Working RE Magazine - Issue 52

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Real Est at e A pprai s ers

Winter 2020, Volume 52

FHFA SLOWS BIFURCATED APPRAISALS Thriving in a Post-FIRREA World Disgruntled Clients (and How to Learn from Them) Fannie Mae and the Future: Recruiting New Appraisers Building a Secure Appraisal Business Appraisal Fee Transparency Act of 2019

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Winter 2020 Volume 52

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From the Publisher Readers Respond

6

FHFA Slows Bifurcated Appraisals Isaac Peck, Editor

Verify That Sale

Hal Humpreys, Appraiser eLearning

12

Thriving in a Post-FIRREA World James Baumberger, MNAA

16 18

Disgruntled Clients (and How to Learn from Them) David Brauner, Senior Broker at OREP.org

Fannie Mae and the Future: Recruiting New Appraisers

24 26

Isaac Peck, Editor

Building a Secure Appraisal Business Joshua Walitt, SRA, MNAA

Appraisal Fee Transparency Act of 2019 Isaac Peck, Editor

30 34 36 37

Appraiser’s (Changing) Role

Mark Verrett, Chief Innovation Officer at Accurity Valuation

Why Hybrid Appraisals Don’t Work Richard Hagar, SRA

What is BIPD? (Why Appraisers Should Care) Isaac Peck, Editor

Professional Marketplace

38

Industry News Mission

Publisher

Working RE

Working RE is published to help readers build their businesses, reduce their risk of liability and stay informed on important technology and industry issues.

David Brauner dbrauner@orep.org

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Shayan Moghaddam shayan@orep.org

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Editor Isaac Peck isaac@orep.org

Assistant Editor

www.workingre.com (click subscribe) Subscription included with purchase of E&O insurance from OREP. Your comments and letters are welcome!

All stories without attribution are written by the editor.

2 Working RE Winter 2020

Working RE is published quarterly and mailed to real estate appraisers, agents and other real estate professionals nationwide. The ads and specific mention of any proprietary product contained within are a service to readers and do not imply endorsement by Working RE. No claims, representations or guarantees are made or implied by their publication. The contents of this publication may not be reproduced either whole or in part without written consent.

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From the Publisher

Just Saying...

by David Brauner, Senior Broker at OREP.org

There are a number of very important items covered in this issue. First, the

Department of Veteran Affairs (VA) says that for bifurcated appraisals on VA loans, the third-party “person” who is hired to gather data must (1) be an appraiser or trainee themselves, (2) sign the appraisal as an appraiser, and (3) be contracted by the appraiser of record (pg. 38). Wow! This is a clear safeguard put in place for veterans and an acknowledgement of the potential riskiness of the bifurcated model that Fannie Mae is testing.

Second, is the decision by the Federal Housing Finance Agency (FHFA) that directs Fannie Mae to freeze the riskiest part of its bifurcated pilot program that replaces an appraiser completely (pg. 6). Again, wow! This decision could be a move back toward prudence, or a bureaucratic hiccup, we’ll have to wait and see.

We have requested clarification from FHFA and will share what we learn.

There is also H.R.3619—Appraisal Fee Transparency Act of 2019, passed The third-party “person” who is hired by the House of Representatives in September 2019 and currently being to gather data must considered in the Senate. This makes mandatory the inclusion of a separate be an appraiser or breakdown of appraiser and AMC trainee themselves, fees in mortgage loan disclosure docsign the appraisal uments for consumers (pg. 26). How long have appraisers been asking as an appraiser, and for that? Since the Home Valuation be contracted by the Code of Conduct ushered in the era of appraisal management companies, appraiser of record. right? Consumers should and will now know how much of the fee goes to the appraiser, and how much goes to the management of the process, if the bill is passed.

Finally, there is the objection by Congress to the Appraisal Subcommittee’s decision to waive appraiser certification requirements in North Dakota (pg.

39). It didn’t change the outcome but it is unusual, to say the least, for appraisers to have their role defended in a meaningful way. Most appraiser issues fall on deaf ears. In this case, Congress went to bat for the integrity of profession.

All this seems like evidence that appraiser issues are in the spotlight and valuation matters. If you believe appraisers are important to the valuation process to preserve the public trust, it might be time to make your voice heard.

One way to do that is through the OREP/WRE Bifurcated Appraisal Survey. So far, appraisers overwhelmingly believe the absence of appraiser oversight in the bifurcated appraisal model will damage quality: and who would know better? (pg. 9). The Survey is still open and you are encouraged to make your voice heard. We will publish the complete results next issue. WRE 4 Working RE Winter 2020

Readers Respond FHFA Slows Bifurcated Appraisals As appraisers we have to take a certain number of classes to be Certified, ongoing continuing education, USPAP classes, and abide by Federal, State, USPAP, FHA, and/or VA guidelines lest we get fined by those entities. It appears that the so called Property Data Collectors would be the cheapest people that Fannie Mae could locate, or have a real estate agent do it. Agents can’t, in most cases, even fill out an MLS Property Description correctly or fully. As a New York State Certified Residential appraiser, I’m just going with the flow and it looks like the flow is going to be more REO assignments coming down the pike. —J. Stachow When you do a full field review, you witness the errors of experienced Certified appraisers (and usually you are only observing the exteriors). I can’t imagine the mistakes you will encounter when a rookie real estate agent tells you what he/she saw. Remember, you are making adjustments from those observations.

These bifurcated appraisals are a sure way to get your E&O doubled. —Candy

 Turn and Face the Strain... an Appraiser’s Life Appraisers have been around for a long time and will continue to be around.

After 46 years in the business I have seen a lot of changes, and this will be a constant into the future. All the next “better solutions” will wither and die, and then it will be a new round of government regulations that increase

the onus on actual appraisals. Keep a stiff upper lip and charge accordingly, as there is a future in being an appraiser.

Just be ready to accept change. Join a local/regional/national association for education, networking, and representation and you will be surprised at the advantages and how you can further your career and professional standing.

