraisal profession. In particular, Subtitle
Congressman Paul Kanjorski, the
an “abomination” that needs more
Tech Summit in Las Vegas, said, “the
industry is up for the same kind of
clearly and specifically included
He admitted Dodd-Frank was not
reasonable (C&R) fees for appraisers as
job that could be done.” He said
This enormous Franken-Dodd
quality.
Frank was not properly corrected
change to financial regulations since
F of the Act, Appraisal Activities,
keynote speaker at the GlobalDMS dirty little secret” is that in piecing
together this massive legislation, some
It appears the dirty little secret of
commented that the appraisal language
clear and concise language that would
require corrective legislation. He
in Dodd-Frank was “inconsequential,” and also characterized the financial
bailout as having been “put together with spit and Scotch tape.”
language guaranteeing customary and a vital element for assuring appraisal
appraisers were in jeopardy if Doddto define a federal standard of C&R
fees. He called credit rating agencies
|
LVM
scrutiny as the credit rating agencies.
mistakes were made, which would
perfect, but “there was not a perfect
30
regulation, and said the appraisal
Dodd-Frank was the hollowness of
need to be corrected after it was hastily passed by Congress. As we’ve heard by Congress before, perhaps there
was “not enough time to read all 2,319 pages” and they “needed to pass the law to know what’s in it.”
Monster was the most sweeping
the Great Depression, affecting all
federal financial regulatory agencies
and almost every aspect of the
The IFR introduced by the FRB
The imperfections of this legislative
providing two ways (presumptions)
nation’s financial services industry.
monstrosity were created by Congress and left for the Federal Reserve Board (FRB) to fix.
The FRB was given 90 days to
promulgate regulations governing the appraiser independence requirements outlined in Dodd-Frank. These new regulations also meant the sunset (stake through the heart) of the
dreaded Home Valuation Code of Conduct (HVCC) that practically
decimated the residential appraisal profession.
IT’S ALIVE! On October 18 the sleeping FrankenDodd Monster was awakened when the FRB published an Interim Final
created the Franken-Dodd Monster by in which a lender or AMC could
demonstrate that they compensated appraisers in a C&R manner.
Presumption One: By paying
fees reasonably related to recent rates
paid for comparable appraisal services performed in the geographic area, but excluding fees paid to appraisers by AMCs.
This is based on a number of factors, including: 4 P roperty 4 4 4 4
Rule (IFR) amending Regulation Z (Truth in Lending Act - TILA) that established new requirements for
appraisal independence for consumer credit transactions secured by the
consumer’s principal dwelling. The
brain used for this monster must have come from a jar with the label “Abe Normal.”
The Reg Z amendments were
supposedly designed to ensure that
real estate appraisals used to support creditors’ underwriting decisions are
based on the appraiser’s independent professional judgment, free of any influence or pressure that may be
exerted by parties that have an interest in the transaction, and also ensured that creditors and their agents pay
4
type S cope of work T urnaround time A ppraiser qualifications A ppraiser experience and professional record A ppraiser work quality
Presumption Two: By relying
on objective third-party data and
information relating to appraisal fees, such as the Veterans Administration appraiser fee schedules, that are
based on recent rates in the relevant geographic market. If this includes
fee schedules, studies or surveys, they cannot include fee data for appraisals ordered by AMCs.
These two options opened the door for many groups to make different assumptions based on all types of
interpretations, especially that which best satisfied an interest. Many have argued that the VA fee schedule is
the cap or maximum fee paid to the appraiser, not the typical C&R fee. Some AMCs and related trade
associations interpreted the language in Dodd-Frank to signify that the
marketplace should be the primary
determiner of the value of appraisal
services and that Presumption One of
The regulations emphasized that the
the IFR relating to recent rates paid for
the utmost concern to lenders, not
fees paid by AMCs.
Also stated was that recent rates
But the Dodd-Frank language was
quality of the valuation should be of merely price or turnaround times. are those paid within the last year
appraisal services specifically included
clear: “Fee studies shall exclude >>
for comparable services, and that
the geographic area is determined, regardless of size, in which the stated fee would be generally accepted for the services requested.
The turnaround time is key to establishing a C&R fee. The IFR recognizes the required turn-time can
Some members of the Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council (FFIEC) have stated the C&R fee was for the purpose of consumer protection, not for the benefit of appraisers. But how are consumers protected when an AMC collects a fee from a lender and pays the appraiser a fraction of that amount?
the source
C&R fees to appraisers. Compliance
with the Interim Rule was mandatory for all consumer credit loans secured
by the consumer’s principal dwelling for which a creditor receives an
application on or after April 1, 2011.
be a legitimate factor to
consider in determining
the C&R fee. And yet the
lenders and AMCs are still continuing to demand a
two-day turn-time with many assignments.
JULY / AUGUST 2011
* LIVEVALMAG.COM | 31
assignments ordered by known
Some believe the expectation was intended for:
the IFR, and that just because an
Many State Appraiser Coalitions
4 t he consumer not to have some
AMC’s responsibility to ensure that an
survey of C&R fees, and agreed to not
4 t he appraiser to not be
Appraisal Management Companies” (AMCs).
were organized to develop their own
accept fees below the stipulated fee in their survey report. Some real estate associations then threatened to “put
appraisers in jail” for price fixing, as
defined in the Sherman Anti-Trust Act. The IFR included a condition that
requires the creditor and its agent to
type of predatory fee payment, and compensated less than what is
considered an appropriate scope
of work necessary to complete the
appraisal assignment requirements.
appraisers developing their own
clarification of C&R fees. Apparently
surveys to determine C&R fees.
Several appraiser groups within states have considered signing a document informing all clients that the fee for their appraisal services in specific
market areas shall be based on the VA fee schedule.
Some members of the Appraisal
became the “Final Rule” without
the “covered persons” defined in
the IFR were the fools and the C&R fee issue remained status quo. Was
the Federal Reserve more interested in the banks they regulated or the
consumer? Somewhere in the empty,
silent darkness, Franken-Dodd lurked,
unrestrained and ready to wreak havoc on a nation.