—Wade Gibson

 Appraisal Fee Transparency Act of 2019: Pivotal Point for Appraisers Amen! I have written my Senator in Georgia and I hope everyone does the same. We have always been the brunt of the complaints about fees and turn

times. This is so far from the truth! These are the only reasons they are pursuing bifurcated appraisals. It is all about the money. Turn time will certainly NOT be improved with these products, with two parties involved in the process rather than one. As for money saved, we are not talking about much at all when you look at the impact it can have for the consumers who think they are getting a REAL appraisal. We need to tell the public the truth so they know the reality of the situation. We need to restore public trust in appraisers and the profession. No one seems to stand up for us in this regard.— Mary Thompson



Conservation Easements There is no excuse or reason for the overvaluation of a conservation easement. It is an appraisal competency issue. A hint is to assure that the IRS definition of Highest and Best Use being used is deemed “imminently probable” as opposed to some more traditional definitions of “reasonably possible.”

Conservation easement appraisals (or facade easement or air space easement) are not assignments for the faint-hearted or inexperienced. Unless the guiding “Special Requirements” of IRS are followed meticulously, even seasoned appraisers can run afoul of the rules.

Future liability can be extreme. —Michael F., American Guild of Appraisers WRE

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FHFA Slows Bifurcated Appraisals

by Isaac Peck, Editor

Editor’s Note: Find OREP/WRE Bifurcated Appraisal Survey Results, see pg. 9.

Many appraisers took Fannie Mae’s new

In other words, Fannie’s Value Verify program of testing bifurcated appraisals is continuing but in a modified, more prudent fashion.

Value Verify pilot program, featuring bifurcated appraisals, as the beginning of the end of the profession. Now Working RE has learned that part of the Value Verify process has been put on hold.

Fannie Mae, which is still in conservatorship, is currently regulated by the Federal Housing Finance Agency (FHFA).

Starting in 2017, FHFA tasked Fannie Mae with “Modernizing the Appraisal Process.” The result is Fannie’s bifurcated appraisal pilot program, which it calls Value Verify. Over the last few months, rumors circulated that Value Verify was “dead.” Well, not exactly, as Working RE (WRE) learned, but the news does indicate there is a watchdog in place.

Fannie Mae tells WRE: “In early 2020, at the instruction of FHFA, we will adjust the Value Verify process to pause the Data and Done option (our bifurcated valuation process that does not ultimately result in the delivery of an appraisal).

We will continue to offer the Data & Appraisal option within Value Verify on a limited pilot basis as a means to evaluate possible improvements to our collateral risk management and create a more efficient appraisal process.”

FHFA confirmed that it asked Fannie Mae to pause any bifurcated valuation process that doesn’t result in an appraisal, telling WRE: “While FHFA continues its review of Enterprise pilots, including those related to the appraisal process, the Agency is directing the Enterprises

Isaac Peck is the Editor of Working RE magazine and the Vice President of Marketing and Operations at OREP.org, a leading provider of E&O insurance for appraisers, inspectors and other real estate professionals in 50 states. He received his master’s degree in accounting at San Diego State University. He can be contacted at isaac@orep.org or (888) 347-5273.

6 Working RE Winter 2020

to focus on activities necessary to support their core guaranty business mission, enhance safety and soundness and facilitate ending the conservatorships.

Accordingly, the Enterprises have been asked to redirect their efforts and pause testing any bifurcated valuation process that does not ultimately result in the delivery of an appraisal.”

In other words, Fannie’s Value Verify program of testing bifurcated appraisals is continuing but in a modified, more prudent fashion. WRE reached out to FHFA for clarification and elaboration on future plans for the program and for appraisers, but at press time, no response has been received.

To understand what has changed, we first have to understand Fannie’s Value Verify initiative. Under Fannie Mae’s initiative, a property data collector, not necessarily a licensed appraiser, would inspect a home and report back on the condition of the property (For more, visit WorkingRE.com; search Bifurcated Appraisals).

Based on the characteristics of the property indicated by the Property Data Collection (PDC), Fannie’s Value Verify initiative offers the lender (and the borrower) one of two options: • Data and Done (an appraisal waiver based on PDC data).

• A desktop appraisal (Fannie’s new 1004P).

So while Fannie’s Value Verify pilot continues, beginning in early 2020, FHFA instructed Fannie to pause the “Data and Done” option, that completely waives the 1004P desktop appraisal and allows loan approval based only on data collection. page 88

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Lyle Radke, Director of Collateral Policy and Strategy at Fannie Mae, presented the Proposed Solution Framework slide (Figure 1) in his presentations at various appraiser conferences throughout 2019. FHFA is essentially halting Option #1: Data and Done, while allowing Fannie to continue with its bifurcated pilot model #2: Data & Appraisal.

Appraisers believe this is good news for consumers because the non-biased eyes of a professionally trained and licensed appraiser will continue to be part of the process. WRE

Figure 1 (Credit: Lyle Radke, Fannie Mae)

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OREP/WRE Bifurcated Appraisal Survey: First Results The OREP/Working RE National Bifurcated Appraisal Survey, which currently has 4,000 respondents, is still open for appraisers to share their voices. While it is not presently clear how long the “Data and Done” option of Fannie Mae’s bifurcated appraisal pilot program will remain paused, OREP/WRE’s Bifurcated Appraisal Survey indicates that the majority of appraisers believe that bifurcated appraisals increase the appraiser’s liability, lead to poorer quality appraisals, and threaten to degrade the geographic competency of the appraiser.

Few appraisers have any experience with bifurcated appraising; 18 percent as the valuation analyst and 5 percent as the Property Data Collector. Oddly, or maybe speaking volumes, only 26 percent say they are open to trying it either as an analyst or data collector—so most everyone willing to try it, may have already.

Appraisers have a number of reasons why they are wary of bifurcated appraisals, even as an analyst, including: • 78%: Liability concerns related to incomplete or inaccurate data from the property data collector.

• 73%: Difficulty in credibly appraising a property that I haven’t physically inspected myself.

• 70%: Difficulty in credibly appraising a property where I haven’t driven the neighborhood, and/or the comparable sales, due to the possibility of an unreliable market analysis and/or other factors.

• 70%: Inadequate fee for the amount of work.

• 65%: Believe it’s bad for the profession.

• 55%: Compromised geographic competency and comparable sales selection in the absence of field work.

Appraisers are warmer to the idea of bifurcated appraisals if the Property Data Collector is a fellow licensed/Certified

appraiser or trainee, with 41 percent indicating they would be “more likely to consider future bifurcated assignments as an Appraiser/Valuation Analyst only” if the Property Data Collector is an appraiser or trainee.