Subcommittee (ASC) of the Federal
State appraiser regulators were
Council (FFIEC) have stated the C&R
ASC and FFIEC representatives at the
Financial Institutions Examination
fee was for the purpose of consumer protection, not for the benefit of
appraisers. But how are consumers
protected when an AMC collects a fee
from a lender and pays the appraiser a fraction of that amount?
Some state appraiser regulators believe Dodd-Frank was intended to require
paid by the consumer for an appraisal service versus what fee was retained
by the AMC, and what amount did the appraiser actually receive?
|
expecting clarification of C&R from the
April 15 directing questions on the
to the FRB. C&R fee complaints were to be filed with the creditor’s federal regulator, or if the agent (or AMC)
is not a federally regulated creditor,
the appropriate agency would be the Federal Trade Commission.
Lenders face penalties for violations
of C&R fees of up to $10,000 per day for the first violation, and $20,000 for subsequent violations. These
are not the only potential penalties.
The types of civil actions the federal
banking agencies may bring include civil money penalty actions. If an
institution-affiliated party (AMC) violates “any law or regulation,”
the agency may assess civil money
penalties of up to $7,500 per day. If the violation involves recklessness, unsafe
or unsound practice, the penalty can be up to $37,500 per day.
Association of Appraiser Regulatory Officials (AARO) conference in early April. The response
was that banks and AMCs may be misinterpreting Presumption One of
Determining Scope of Work is a critical component of determining appropriate C&R fees. Knowledge and experience of various valuation methodologies and report types may provide an advantage to appraisers with adequate training and use of technology.
the source
transparency of fees, i.e., what fee was
32
not necessarily satisfied.
appropriate interpretation of C&R fees
April 1 (April Fools’ Day). The IFR
mentioned in the IFR about
appraiser is actually paid a C&R fee is
so as to prevent what would be
where the property is located
or monopolization. Nothing was
such as price fixing, market allocation
are paid for an assignment is C&R, the
The ASC posted a notice on its website
affect the compensation of appraisers –
in violation of state or federal law that
document indicating the fee that they
considered C&R in the market
APRIL FIRST DEADLINE: DEAD SILENCE
not engage in any anticompetitive acts
AMC requires an appraiser to sign a
LVM
sufficient to define C&R fees. They also believe the IFR intended C&R fees to
accommodate complex appraisals for which the ordinary C&R fees may be
inappropriately low. Also, there simply
were no studies in existence establishing C&R fees on complex appraisals;
therefore, it is inappropriate to rely on
or require the use of studies that do not exist.
Although banking agencies are
adhering to the new Reg Z (TILA), many lenders and their affiliates
(AMCs) are continuing to rely on
Presumption One to develop C&R
fees. Lenders and banking agencies are receiving complaints from appraisers
that AMCs have actually lowered their
fees since April 1, and continue to select appraisers based on the lowest fees and quickest turn-time.
Lenders and AMCs also infer
that Congress was aware of the
absence of reliable studies because
Congress required the Government
Accountability Office (GAO) to conduct such studies. Congress required the
GAO to study several matters relating to appraisals and appraisal fees.
The subjects GAO were required to study include: 4 T he
4
4
4
prevalence of certain appraisal approaches, models, and channels, and their accuracy T he costs to consumers of these approaches, models, and channels T he disclosure of fees to consumers in the appraisal process T he mechanism by which the lender compensates the appraiser
4 How
Dodd-Frank and the IFR affects the cost of appraisals
This Is What Bruce Has to Say
The GAO’s study is not required to
be final until a year after enactment
of the Dodd-Frank Act – July 21, 2011. Lenders conclude the only reasonable
inference is that Congress intended the rulemaking that sets C&R fees to be
conducted after the GAO studies on
appraisals are complete and only after
there is a suitably robust basis on which to set C&R fees.
BRIDE OF FRANKEN-DODD: THE CONSUMER FINANCIAL PROTECTION BUREAU (CFPB) The CFPB monster has been pieced together over the last year and is scheduled to come to life on the
anniversary of the creation of Franken-
Dodd, July 21. This monster will become the main regulator for the mortgage
industry and will oversee how loans are written and possibly determine C&R fees.
Who knows what terror the GAO study may produce? Did federal agencies
deliberately ignore many of the Dodd-
Frank mandates, including clarification and specific guidelines on establishing C&R fees, until the CFPB joins the FFIEC?
Kanjorski said the clear consensus of 40 economists was that if Congress failed to act on the financial bailout, the U.S.
going to the source
first
perspective
“
The response was that banks and AMCs may be misinterpreting Presumption One of the IFR, and that just because an AMC requires an appraiser to sign a document indicating the fee that they are paid for an assignment is C&R, the AMC’s responsibility to ensure that an appraiser is actually paid a C&R fee is not necessarily satisfied.
“
are no studies of appraisal fees
8 quote
e
Lenders and AMC argue there simply
market would fail and sink into a
depression. He said the military was put on standby to defend Washington, D.C., from outbreaks of chaos and riots if a total depression occurred.
Be aware! Be prepared! >> JULY / AUGUST 2011
* LIVEVALMAG.COM | 33
SURVIVAL – TECHNOLOGY-BASED SOLUTIONS The solution for many competent and knowledgeable appraisers has been to just say no to quick and cheap appraisal orders.
Another strategy was submitting an assignment bid using various national and local C&R fee surveys, or using their own C&R fee schedule based on actual costs and profit margin.
ACI Appraisal software provider ACI provided a presentation on their Reasonable Fee Calculator™ at a recent AARO conference as a solution to the C&R fee issue. The simple form allows licensed users to align costs and fees to the assignment’s scope of work. Individual parameters for overhead per appraisal, pass-through costs for the assignment, and mileage can be included in the fee review. The scope of work estimation can be based on hours of effort and tailored to a specific valuation product. You can create a factor to quantify and adjust for skills and experience, and view the hard costs to produce the appraisal assignments. This type of quick analysis will allow you to respond to the appraisal order with a reasonable fee that provides an appropriate profit. Determining scope of work is a critical component of determining appropriate C&R fees. Knowledge and experience of various valuation methodologies and report types may provide an advantage to appraisers with adequate training and use of technology. There are many
GlobalDMS alternatives that may be offered to clients other than the 1004 and 2055 reports, depending on their specific use and scope of work.
Appraisal World AppraisalWorld introduced the Collateral Valuation Report (CVR™) at a recent AARO conference. This appraisal report is based on computer-aided appraisal software, and is produced by appraisers trained in real estate regression analysis. Unlike an AVM, the appraiser is center stage and has complete control over the data analysis and the valuation process. Lenders view the CVR as a highly attractive alternative to provide more accurate and more reliable valuation with analytical features to replace BPOs, particularly for HELOCs, portfolio loans, default management, alternative in loan modification programs and quality assurance. Most appealing to lenders is the significant reduction in C&R fees and a turn-time of just hours.
GlobalDMS offers collateral management systems for lenders, AMCs and appraisers. Their commercial and residential real estate valuation software provides solutions that promote compliance with state and federal regulation, reduce costs and expedites valuation processes. Their technology solutions include MARS (MISMO Automated Review System) which converts PDF documents into industry standard formats, such as MISMO XML, and allows customized review rules to evaluate collateral. Management and workflow automation technology that is specifically designed to streamline appraisal processes and maximize efficiencies allow lenders, AMCs and appraisers to determine an appropriate C&R fee. These proprietary programs are just a few examples of how technology can be used to reduce overhead costs and promote a competitive advantage for appraisers and lenders. Additional research of appropriate technology for specific user requirements is highly recommended.
Conclusion
Just as the appraisal profession has its
As technology continues to change
It’s important to remember the new
the same is true for AVMs, BPOs and
it is increasingly important that its
appropriate standards of safety, due
valuation. It is only through continued
in real estate transactions. These
can properly navigate through
of fully understanding the risk
methodologies to their maximum
and direct lenders to a variety of
servicers, investors and ultimately the
inherent strengths and weaknesses,
regulations are focused on maintaining
other qualifying methods of real estate
diligence and proper consideration
education that the mortgage industry
regulations emphasize the importance
the regulations, using all available
associated with collateral valuation
potential for the benefit of lenders,
tools available for developing that
homebuyer.
understanding.
34
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LVM
the mortgage industry’s landscape, participants fully understand the
proper balance and application of
valuation types and processes. Using the right tools in conjunction with
new regulations to protect consumers and financial institutions, valuation
service providers should realize greater efficiencies through appropriate use of emerging technologies. 6
&
customary
reasonable ... Appraisers should set their own fees.
second
Customary & Reasonable
perspective
special section
Recently, I received quotes for the scraping and painting of an old Victorian home. The
is customary and reasonable to pay
minimum, I would like nothing more
the same exact job. Maybe the highest
we pay appraisers, leveling the playing
approximately 3,000 square feet. I
the summer. Or maybe they believed
prior to beginning work. The quotes
their competitors.
Many in the industry use the word
the end, I decided to take the $13,000
Customary is commonly known as usual practices associated with a particular society, place or set of circumstances. Don’t get
again on this appraisal”… really? One
a painter? They were all asked to do
bidder didn’t care if they won the job
home was built in 1860 and was
because they were already booked for
thought it was best to get three quotes
they did superior work compared to
ranged from $10,000 to $15,000. In quote, however, I negotiated an
additional $2,000 off the quote based on competitor pricing. All painting
companies I called were reputable and had been in business for many years.
They also all had insurance and I had
me wrong; I do not believe that just
seen their work around town.
because it has been customary that
Herein lies the basic question: How
companies (AMCs) have been paying
could the quotes be so far apart? What
some very large appraisal management “low” fees, this should continue. At a
than to see these large AMCs pay what field. This does, however, mean that it has been customary for appraisers to accept these fees.
“low” too often. “You came in ‘low’
begins to wonder: “low” compared to what, exactly? Lower than the owner thought? Lower than a lender needs to finalize the loan? That being said,
“customary” changes with the times. Because it becomes more costly to complete the work (gas prices are
high, wages are increasing, expenses rise), fees in general increase. As the cost to complete work decreases >> JULY / AUGUST 2011
* LIVEVALMAG.COM | 35
Jam es Kir chm eyer
Really?
(the improvement of technology, the oversupply of bidders), prices fall.
Reasonable is commonly known as having sound judgment and being fair and sensible. A reasonable fee for
4
4
4
work to be completed is the fee that several qualified persons would be
willing to accept for the job. This may or may not be the highest or lowest fee. If 10 qualified appraisers offer
fees from $400 to $1,000 with five of the appraisers at $500 or less, does
that mean you are paying less than a
customary and reasonable (C&R) fee if you pay $450? For five of the higherpriced appraisers, it would appear
below market rates. Are “market rates” truly set by the market?
Aren’t reasonable fees the fees that appraisers are willing to accept for
their services? Some appraisers are
saying that this is not true; that they
accepted the fee because they had to. Really? I doubt that there was a gun to their head. We turn down work every day that does not meet our
expectation of a reasonable fee; and
it may be customary for the client to
pay the fee they are offering, although it may not be reasonable. The market
sets itself – especially when expenses for completing jobs cut too far into
the margins, bidders begin to raise the level at which they will accept jobs.
Here are some valid questions to think about: market studies and appraiser surveys reflect proper levels of C&R fees?
For appraisers that accept work from AMCs, it has been C&R to have two
sets of fee schedules: one fee schedule
for direct clients, and one for the AMC; each has its place.