Among the reasons appraisers say they will not perform work as the Property Data Collector are:

With over 88 percent of appraisers expressing concern that the bifurcated appraisal model will threaten their geographic competency, it follows that even among those appraisers who are willing to do these assignments, many still have concerns about how this process will affect their quality of work. After all, the appraiser is the local market expert precisely because they are working in • Inadequate fees: 72% these markets, driving comparables and • Bad for the profession: 61% visiting properties, day in and day out.

• Potential liability: 56% When it comes to appraisal turn Seventy percent (70%) of appraisers times, one of the main drivers of this believe there is no benefit to bifurcated proposed shortcut, over 80 percent of appraisals at all. Only 8 percent believe appraisers surveyed do not believe splitthat bifurcated appraisals will provide an ting the process in two will improve “opportunity for appraisers to focus on turn times. higher-level analytical appraisal skills.”

Over 1,500 of the 4,000 respondents have left comments as well, such Geographic Competency as this one: “FNMA is contradicting The survey reveals a definite consensus themselves. When CU started, Fannie among appraisers that widespread adopwas sending warning letters to appraistion of bifurcated appraisals will threaten ers stating the ratings used for condition geographic competency. If appraisers and quality were different than other increasingly spend more and more time appraisers. Now it is OK to have an performing the analyst role, without untrained third party making those calls? going out into the field—driving comHow ridiculous is this?” parables and noticing the subtle differ You can find survey data and over ences between different submarkets, the 1,500 considered responses left by concern is that they will not be able to appraisers at WorkingRE.com/hybridresults. maintain the in-depth market knowledge Appraisers are the experts in the field, needed to properly perform their jobs. doing the appraising and having the Question #9: Do you believe that expertise, which makes their insights into appraiser-analysts who do not visit neighborthe proposed changes and the effects on hoods/properties are in danger of losing their abilquality and the public trust the gold stanity to produce credible reports over time due to a dard for anyone making a decision on the loss of familiarity with markets, neighborhood future of collateral valuation. influences and/or other factors?

The average time to complete the survey is three minutes. The survey Yes remains open for appraisers to comment on Fannie’s new proposed bifurcated model. If you haven’t taken the survey No yet, please visit WorkingRE.com/hybridsurvey 0% 20% 40% 60% 80% 100% to add your voice and comments.

This is a developing story, to stay upto-date on the latest news and informa» Yes: 88.24% tion, be sure to subscribe to Working RE’s » No: 11.76% online edition at WorkingRE.com. WRE Winter 2020 Working RE

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Verify That Sale

by Hal Humphreys, Appraiser eLearning

W

The sales we use are almost always the foundation of our valuation analysis. If we get the sales research and verification right on the front end, many sections of our reports can be stronger and more supportable.

“ here did you verify this?” the attorney asked.

“Deed and public record,” the appraiser said. “Deed and public record.”

The attorney proceeded to eviscerate the appraiser, in court, on the stand, under oath. It was painful to watch.

“Did you at any point call the seller?” the attorney asked. “No, but...”

“Did you at any point attempt to call the buyer?” “No, but...”

“Would it surprise you to learn that the seller and the buyer are brothers-in-law?”

“Erm … what?”

This painful scene illustrates the most important reason appraisers need to verify sales: sometimes, malfeasance occurs just beneath the surface. And unless you make those calls, you’ll never know about it. Of course, the more basic reason is to make sure that we do our due diligence.

Please turn your hymnals (sorry, USPAP) to Standard Rule 1-4. “In developing a real property appraisal, an appraiser must collect, verify and analyze all information necessary for credible assignment results.” I’m going to suggest that pulling a deed and accessing public records fall squarely into the “collect” portion of this directive. We need to take it a step (or three) further.

Let’s break this down a bit: “… an appraiser MUST ….” That’s not a suggestion. It’s not a thing to consider. It’s a directive. It’s a foundational issue that is so important as to merit a “must.” “… verify and analyze ALL ….” All. Not some.

Not just sales but all information. But for this discussion, we’ll focus on the sales.

Why? The sales we use are almost always

Hal Humphreys is a partner at Appraiser eLearning. He is a lifelong learner and educator. He is a practicing Certified Fraud Examiner and professional investigator. Hal is a CDEI certified instructor through IDECC. He writes, lectures, and he walks … a lot.

10 Working RE Winter 2020

the foundation of our valuation analysis.

If we get the sales research and verification right on the front end, many sections of our reports will be stronger and more supportable.

So here’s the question. How do you verify sales? Start with the collection. Yes, go to the MLS and pull sales. Yes, go to the assessor’s website and pull information. Yes, of course, go to the register’s office website and get a copy of the deed.

But there’s more.

Use these resources to identify witnesses, people with firsthand knowledge of the transaction. Then—and this seems to be the part we often overlook—call those people and talk to them. Ask the buyer if the sale was arm’s length. Ask the seller to verify the purchase price. Ask them if there was anything included in the sale that is not mentioned in the MLS or the deed.

For instance, I once found a sale of a piece of land that seemed perfect. It closed within a month of my appraisal date. It was almost exactly the same size, same amenities, same access, etc. I could have just transcribed the information and used it as a sale in my report. In a lot of circumstances, I would have (tight deadline, pesky client, too much to do). In this case, the sale seemed almost too good to be true. I dug a little deeper.

I found the seller’s name from the deed, and the buyer’s, too. I took a little time to do a quick Google search for the names and promptly found good phone numbers for both. I called the seller first.

“Well, yeah, the sale was arm’s length,” he said. Check. “Mr. Stevens called me a couple years back and wanted to buy the property. He put a couple a couple thousand down and then paid me a thousand a month for two years.”

The sale, recorded just last month, showed a consideration of $2,500.

Which, to be fair, was correct—in a way. But—In Econ 101 we learned that there’s a time value to money. A dollar today is worth more than a dollar tomorrow. This sale was an ownerfinanced sale. The seller charged no interest. Sure, it was arm’s length, but the real number was something less than $25,000.

I talked to the buyer, who informed me that he looked into conventional financing. He had allotted $25,000 to buy the property. But if he took out a bank loan, the final cost would be somewhere north of $35,000, including principal and interest. So he proposed the $2,000 down and $1,000 per month owner-financing with no interest. The seller was thrilled. The buyer was happy, but the actual purchase price, according to the buyer, was more like $18,000.

One more thing to consider: when did this sale actually close? The deed transfer occurred after all of the $25,000 had been paid, but when did the sale

happen? When was the meeting of the minds? It was two years ago.