Some appraisers have chosen not
to complete any work from AMCs. Conversely, some appraisers only
accept work from AMCs. There are
also some appraisers that choose to
balance direct work with work from
some AMCs. There is a small drawback to direct work because of built-in extra costs. Direct work requires marketing and advertising; cost of integration; dealing directly with the client
regarding statuses; reporting; grading; billing; collecting; periodic service
level meetings; regulatory compliance;
contract negotiations; etc. A good AMC provides a service, not only to the lender/client but to the appraiser as well.
Appraisers should look for an AMC that provides: 4
4
4 D o
4
4
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What is asked of the appraiser supplying the C&R fees for the survey? What fees are they quoting? What is included in C&R fees?
comfortable buffer that A allows for truthful reporting of value without pressure A ccess to a base of goodquality clients/end users Ease of pickup /delivery of work through technology Clear statement of scope of work and performance expectations A meaningful review process
4 Adequate 4
compensation Ease of billing and payment management
The appraisal profession is a business, but many appraisers do not run it like
a business. I have been in the appraisal industry since 1983 and have seen
appraisers that charge much more than I do to complete an assignment. I have seen a disproportionate number of
appraisers (and appraisal companies) that charge much less than I do. In the end, I still get work and I price
based on profitability. I do not price
to break even, or (like some appraisal
companies that bundle title and other services) as a loss leader product.
I realize the house-painting scenario does not accurately reflect the much larger dynamics of the appraisal
industry. I simply wanted to fire you
up to read the rest of the article. As in many industries, there are unlimited strategies for a balance of business. They can consist of the services,
processes, features and benefits that
you offer, as well as what clients you
decide to do business with, and what
fees you choose to offer to your clients
… fees that you believe to be C&R and hopefully profitable.
My personal opinion is that I do not
want set C&R fees shoved in my face insisting that I complete an appraisal for a certain amount.
I believe higher-qualified, long-term appraisers have the right to charge
more for their expertise. I also believe that appraiser trainees should be
allowed to charge less for their work
to gain a client’s confidence and work toward becoming certified. I truly do not know what will become of the
whole debate over C&R fees. I am,
however, ready to rebuild a business
strategy around whatever happens. 6
JULY / AUGUST 2011
* LIVEVALMAG.COM | 37
Fingers
Er nie Dur bin ii, sr a, c r p
pointing Who’s responsible for low appraisal fees?
third
Customary & Reasonable
perspective
special section
Dodd-Frank went into effect April 1, 2011. Now that April Fools’ Day has come and gone, there is a lot of discussion and fingerpointing going on about customary and reasonable fees. How in the world did a section
genesis of this section in the bill lies
the process. National lenders may have
now extinct Home Valuation Code of
and local lenders, saddled with the
for real estate appraisers get into the
and Freddie Mac, was a real game-
Dodd–Frank Wall Street Reform and
agreement required Fannie and Freddie
deep in this gargantuan bill, aimed
appraisal independence. No longer
Wall Street), is a very short passage
was dependent upon the closing of
appraisal fees. Why should legislators
of the appraiser. Many lenders who
being of real estate appraisers? The
in-house made a decision to outsource
with appraiser independence and the Conduct (HVCC).
In May 2009, the HVCC took full effect. This private agreement between the
New York Attorney General’s Office
already been doing this, but regional
new requirements, decided AMCs were the way to go. Suddenly, there was
great demand for outsourcing of the appraisal management process.
on customary and reasonable fees
and the two largest GSEs, Fannie Mae
Dodd-Frank requires appraisers to be
financial reform bill known as the
changer. The result of a lawsuit, this
The bill instructs that fee schedules
Consumer Protection Act? Buried
to institute new policies regarding
at a completely different sector (i.e.,
were any parties whose compensation
attempting to shore up eroding
the loan to be involved in the selection
be concerned with the financial well-
had originally managed appraisers
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paid customary and reasonable fees. established exclude the influence of appraisal management companies. Violations draw a heavy penalty,
equating to fines up to $10,000 for
each day any violation occurs. The
implication is clear: Customary and
reasonable fees are something different than the typical amount received by the appraiser from a management
company. At first read, Dodd-Frank
From the perspective of the panel
AMCs as the culprit for low appraisal
low fees lies with the appraiser. They
seems to be pointing the finger at
fees. But is that fair? Do AMCs share all the blame for low appraisal fees?
I think not. Fellow appraisers, please
read on and hear my whole argument; I’m in your camp.
From the appraiser’s perspective, AMCs are certainly the problem
causing fee attrition. After all, they
are essentially middlemen who come in and scoop a portion of the full fee the appraiser used to enjoy. And for that fee, it seems like all they do is
aggravate the hell out of us appraisers. Working on a national level, AMCs
manager at an AMC, the problem with contend appraisers, from their own
training, should understand the nature of supply and demand. When there
With Dodd-Frank having my back, I say that we should all be pointing our fingers at the lenders (careful which finger).
aren’t too many houses on the market,
AMCs are sheepish about pointing
buyers. It’s no different in the valuation
they want to. Appraisers are too
appraisers, resulting in declining fees.
to consider the lender’s culpability in
should charge more. But as long as
AMC margins discussed above. These
compete based on fee, they will make
back pocket of appraisers. For the most
retain appraisers that enhance their
pay for the additional services of an
prices go down as sellers compete for
fingers at their clients, but I know
space; there is an oversupply of
distracted by their hatred of AMCs
If appraisers want higher fees they
the matter. The problem lies with the
supply exceeds demand and appraisers
margins are taken directly out of the
the appropriate business decision and
part, lenders have been unwilling to
margins.
AMC. In order to compete for business, the management companies essentially
tried to standardize all of their lender
offer a no-cost outsourcing of appraisal
requests for additional information and
that realize the benefit from this
a credible result. From an appraiser’s
dollars are added to their bottom line
requirements. The result is incessant
management. Lenders are the ones
detail, much of it not contributing to
competition. Millions and millions of
view, there’s no question that you have
by outsourcing appraisal management.
take a portion of the full fee.