If I had used this sale, there’s a better than average chance that no one would have ever thought to question it. However, if for any reason that sale was used in an appraisal that ended up in court, you can bet that the attorneys would dig into every single detail of the appraisal, including the verification of that sale.

I often get the opposition, “That’s all fine and good, but we don’t have time to make three phone calls on each sale.”

This may be true but there are ways to use process to make it less onerous. My dad used to take one day a month and verify all of the sales in his county. He and his secretary (and sometimes with me as well) would divvy up the list and start calling buyers, sellers, and agents: anyone who could, with firsthand knowledge, answer questions about the circumstances of each transaction. It took about half a day. A lot of people said things like, “I ain’t tellin’ you that.” Or “That’s none

of your business.” But we persisted, and at the end of the day, my dad had a new three-ring binder chock full of verified sales to use for the next month.

This process is even easier now. Dad and I would paw through the blue-book directory to find phone numbers. We’d go to the courthouse and make paper copies of deeds. Now it’s a matter of databases and Google. And, of course, time.

How much more supportable would your reports be if you had verified sales from which to derive your estimate of value? How much more certainty would you have when a reviewer challenges your analysis? How much more comfortable would you be on the stand when that lawyer starts to ask questions?

“Where did you verify this,” the attorney asks. “Well, I got copies of the deed and deed of trust and I talked with the seller and the buyer. The agent also verified the sale and let me know…”

See how much more fun that version is? WRE

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Thriving in a Post-FIRREA World

by James Baumberger, MNAA

We real estate appraisers are remark-

able professionals. The potent combination of our education, experience, integrity, market knowledge, and analytical judgment is unparalleled. Not to dampen the dreams of those who believe artificial intelligence (AI) and computational analytics will soon render appraisers obsolete and unnecessary, but I do not believe that movie is “coming to a theatre near you” anytime in the near future.

However, I do believe the tools of advanced technology will be found in the toolbox of appraisers who have adapted to thrive in a post-FIRREA world.

Post FIRREA

In a post-FIRREA world, clients must want to employ appraisers.

After achieving my first state appraiser license 30 years ago, I practiced most of my career in the world created by FIRREA, or Title XI, where my mortgage lending clients had a regulatory requirement to employ my services. Passage of the Financial Institutions Reform, Recovery, and Enforcement Act jokingly evoked the following from some colleagues: “Finally I’m a Rich Real Estate Appraiser.” As it turns out, the joke was on us, but the punchline would not be revealed for many years, as we will discuss later.

As you know, in 1989 FIRREA ushered in the Appraisal Subcommittee (ASC), the Appraisal Foundation (TAF), and the modern era of mandatory state licensing for real estate appraisers.

FIRREA originally required that statecredentialed appraisers be required to

James Baumberger is the managing partner at First Choice Appraisal Management, operating an ethical cost-plus business model in the Western United States. He is also President of the Coalition of Oregon Real Estate Appraisers (COREA), serves on the Board of Governors of the NAA, and is a second-generation appraiser, who is a course author and instructor for the Columbia Institute, Appraiser eLearning, and FCAM U.

12 Working RE Winter 2020

perform appraisals for Federally Related Transactions (FRTs) with a transaction amount > $100,000—referred to as the residential De Minimus, or appraisal threshold. With apologies in advance to redheads, who are perfectly fine people, state-credentialed appraisers suddenly became the redheaded, freckled step-children of the mortgage lending industry. While some lenders grudgingly acknowledged we were part of the family, they did not necessarily want to sit next to us at the dinner table.

Still, many of us enjoyed thriving careers in those years believing that most of America’s residential mortgage transactions were FRTs. It was a little disconcerting in 1994 when the residential De Minimus, or appraisal threshold, was increased by federal banking regulators to > $250,000. Still, most of us did not notice a decrease in demand for our professional services. The commonly shared assumption was that FRTs were all of the loans sold on the secondary market, plus those loans either guaranteed or insured by the federal government, which represented the vast majority of residential mortgage lending transactions.

For the first few years after the creditforeclosure crisis of 2008, a common question asked repeatedly of attorneys, compliance experts, and federal regulators at national appraisal conferences was, “What is the exact definition of an FRT?” The answers were always some variation of, “We are not sure, so we have asked the Agencies for a definition.” The Agencies, sometimes called the Interagency, refers to the Federal Financial Institutions Examination Council (FFIEC). The FFIEC is comprised of the CFPB, FDIC, FHFA, FRB, NCUA, and the OCC.

Eventually, guidance on what was an FRT, in terms of FIRREA’s appraisal requirements, began to be revealed by the FFIEC in exposure drafts and rulemaking commentary. The FFIEC’s final conclusion was either brilliant or devious in the extreme, depending upon one’s perspective. Either way, the guidance was earth-shattering and stunning to all.

The Agencies (FFIEC) decided that any residential mortgage transaction which is exempt from the appraisal requirements of FIRREA is not an FRT. Next, the FFIEC significantly narrowed the appraisal requirements for Federally Related Transactions by issuing four exceptions to FIRREA. The following four types of residential mortgage transactions are exempt from FIRREA’s appraisal requirements, and thus are not FRTs: • Loans that are sold to the Government Sponsored Enterprises (GSEs)— Fannie Mae and Freddie Mac. • Loans insured or guaranteed by a U.S. government agency—FHA, USDA, and VA. • Loans with transaction amounts < $250,000—current De Minimus which is increasing to < $400,000 on 01/01/2020.

• Loans that were not originated by a regulated institution.

If this is news to you, I would recommend you sit down, pause momentarily, and take a deep breath before reading further.

The FFIEC now estimates that 90–91 percent of residential mortgage lending transactions do not require an appraisal based upon regulations. Now you understand why I say the joke was on us, and why I say we are now practicing our profession in a post-FIRREA world.

Is this the end for residential real estate appraisers? Must we fade into the dust bin of history as blacksmiths and typesetters before us? Not at all, and our future can still be very successful, but the rules of engagement have definitely changed for us. In a post-FIRREA world, clients must want to employ appraisers.

Fortunately for us, the good news is that many borrowers, lenders, and real estate brokers recognize that appraisers add value to the transaction—pun intended. Not that kind of value, as in a higher value opinion, but in terms of invaluable consumer protection.

Appraisers protect consumers by ensuring the estimated property value supports the loan amount. In the federal rulemaking comments for the increase in the residential appraisal De Minimus to < $400,000 on 01/01/2020, appraisers are officially recognized as helping to ensure “a safe and sound real estate lending process.”