When lenders outsource appraisal
to point the finger at AMCs; they do
On the other hand, AMCs point
the finger at appraisers. They have
panels that number in the thousands of certified and licensed appraisers throughout the United States.
These appraisers have all met the qualifications of The Appraisal
Foundation and are appropriately credentialed to provide valuation
services. When they order an appraisal in a particular marketplace, why
should they choose to pay more than
the lowest bid for equally credentialed and qualified appraisers? AMCs are not in business to lose money. They
have to make an appropriate margin
But who is pointing the finger at the lenders? I think Dodd-Frank is. A
deeper reading of this document
management to AMCs they have
the ability to “right-size” according to business volume. The volume of
lending transactions has always >>
reveals that ultimately it is the lender’s responsibility to see that appraisers receive customary and reasonable fees. Lenders are responsible
and held liable for their third-
party agents such as appraisal management companies.
The motivation behind this
requirement is ultimately the protection of the consumer. Legislators want to make sure consumers are not
At first read, Dodd-Frank seems to be pointing the finger at AMCs as the culprit for low appraisal fees. But is that fair? Do AMCs share all the blame for low appraisal fees?
the source
to stay in business. AMCs contend
they will pay whatever is necessary
to satisfy their clients’ (the lenders’)
needs; but they won’t pay more than is necessary.
overcharged in the process and transactions are based on competent, accurate
valuations, the results of
which ultimately protect all parties.
JULY / AUGUST 2011
* LIVEVALMAG.COM | 39
8 quote
going to the source
third perspective
This Is What Ernie Has to Say
“
If they’re going to enjoy the benefits of outsourcing they should pay for it and not turn their head and look the other way as the cost of the service is taken out of the appraiser’s back pocket.
the source
been somewhat volatile, but the past several years it has been extreme.
When a lending institution has an
for these fluctuations can be nerve-
racking. If they are not prepared for a
rapid increase in the marketplace they can find themselves falling behind
quickly and unable to close loans in a timely manner. The natural result is a loss of business. The alternative is to remain staffed at high volume levels
they
down this is a detriment to the bottom
appraisal services that do not involve
watching people update their Facebook
They should pay AMCs for the service
Outsourcing all or a portion of the
reasonable fee. AMCs would be happy
fiscal decision. That’s fine, but I say pay
adjust their margins accordingly to be
all the time. Clearly when things slow
pay for
line. Upper-level management hates
an appraisal management company.
rather than do something productive.
they provide above this customary and
appraisal management process is a good
to compete based on their service and
for it.
competitive. Appraisers could tolerate
Recently I was talking with a friend of
work if the fee was appropriate. Lenders
150-plus employees on payroll. My
benefits of a nationwide panel. The
resources department. He indicated his
passed on to the consumer as a line item
human resources management company
could eat the cost as they compete with
other HR headaches. He simply paid
from this solution.
this service. So I asked him a question
AMCs, appraisers and lenders have
you charge the employee the $20 per
problem. Each shares some portion of
was ludicrous, and replied, “Of course
perpetrator is the largest benefactor:
it saves me money in the long run. Why
benefits of outsourcing they should pay
me money?” I explained that that was
the other way as the cost of the service
glazed over as I tried to explain what’s
pocket. Ultimately, if the fines outlined
would still enjoy right-sizing and the
friend decided to outsource his human
cost of appraisal management could be
employees were in fact “leased” from a
on the HUD statement. Or the lender
that took care of payroll, benefits and
others for consumers. Everyone benefits
$20 per employee per paycheck for I already knew the answer to: “Do
all contributed to the appraisal fee
paycheck?” He thought the question
the blame, though I contend the largest
not; that’s a cost of doing business and
the lenders. If they’re going to enjoy the
would I charge my employees to save
for it and not turn their head and look
the answer I wanted to hear and his eyes
is taken out of the appraiser’s back
going on in the appraisal space.
in Dodd-Frank are imposed, lenders
and the problem of customary and
and reasonable fees are needed for the
“
reasonable fees. Lenders should pay
LVM
will sit up and pay attention. Customary longevity of the appraisal industry
for their outsourced services.
and the protection of the consumer. It
The solution is simple and it’s called
fingers and contribute to solving the
cost-plus pricing. Lenders know what
|
some of the other annoyances of AMC
mine who owns a small factory with
The same is true for lenders, AMCs
40
He thought the question was ludicrous, and replied, “Of course not; that’s a cost of doing business and it saves me money in the long run. Why would I charge my employees to save me money?”
internal appraisal department, staffing
behooves all parties to stop pointing problem. 6
the
cornerstones of
& Fees
customary
reasonable
Customary & Reasonable
Patr ick Spicuzza
Qualification, agreement and transparency are needed in the AMC/appraiser relationship.
fourth
perspective
special section
Dwellworks is honored to be asked to contribute to this article. We welcome
supported by analysis performed by an
individual assignments, and finally,
the opportunity to share our take on
Since the 2009 implementation of the
best practices and views on customary
Home Valuation Code of Conduct
Developing an Appraiser Network
and reasonable fees. As an Appraisal
(HVCC), a general presumption
Management Company (AMC), we
seems to have permeated the industry
strongly support the intention of
that all AMCs utilize the lowest-fee
The backbone and value of a quality
the Dodd-Frank legislation and the
appraiser (regardless of competency),
Federal Reserve Boardâ&#x20AC;&#x2122;s assertion that
and pressure appraisers to accept
of field appraisal professionals. The
real estate appraisers must be free to
lower-than-market fees in return for
use their independent professional
continued business. It is important to
judgment in assigning home values
note that there are differences in how
without influence or pressure from
various AMCs service their clients
those with interest in the real estate
and determine which appraisers to
transaction. Further, those appraisers
assign to a file. To effectively assess the
should be paid customary and
differences from an AMC perspective,
reasonable fees and the free market
it is necessary to evaluate how
should determine those fees
appraiser networks are developed,
independent third party.
how appraisers are selected for
how appraiser fees are determined.
AMC lies primarily in the network
development of an effective, tenured network relies and builds upon
established prequalification criteria
(as minimum requirements) in order to be considered for inclusion in the appraiser network.
Specifically: 1. V alidated license and in good standing with the state licensing board JULY / AUGUST 2011
* LIVEVALMAG.COM | 41
going to the source
fourth perspective
“
... a general presumption seems to have permeated the industry that all AMCs utilize the lowest-fee appraiser (regardless of competency), and pressure appraisers to accept lower-thanmarket fees in return for continued business.
8 quote
This Is What Pat Has to Say
2. C lear status from the Appraisal Subcommittee (ASC) for warnings, corrective or disciplinary actions 3. Three years of credible appraisal experience 4. Adequate E&O insurance coverage (minimum of $250,000) 5. S atisfactory results from: 4 Q uality review of appraisal report samples 4 Dwellworks-created USPAP quiz 4 C lear criminal background check 4 Reference check 6. C ompleted Service Level Agreement 7. C ompleted MWBE Compliance Certificate Most, if not all, AMCs realize their success is dependent on the competency of their network; by completing a thorough precertification process, the AMC ensures everyone in the network is competent and able to effectively complete their
assignments. The notion that incompetent appraisers are being utilized by AMCs
is concerning because that would bring into question the licensing process
administered by the states and monitored by the Appraiser Subcommittee, as well as the appraisers’ adherence to USPAP
policy which requires appraisers to only
“
accept appraisals that they are competent to complete.
Appraiser Assignment Key performance indicators and a
ranking methodology that considers past appraiser performance metrics
are utilized in qualifying any appraiser for assignment. Effective AMCs take 42
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a proactive and interactive approach
to monitor performance of appraisers, including report turn time, report
quality, variance and professionalism. This methodology strives to ensure
the best-fit appraiser is determined for assignment. Certain AMCs have been
known to broadcast an order to numerous appraisers and assign the order to
the cheapest and/or fastest appraiser
responding. While we do not use this methodology, the broadcast method
may be considered appropriate as long as the AMC is broadcasting to a list of
appraisers that are appropriately qualified and charge similar fees in a geographic area.
Appraiser Fee Appraiser fees are agreed upon during
the application process when an appraiser is admitted to the network. Dwellworks
conducts an assessment of the appraiser’s quoted fee in comparison to the fees of the other appraisers within the same coverage areas. Assessment results
identifying market-rate discrepancies
are discussed and a final fee is agreed upon. The approach allows for the
assignment process to be based strictly on performance since all network appraisers are approved as having a market rate. Dwellworks agrees with the Federal
Reserve Board interpretation that the
marketplace and supply and demand
should be the primary determinants of
the value of appraisal services and what is considered the customary and reasonable rate of compensation. The challenge
within is how to apply the two suggested methods that can be considered vague.
Although recommended as an accepted method, as an AMC we do not believe that the Veterans Administration (VA)
fee schedule is an appropriate measure for customary and reasonable since it
does not consider the cost of managing the appraisal management process. We believe this fee schedule is specific to
VA appraisals and is not meant to be
ensure that the AMCs are charging
Additionally, compensating appraisers
serves as a benchmark for the highest
services to the lender, and also ensure
of the home could be construed as an
customary and reasonable, but rather rate that can be charged.
We recommend a federally sponsored
fee study be performed to alleviate the complexity of this rule and to assist
the lenders in setting the fee schedules
a fair and appropriate fee for their
that the AMCs are paying a customary and reasonable fee to the appraiser.
By reporting these two fees separately, it will also be easier to monitor
compliance and report violations.
that AMCs would be mandated to
Another element that is important for
eliminate the practice of cost-cutting
needs to be met for exception fees to
follow. This would reduce or even
by AMCs at the expense of appraisersâ&#x20AC;&#x2122; fees, and further serve to enhance
the quality of the reports and service
delivery as the key value propositions that differentiate AMCs from their competitors.
Most importantly, we believe that
the fee paid to the appraiser and the
management fee earned by the AMC should be transparent and reported separately for full disclosure to the
borrower and the lender. This would
lenders to define is the criterion that be paid to an appraiser. Historically,
lenders have used home value as a key
at different rates as a result of the value appraisal independence violation as
it is effectively basing the appraiserâ&#x20AC;&#x2122;s compensation on the eventual
appraised value. A superior model
would allow the AMC and appraiser to document the complexities for a given
property in seeking fee exceptions. The AMCs could also be asked to provide quotes from a few appraisers in the area to verify the complexity.
determinant for approving a requested
While it is understandable that the
complex properties (e.g., if the home
reasonable fees differs among lenders,
fee increase by an appraiser for
is greater than $1 million in value,
the lender will pay an extra $100 in
appraisal fees). This practice is archaic and fails to compensate appraisers for properties that are lower in value and higher in complexity (e.g., no MLS,
waterfront, unique, rural or remote location, lack of comparables, etc.).
interpretation of customary and
AMCs and appraisers, we believe
further clarification is needed for the spirit of the law to be truly fulfilled. Clarification from the FRB or the
Consumer Financial Protection Bureau,
which is expected to be up and running this July, would go a long way toward resolving this delicate issue. 6
JULY / AUGUST 2011
* LIVEVALMAG.COM | 43
THINGS
Driving over the Coronado Bridge today on my way to do an appraisal, traffic was
APPRAISERS
nearly at a standstill. Rounding a parked car, I saw a lady swigging from a wine bottle and looking over the side. I was shocked nobody else was stopped. I pulled in front of her car and started talking with her. She told me her car broke down and that she was just waiting for a tow truck, but I stayed within arm’s reach of her and continued trying to talk to her. After about five minutes of getting nowhere and no police to be
From an aircraft parked on the front lawn to a run-in with a bear, appraisers come across many photo-worthy sights on a dayto-day basis. We are bringing
back the section Things Appraisers See to feature your personal bear and aircraft moments.