Remaining Relevant Appraisers must provide positive customer experiences and achieve mastery of advanced valuation technology to remain relevant and thrive. The false stereotype, which sadly contains a kernel of truth, of a curmudgeonly appraiser who is unaware that they are in a customer service business must be debunked. While we cannot, should not, and will not ever commit to a target value, we must commit to providing active communications and credible results combined with professional courtesy and timely service. Clients with other options must choose to hire appraisers in a post-FIRREA world.

The primary driver of these regulatory changes, to provide clients with flexibility and options in terms of the valuation services they choose to employ, is the rush of mortgage lenders to gain a competitive advantage through innovation—by delivering a digital mortgage experience. Consumers are already demanding this functionality in today’s Amazon world based on ease, simplicity, and speed. Advanced software, big data, and computer analytics have combined to make the digital mortgage experience achievable for the first time in history.

The July 2018 Executive Order 13772, titled Nonbank Financials, Fintech, and Innovation, in the lending and servicing section (pages 83–143), discusses appraisals on page 103: “In recent years, lenders and homebuyers have pointed to the appraisal … as a frequent source of delays and a driver of extended closing timelines.” Fintech refers to the integration of technology into financial services companies in order to improve their use and delivery to consumers.

The Executive Order continues that Fintech has “begun to disintermediate the traditional appraisal process… this technology has been adopted by both GSEs.” Advances in Fintech—especially AVMs—“have pushed appraisals in a new and innovative direction.” The Executive page 148

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7page 13

Order discusses desktop appraisals and hybrid, or bifurcated, appraisals as an intermediate type of appraisal combining aspects of the traditional appraisal process with automation and the database capabilities of AVMs. Think what you will of these changes, there is no putting the technology genie back into the bottle. Change is the only constant. Whether we residential appraisers like or dislike the introduction of bifurcated desktop valuations, based on third-party property data collections, we cannot stop, nor ignore, this significant change in our industry. Honestly, my feelings about these changes are bittersweet depending upon the implementation of effective safeguards.

Apparently, the Federal Housing Finance Agency (FHFA)—federal overseer of Fannie Mae and Freddie Mac— shares the feelings of many appraisers that these changes are folly unless there are thoughtful safeguards and welldefined limits to protect the public trust.

As reported in this issue of Working RE magazine, the FHFA has placed a hold on one aspect of Fannie Mae’s Value Verify™ program known as Data and Done (See pg. 6 for more). This hold on issuing appraisal waivers based on Property Data Collection results does

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not prohibit Fannie Mae from continuing to pilot test its bifurcated desktop appraisal option (Visit WorkingRE.com; search “Bifurcated Appraisals” for more).

Evaluations Advanced technology, big data, computer analytics, and the GSE’s data-mining of millions of appraisals have combined to change appraisers’ traditional scope of work and the appraisal workflow process itself. In addition, the market demands a wider suite of valuation services than many of us are currently comfortable providing. For example, the demand for evaluations is reported to be approximately three–four times higher than for appraisals. If appraisal annually represents a $2.7–$2.8 billiondollar industry, many experts report that evaluations are an $8 billion-dollar industry. Most evaluations in America are not completed by appraisers today, but they should be tomorrow. I believe professional appraisers are uniquely prepared to become the most trusted solution providers for all valuation services involving real estate.

Change—Only Constant A wise appraiser told me recently that, “It is time for appraisers to become comfortable with being uncomfortable.” Rather than being insensitive, or flippant, he was cognizant that we are called in this moment to be flexible and adaptive during a transitional period of major industry change. Naturally, change provokes some discomfort in us.

As you may be, I am discomforted by the enormous changes in federal regulations over the last few years that now exempt 90–91 percent of all residential mortgages in America from the appraisal requirements of FIRREA. We no longer live and work in an America where residential lending clients must employ professional real estate appraisers.

In the post-FIRREA world where clients must want to hire appraisers,

fortunately for us, many lenders, regulators and the GSEs continue to publicly recognize the value that credible appraisals and independent appraisers add to inform the decision-making process for real estate financing transactions. No other group of professionals is as prepared—by education, experience and ethical standards of practice— to protect the public trust, serve the credit-financial system of America and safeguard the real estate wealth of Americans, as are today’s highly competent professional real estate appraisers.

If appraisers evolve into providers of valuation services, master advanced technology and improve our customer service skills, appraisers will remain the preferred solution providers for all institutions that use valuation services.

Tomorrow’s valuation services provider will perform a wide array of professional services ranging from inspections and property data collections to evaluations, bifurcated desktops and traditional appraisals, using technological tools we can barely imagine today.

We appraisers are extraordinary. The judgment and integrity that we contribute cannot be replaced by computers.

As long as we apply both of these qualities effectively, and realize we are in a customer service business, the future for appraisers will be gratifying and rewarding. Residential appraisers can adapt and evolve into the valuation services providers of tomorrow. The best real estate valuation solutions, in my opinion, will come from the potent combination of advanced technology, big data and computer analytics driven by professional appraisers with the knowledge, expertise and objectivity to reliably reconcile the final results. I believe the future can be as bright for appraisers as we have the will to create for ourselves! WRE

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Disgruntled Clients (and How to Learn from Them)

By David Brauner, Senior Broker at OREP.org

You may think I’m crazy but I love cus-

Feedback is the best way to understand your business.

The customer’s experience is what pays the bills.

tomer feedback—good and bad. Enjoying positive feedback should go without saying: we all want to make a positive impact in the world- but the negative feedback too? Why on earth would we want that?

In my experience, negative feedback is gold! It’s like finding a $100 bill—and here’s why.

Feedback is the best way to understand your own business. The customer’s experience is what pays the bills. For us at OREP, it’s listening to our insurance clients. For many of you, it might be listening to the AMC folks who review your reports or the homeowners, attorneys and others who engage you directly for your expertise. When you’re wearing many hats, trying to run a small business—appraiser, marketer, IT guru, accountant, etc.—it’s hard to take the time. But that’s how you extract the gold from the rough lump of feedback: listen, consider and then fix whatever needs fixing. I know, simple right? It is and it isn’t.

It requires taking a breathe when you’re often too busy to breath and refraining from a defensive response when you’re in a pressure cooker with the heat turned up.

At OREP, we have a lot of clients, and honestly we get many positive comments every single day. I still enjoy and appreciate every one. I see just about every email that comes into our company.