So shoot us your photos at info@livevalmag.com or simply log on to our website to upload them under Things Appraisers See and look for them in an upcoming issue.
{
{
This month we received this heroic story from Bryan Knowlton, an appraiser in San Diego, and couldn’t pass up the chance to feature it in What Appraisers See. Job well done, Bryan – saving lives and appraising houses one day at a time!
seen, she was getting irritated with me, telling me to leave. I got in my car and called 911 to ask what I should do. I feared I might anger her more and that she would try to jump. The operator was advising me not to endanger myself. I could hear the “whoop whoop” of highway patrol trying to get through. I got out of my car and quickly walked toward her again, since I could see she was panicking, looking around and looking over the side. She then walked toward her car, but once she saw the patrol she made a bolt for the side. I ran toward her, grabbed her and held her tight. She hit me on the head a few times with her bottle and I pulled her to the ground. The next thing I knew, two police were on top of us as she continued to resist and then finally gave in. As appraisers we see people in all types of horrible situations, and have often thought how horrible our lives are. But I know that we are generally a caring group of individuals who will step up when needed to make the right decision. This is something I hope to never see again, but if I do, I know I will be ready to face it. 6
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n n n n n
LIA’s products are in response to requests made by real estate appraisers and other valuation professionals, seeking to meet the day-to-day challenges of the appraisal industry. In addition, LIA remains to be the leader in loss prevention and appraiser liability education.
For more information, visit our website at www.liability.com, or contact: Robert A. Wiley, Asst. V.P. robert@liability.com, 800-334-0652, Ext. 128 Peter Christensen, General Counsel peter@liability.com, 800-334-0652, Ext. 148
Serving the Appraisal and Valuation Industry since 1977
LIA Administrators & Insurance Services 16oo Anacapa Street, Santa Barbara, CA 93101 Ph: (800) 334-0652 Fax: (805) 962-0652 www.liability.com JULY /lia@liability.com AUGUST 2011 LIVEVALMAG.COM
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VOICES OF VALUATION
8
VOICES OF VALUATION Last month’s articles sparked a lot of debate. Here are some responses from our readers.
Valuations Other Than Appraisals
“The fact is that there are NO regulations placed on alternative valuations, no required training for those who perform them, no USPAP, no oversight, no experience requirement, not much of anything to assure that the person doing them knows much of anything about accurate valuation.” - Greg
1
Keep Fighting for Your Independence
“Great article. Chuck is right on point with the changes we face and how the Dodd-Frank Act is the next step along our journey for appraiser independence. I believe we will look back 10 years from now and see this as one of the landmarks that Chuck discusses. Thank you for the article.” - Matt
For What It’s Worth
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LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM
do you have something to say?
www.livevalmag.com 8
Best Practices
“Most video cards will support three monitors. You can also get NitroPDF for free, which converts files to PDF and allows limited mark up. Go paperless, saves time and money. Get rid of the boat anchor desktop. Go with a high speed laptop with a docking station, really inexpensive now.” - CAappr
4
“This question does not make sense to me, based on what you have written. Dodd-Frank says you won your point that lack of AI membership cannot be a cause for rejection. At the same time, clients should have the right to choose the most competent appraiser they can find. So, for folks who are ‘summa cum laude’ appraisers and who do not want to belong to AI (or NAIFA, or whoever…), their challenge is marketing. In a capitalist environment, it is incumbent on the seller of services to convince the buyer that they have the best product - to get a foot in the door, somehow, some way. That’s one of the reasons golf has become so rampantly popular in recent years.” - Michael Tabor
TSI
Appr aisal
®
We’d Like to Welcome You to Our Team.
We’re Hiring. Join Us! TSI Appraisal® is hiring 200+ staff appraisers to supplement its existing appraisal network across the United States. We are seeking highly skilled candidates to fill numerous open staff appraiser positions. Our focus is on major metropolitan areas in the following markets: Alabama, California, Colorado, Connecticut, Georgia, Indiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New York, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Virginia, Washington and Washington D.C.
Qualified residential appraisers are invited to complete our short appraisal evaluation at:
tsiappraisal.com/appraisers
877.762.5342 = tsiappraisal.com TSI Appraisal
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* LIVEVALMAG.COM | 47
CORELOGIC STATS
CoreLogic
north dakota
april highlights 2011
+4.2%
michigan
-13.2%
vermont
+3.4%
rhode island
-11.6% idaho
-15.2%
new york D.c.
+2.2%
nevada
+3.2%
-11.4% arizona
-11.9% mississippi Including distressed sales, the five states with the highest appreciation were: North Dakota (+4.2 percent), Vermont (+3.4 percent), New York (+3.2 percent), The District of Columbia (+2.2 percent) and Mississippi (+1.4 percent).
+1.4%
Including distressed sales, the five states with the greatest depreciation were: Idaho (-15.2 percent), Michigan (-13.2 percent), Arizona (-11.9 percent), Rhode Island (-11.6 percent) and Nevada (-11.4 percent).
south dakota
-5.9%
North dakota
+4.5%
minnesota
-5.6%
idaho
-9.5%
West Virginia
+8.4%
nevada
-10.3% arizona hawaii
+5.8%
-6.0%
south carolina
+6.1% mississippi
Excluding distressed sales, the five states with the highest appreciation were: West Virginia (+8.4 percent), South Carolina (+6.1 percent), Hawaii (+5.8 percent), Mississippi (+5.0 percent) and North Dakota (+4.5 percent).