When an OREP agent is called out in particularly glowing terms by a client, I send it around for everyone to appreciate—it

David Brauner is Publisher of Working RE magazine and Senior Broker at OREP, a leading provider of E&O Insurance for appraisers, inspectors and other real estate professionals in 50 states (OREP.org). He has provided E&O insurance to appraisers for over 25 years.

He can be contacted at dbrauner@orep.org or (888) 347-5273. Calif. Insurance Lic. #0C89873. Visit OREP.org today for comprehensive coverage at competitive rates.

16 Working RE Winter 2020

makes me proud of them and proud of our business. When a critical comment comes in, I try to always follow these three steps: listen, consider and improve, if possible.

Automated Reviews Recently, we began using an automated one–five star rating system (Blipp Reviews) for customers that also provides space for feedback, in addition to the star rating. I review every one of these too. I love it now but I have to admit I was hesitant at first because I dislike most surveys (many are a less than straightforward way to get my data or to upsell). I seldom review anything and almost never if it’s bad, unless something is deceptive or defective. I figure OREP insureds feel pretty much the same way. Well, it turns out we get a fairly high percentage of feedback and much of it very nice; we get a lot of 5-stars. Very few come in with actual written comments, and when they do, most are almost always constructive. Here’s how to turn a bad review into something positive.

Case Study Last week, a review came in that indicated the financing wasn’t clear and our insured had problems trying to get quoted for general liability insurance (GL).

Interesting I thought. We have thousands of clients every year who finance and I don’t recall ever hearing that the process is unclear. On the other hand, I seldom take those calls unless the issue can’t be resolved by the first person trying to handle it. I believe things can always be improved. The Blipp Review system is new, so I considered that maybe there’s been

a problem for a long time that I was never aware of. In other words, maybe the financing verbiage has been unclear for years! I called the client to find out.

Regarding the financing confusion, they really had no specific feedback, which happens sometimes. They may know it wasn’t good, but can’t tell you why specifically. I was prompted to take a look.

Sure enough, the language could stand some fine tuning. By the end of the day, a revised, more coherent set of instructions was in place on our website. Who knows how many people over the years had “friction” when trying to finance instead of a “seamless” experience (like Amazon). And the added bonus of the clarity, of course, are the many calls that our clients will not have to make and our staff will not have to answer—saving everyone time and money. Yeah!

Regarding the General Liability (GL) issue, the client said the application was too complex and that he didn’t get the help he needed from his agent in figuring it out. I happen to agree that the GL application is confusing but that is something we can’t fix. I did speak to the OREP agent in question, who is VERY patient and I was satisfied they did their best. Looking at the database I could see multiple, timely return contacts with the client by phone and email.

So I listened and considered. I asked the client why they needed GL in the first place. GL is coverage for bodily injury and property damage (BIPD) for the inspection of the subject property, and also for an insured’s own business office, if they have one. However, his OREP E&O policy includes free BIPD for coverage when at the subject property. It turns out the insured had a home office, not an outside office space, and didn’t need the full GL policy after all (See pg. 36 for more on BIPD). He therefore saved $200–$500 because he got all the coverage he needed in one policy. Was he happy? You bet. I think I’m safe in saying we reversed the client’s experience from negative to positive, with the

bonus of improving our processes. Was I gratified? You bet.

Don’t get me wrong, the customer is not always right, but I find that they almost always have some kernel of advice to be considered if we just stop and listen. If you’re working with an AMC, maybe you can cut down on the corrections and call backs by making your reports more airtight and your business more profitable. The course How to Raise Appraisal Quality and Minimize Risk (7 Hours CE) is free for OREP insureds. Maybe more error free, more thorough work will make you more valuable and better able to earn higher fees. How much more is an appraisal report worth to a client when it’s clear and complete the first time?

Maybe a client will suggest something

that helps you insulate yourself from liability or land more full-fee work.

So when you face criticism, it’s a good practice to take a breath (rather than getting defensive) and realize you’re being handed a golden opportunity. Someone is taking the time to help you. Listen to the issue and consider its validity. If you need to make a change, do it! If you don’t, move on and feel good you investigated. Very rarely do I find that “negative” feedback isn’t helpful in some way if we can listen and consider and change. WRE OREP insureds/members enjoy 14 hours of FREE Continuing Education (CE), including How to Raise Appraisal Quality and Minimize Risk (7 Hrs.), taught by Tim Andersen, MAI.

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Fannie Mae and the Future: Recruiting New Appraisers

by Isaac Peck, Editor

If you were to ask an appraiser about the

Does Fannie Mae see a future for appraisers?

general outlook of the profession, the answer you get might be pretty glum.

Appraisers are worried about being cut out of the valuation process by Fannie Mae’s Appraisal Waivers and Freddie Mac’s Automated Collateral Evaluations (ACEs).

Not to mention Fannie’s latest move to bifurcate the appraisal process, with its Value Verify program, where the inspection of the subject property, also called the Property Data Collection (PDC) by Fannie Mae, is completed by a thirdparty (either a licensed appraiser or not), with the actual valuation portion of the assignment being completed by a separate appraiser based on the data provided by the property inspector.

These numerous initiatives by Fannie Mae have been interpreted by many as an effort to minimize the role of the professional appraiser in today’s mortgage and real estate markets, with some appraisers wondering if the “powers that be” are seeking to get rid of appraisers for good.

In the face of all this, it is definitely surprising, if not slightly contradictory, to learn that Fannie has recently launched the Appraiser Diversity Pipeline Initiative (ADPI) as a way to attract new recruits to the appraisal profession. Does Fannie Mae see a future for appraisers?

Working RE recently sat down with Keisha Wilkerson, a General Certified Real Estate Appraiser who has worked at Fannie Mae in various roles since 2011, to learn more about Fannie’s new initiative and what is motivating Fannie to help recruit more individuals into the appraisal profession.

WRE: Fannie Mae has recently launched an initiative to help recruit new

18 Working RE Winter 2020

professionals into residential appraisal careers. Tell me about that initiative: what steps have you taken, and what’s the plan going forward?

Wilkerson: In late 2018, Fannie Mae, working with the National Urban League and Altisource, launched the Appraiser Diversity Pipeline Initiative (ADPI). The purpose of the initiative is to raise awareness of career opportunities available in the residential appraisal field and encourage diverse new entrants to the profession.

To accomplish these goals, we are focusing on hosting community events that provide in-depth information about what appraisers do, what career paths are open to them, and the steps to becoming an appraiser. You could say it’s like a “career day” at school— attendees hear firsthand from appraisers who talk about real-life experiences and answer questions. We started with events in Baltimore and Philadelphia, hosted by the local Urban League Entrepreneurship Centers.

In August 2019 the Appraisal Institute (AI) signed on to the initiative, announcing that they will co-lead the initiative with Fannie Mae. Continuing to work with the Urban League and Altisource, the effort expanded to host appraisal career workshops in Chicago and New Orleans by the end of the year. New incentives for would-be appraisers who attend the workshops and show enduring interest may include scholarships for trainee education, appraisal software, and other resources to help them navigate the education and training process. page 228

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7page 18

WRE: Why did Fannie Mae launch the initiative? Why is this important to you?

Wilkerson: Real estate appraisers are important to Fannie Mae and play an important role in helping us assess the risk of our collateral, now and in the future. I became a Certified General real estate appraiser in 2006, and even then, I could see evidence of the statistics we hear about so much today. A majority of appraisers are over the age of 55, without enough new entrants to take their place in the next few years. There is also a lack of gender or racial diversity in the appraisal profession, so we see this as an opportunity to raise awareness of the appraiser profession and attract diverse new entrants at the same time.

For me personally, I have appraised residential and commercial property, worked in the field and in an office, and have had the pleasure of seeing a member of my own family successfully start her own appraisal shop with the flexibility to raise her young family at the same time. This is a great profession, providing much-needed services, and I’m thrilled to introduce new people to it.

WRE: Many appraisers believe that Fannie Mae is proposing significant changes to the valuation industry (the

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22 Working RE Winter 2020

move towards appraisal waivers and PDCs, for example) that will substantially decrease the utilization and demand for residential appraisal services. Yet Fannie’s move to help recruit new professionals into the residential appraisal field seems to contradict the idea that residential appraisal work is going to decrease substantially. Can you address this perceived contradiction?

Wilkerson: Appraisals are very important to Fannie Mae in managing our risk. We offer appraisal waivers on a small percentage of the loans we acquire —mostly refinances with loan-to-value ratios below 80 percent. But we continue to require appraisals for the majority of loans that we purchase.

So while the appraisal is critical for most mortgage loans delivered to Fannie Mae, it is a “long pole in the tent” in the origination process. There are periodic shortages of appraisers in some markets that can lead to long waits and high prices for appraisals. Lenders and their borrowers quickly become frustrated with delayed loan closings and added costs. With more than half of appraisers nearing retirement, new career entrants are critical.

WRE: What would you say to a potential new appraiser recruit who is worried about the longevity of the residential appraiser career path? Does Fannie Mae see a future for appraisers for years to come?

Wilkerson: In our career workshops, we talk about the appraiser’s role in the history of real estate, as well as the exciting future of the appraisal profession.

People have been predicting the end of the appraisal industry since shortly after the first appraisal was completed, but it hasn’t happened yet and we don’t see it in the future. While residential appraisals are used in the mortgage industry, they are also used for a variety of other purposes, including estate valuation, litigation and taxation support, public policy decision-making, and more. Appraisals

continue to be needed in the mortgage industry, and these additional needs are not going away either.

WRE: How do you see the current role of the residential appraiser changing and evolving over time?

Wilkerson: Modernization of the residential property valuation process that is already underway means appraisers will work smarter and have more opportunities to specialize.

Historically, real estate appraisers have spent much of their time collecting data rather than developing a value opinion. With the enormous amount of data readily available today through the Internet and other sources, we expect the appraiser’s role will evolve into more of a market analyst and less of a data gatherer.

Appraisers are inquisitive, looking at data from a number of different angles to understand trends and the why of things, not just the what. Many appraisers in the future may want to specialize in analyzing and deciphering that data, or accurately recording the facts at property sites for other appraisers to analyze.

We don’t see everyone or even a majority of appraisers making the switch to specialization in the near future, but it will probably happen at some point.

Whether future appraisers choose to specialize or to follow the traditional path of performing both property data collection and analyzing the facts to produce an expert estimate of property value, some of how they work will change. I’ll give you an example: In an audience poll at a recent real estate appraiser conference, 58 percent reported that they still use a clipboard as their primary way of collecting data. That was an amazing number considering that mobile apps currently in the market can save appraisers so much time by capturing data in the moment instead of them having to transfer their clipboard notes later. There is also new technology to simplify routine tasks like measuring and drawing sketches of the property.

As these innovations evolve, and as new

professionals enter the appraisal industry who are willing to embrace that technology to provide more standardized data with more accurate results, we see the real estate appraiser’s role becoming more efficient and even more valuable to the industry.

This evolution also presents intriguing new opportunities for appraisers to work in a variety of different ways, providing flexibility on working hours and location. Appraisers can run their own business or work for a company—there is no single career path. This flexibility promotes a healthy work-life balance: appraisers are often able to pivot working hours around family priorities, taking care of business at the most convenient and productive times of the day.

WRE: How will you measure the success of the initiative?

Wilkerson: In the long term, Fannie Mae wants to help enable a strong

appraisal profession that offers attractive career opportunities to a diverse workforce. Our initiative is not the only effort to support appraisal careers: the Appraisal Qualifications Board has recently adjusted training requirements that have for years discouraged many potential entrants to the field. The U.S. Department of Veterans Affairs and others in the industry are working to attract veterans to the profession as a post military service career option. All of these efforts will work together.

In the short term, our reward is individual success stories like this one: in one of our career workshops in Baltimore, we met a bright young woman who was very interested in a future as a real estate appraiser. At the event, she met a member of our panel, a successful local real estate appraiser, who later agreed to take her on as a trainee. This is success: attracting motivated entrants to

the profession through our awareness campaign.

WRE: What can stakeholders in the appraisal industry like OREP/Working RE, as well as boots-on-the-ground appraisers, do to help with the initiative?

Wilkerson: One thing we hear over and over is that potential appraiser trainees are discouraged by how difficult it is to find a mentor willing to provide the required on-the-job training. Appraisers can encourage new entrants to the profession by taking on trainees to help develop the next generation of appraisers. Other industry stakeholders can help to spread the word about appraisal career opportunities. Additionally, Fannie Mae is working with the Appraisal Institute to develop a scholarship fund for appraiser education and training. We look forward to working with industry stakeholders to build this much needed program. WRE

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Building a Secure Appraisal Business

We are all faced with a choice about how we will adapt to the changes.