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+5.0%
Excluding distressed sales, the five states with the greatest depreciation were: Nevada (-10.3 percent), Idaho (-9.5 percent), Arizona (-6.0 percent), South Dakota (-5.9 percent) and Minnesota (-5.6 percent).
april HPI for the Countryâ&#x20AC;&#x2122;s Largest Core Based Statistical Areas (CBSAs):
| Cbsa |
april 2011 12 month hpi changed by cbsa
single-family
single-family
excluding distressed
Chicago-Joliet-Naperville, IL -11.1% -2.8% Phoenix-Mesa-Glendale, AZ -11.0% -5.9% Atlanta-Sandy Springs-Marietta, GA -9.1% -5.6% Los Angeles-Long Beach-Glendale, CA -5.1% 2.8% Riverside-San Bernardino-Ontario, CA -4.1% -1.4% Houston-Sugar Land-Baytown, TX -3.4% 6.4% Philadelphia, PA -1.6% 1.7% Dallas-Plano-Irving, TX -1.4% 4.9% Washington-Arlington-Alexandria, DC-VA-MD-WV -0.3% 5.5% New York-White Plains-Wayne, NY-NJ 2.0% 3.1%
directory
2
DIRECTORY
ACI
Dwellworks, LLC
a la mode, inc.
Global DMS
800.234.8727 aciweb.com
216.682.4200 dwellworks.com
Kirchmeyer & Associates
877.762.5342 tsiappraisal.com
LANDY
Urban Lending Solutions Appraisals
800.ALAMODE info@alamode.com alamode.com
877.866.2747 globaldms.com
800.336.5422 landy.com
Bradford Technologies
800.640.7601 intercorpinc.net
Intercorp
LIA Administrators & Insurance Services
800.622.8727 bradfordsoftware.com
The Berger Company 619.225.2225 thebergercompany.com
IRR Residential
866.538.8935 irr-residential.com
Kentucky Real Estate Appraisers Board 859.623.1658 kreab.ky.gov
TSI Appraisal
800.771.5246 kirchmeyer.com
888.996.8060 urban-lsa.com
800.334.0652 liability.com
White Picket Fence Appraisals, Inc. 800.936.1873
whitepicketfenceappriasals.com
REVAA
202.223.7800 revaa.org
Stage Capital, LLC
202.640.8912 rstaiger@gwmail.gwu.edu
JULY / AUGUST 2011
* LIVEVALMAG.COM | 49
}
FOR WHAT IT’S WORTH
}
FOR WHAT IT’S WORTH
Customary & Reasonable
calamity. As we know, getting the law passed
second presumption does. Yet both options
more controversies and compromises than
likely to be derived from the basic question:
involved a ferocious legislative contest with anyone envisioned. Yet nobody—except
for some in the new majority in the House of Representatives—is eager to revisit the remaining systemic issues any time soon.
On the contentious issue of customary and reasonable fees, the Board’s Rule deems
the marketplace the reliable regulator of
Don Kelly
appraisal services in the same geographic
area where the service is to be provided?” The reports, statistics and expert opinions that the functional approach involves are
ultimately derived from the same data, but are more focused geographically.
two options for determining valuation fees:
law’s dual options for valuation fees work to
one basically historical, the other functional.
One, reflects the methodology of
a traditional appraisal, reviewing
compensation paid for comparable anticompetitive measures. The functional
perspective
“What have appraisers been paid for similar
An obstacle to harmonious implementation
interpreted by the Board, Dodd-Frank offers
work in the past in the absence of
fifth
rely on recent market data. Such data is
the relative cost of valuation services. As
The historical approach, or Presumption
Customary and Reasonable: The Marketplace Knows.
special section
approach, or Presumption Two, would allow fees to be established through
has arisen from the fears of some that the
actually cut or limit compensation. That, of
course, remains to be seen. Nevertheless, had the Board offered only one option, it would doubtless have been decried as dictatorial.
By offering two, the Board demonstrates its confidence in the ability of the marketplace to sort things out. Surely, most participants
in the mortgage finance industry appreciate the wisdom of the market.
objective third-party data or fee surveys
Contention also centers on the first
excluding compensation paid by appraisal
fees. But as the earlier FHA guidance noted,
within the relevant geographical area, but
management companies. Both approaches
rely on marketplace data to establish what is customary and reasonable in the eyes of the law.
“FHA believes that the marketplace
Specifically, the first presumption requires
customary in terms of fees.” From: FHA
compensation is reasonably related to rates
presumption’s dependence on recent AMC it is the marketplace that best determines
the reasonableness of the fee. Lenders and professional appraisers agreeing on an
appropriate fee for specific services rendered is a pretty basic and reliable formula. The second presumption does not include
AMC fees and can be used if lenders have
best determines what is reasonable and
lenders or their agents to ensure that
Frequently Asked Questions.
for appraisal services in a geographical area
Long before HVCC and recent legislation,
such as the type of property, scope of
reasonable fees to be paid for appraisal
specifically bans anticompetitive measures
amendments to the Truth in Lending Act
from entering the market. The second
FHA into the broader mortgage market.
third-party information from academic
The Board has recognized that the Dodd-
Reserve Board has issued guidance on
agencies.
structures fairly and realistically based on
federal bank agencies have begun to
One difference that disturbs some industry
the real estate finance industry, which
not require creditors to exclude third-party
within the last year, adjusting for factors
HUD-FHA policy required customary and
work and complexity of the assignment. It
services. The Dodd-Frank Act, with its
such as price-fixing or restricting others
(TILA), extends this requirement beyond
presumption permits reliance on objective
Now, pursuant to the law, the Federal
studies, research reports and government
fees in its Interim Final Rule and the
address the inadequate structures of
observers is that the first presumption does
contributed to our worldwide economic
information that includes fees paid for
50
|
LVM
appraisals ordered by AMCs, while the
sufficient confidence in other specified
data. Some fear that AMCs and lenders will invoke the first option to impose a de facto appraiser pay freeze. Yet others fear that,
if fee schedules such as the Department of Veterans Affairs offer guidance in a set fee
schedule, the suggested rates could morph into a ceiling or limit on compensation.
Frank Act provides the flexibility to set fee the evolving marketplace. Compensating
appraisers at a customary and reasonable rate makes sense for all involved and the
marketplace will be the basis, as it should be, for that rate. 6
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