By Joshua Walitt, SRA, AI-RRS, MNAA, CDEI

Like many of you, I got my start as

a real estate appraiser in residential mortgage work. At the time, residential mortgage work was all that I knew, and for a time, all that I thought I could do!

As a residential real estate appraiser focusing heavily on 1004 work, I had blinders on and I had not adequately considered the many, many opportunities available to me. As I developed as a professional, I began to realize that the potential career paths, types of work, and the different roles available to a real estate appraiser vary widely. I think too often as appraisers we severely limit ourselves into what we can or can’t do and define the services we can offer to the marketplace far too narrowly.

The industry is changing, and I like to think of myself as being part of the change, rather than being apart from the change. As appraisers, we each need to ask ourselves: “Do I want to be a part of the change that is taking place in the industry, or will I be apart from it?” Either way, as things change in life and in business (and they will!), we are all faced with a choice about how we will adapt to the changes and overcome the obstacles we encounter along the way. As the appraisal industry continues to evolve and change, it’s important that we appraisers understand that we are capable of providing a very wide range of services in a variety of roles.

For example, here is a list of valuation-related services that appraisers are suited for and can diversify into:

• • • • • • • • • • • • • • • • • • • • •

Residential and Commercial Appraisal Review Consulting Forensic and Investigative Services Evaluation Property Data Collection Insurance Divorce Legal/ Litigation Financial Planning Estate Tax Appeal Government and Regulatory Pre-Listing and For-Sale-By-Owner Disaster/ Stigma Pre-foreclosure and Short Sale Bankruptcy Relocation Private Mortgage Insurance Condemnation & Eminent Domain Instructing, training, writing, and designing courses • Relocation • Bail Bonds When I talk about diversifying your practice, I’m not talking about changing it overnight, or even changing it next week. It’s not as if your business is going to look entirely different next week or next month, once you start branching out into other valuation services. It can take months and years to build a highly diversified business, but as appraisers we should know where we want to go.

When we talk about how we are going to overcome obstacles, we need to look at the opportunities that are out there for us as professional appraisers.

Joshua Walitt is the principal consultant for Walitt Solutions. He provides short—and long-term consulting services related to valuation, education, review, and investigations. Clients include lending institutions, appraisers, appraisal management companies, attorneys, accountants, education providers, regulators, and others.

24 Working RE Winter 2020

For those fond of reading between the lines, I am not predicting the demise of the residential real estate appraiser, or even a drastic reduction in demand for residential appraisal work. I don’t have a crystal ball. Rather, my point is that we are capable of much more.

Residential mortgage work is important, but we don’t have to be “stuck” or trapped in a singular line of work.

Instead, we have the ability, and of course, the choice to build a diversified valuation practice that provides a wide range of services and value to various elements of the valuation marketplace.

Diversification is a good business practice for any professional.

The 1004 appraisal is a subset of “Valuation Services,” and independent appraisers who want to thrive in the future need to understand the need to become a one-stop shop for a wide variety of valuation services and avoid leaning on a business model that revolves solely around the 1004.

Successful appraisers will diversify their businesses away from strictly traditional 1004 appraisals and will offer a wide range of “valuation services,” including traditional appraisals, desktop appraisals, inspections, evaluations, consulting, and other services.

In addition to operating as an independent fee appraiser, there are other roles that are available to us within the valuation industry at a variety of firms, including: • Contractor Appraiser • Staff Appraiser • Compliance Officer

• • • • • • • • • • • • • •

Risk Officer Underwriting Manager Panel Manager Risk Manager County Assessor Valuation Consultant Tax Specialist or Tax Appeal Officer Chief Appraiser Review Appraiser Appraiser Supervisor Training Manager Professor, Author, Instructor Investigator Sales

Related Fields In many cases, the skillsets and experience that we develop as appraisers are not even limited to the valuation field in a strict sense. There are also a variety of related fields that appraisers can branch into, such as: • • • • • • •

Underwriting Brokerage Appraisal Management Property Management Software and Tech Advocacy Home Inspections

When I presented this topic at the Appraisal Summit in September 2019, several of the attendees told me that they also hold a real estate sales license. Some appraisers have also found success being dually licensed as an appraiser and a home inspector.

After years of providing appraisal and consulting services, I shifted to the appraisal management side of the profession in 2016, as a way to grow professionally and develop additional skillsets beyond being strictly a residential fee appraiser. Recently, I returned to a focus on consulting. I also know appraisers, including myself, who developed their own software tools (usually with the help of an IT guy) and continued appraising while building up their side business.

How to Get Started Once we understand the vast selection of different career paths, roles, and services that we can pursue and offer, the next question becomes: how can we get started? The first thing to decide is what we want our businesses (or our careers) to look like in 1, 3, 5, or even 10 years from now.

Your path will look different than another appraiser’s path. Once you figure out where you want to go with your career, consider some action steps to take: Update your resume, noting your specific qualifications, unique experiences, special classes, and any skills you have that may set you apart from other appraisers. Remember to include your work types, complex assignment types, speaking engagements (no matter how small), training and teaching.

Most of us are not professional resume designers, so consider outsourcing it to get it “off your plate” by going to websites like Fiverr.com.

Take advantage of any advanced classes, new or more efficient and accurate methods of research, special training experience, and designations with professional associations. Rather than taking a class simply because it satisfies your need to obtain four or seven more hours of continuing education, take a moment to select a class that will move you towards your goal of obtaining new specialized knowledge that will give you an advantage.

Don’t underestimate the power of talking to other appraisers. If you’re a one—or two-person firm, understand that your interconnections with appraisers are likely limited. Meet with local and regional appraisers, to hear about best practices, good clients, requests for new types of services, industry news and laws and regulations. If you’re a residential appraiser, align yourself with a good commercial appraisal as a referral partner—to help satisfy each other’s clients where one

appraiser may not be able to accept a residential or commercial property appraisal. (And you never know what you’ll learn!)

Join and attend networking meetings of the Chamber of Commerce.

Find out where and when industry groups meet, such as the bar association, accountants, financial planners, real estate agents, bankers, and homeowners associations. Set a plan for how often you’ll attend which meetings, depending on the new space you want to expand into.

Ask for the business. It sounds obvious, but if you want to help a local bank set up their internal appraisal assignment and review department, they won’t know until you tell them. Talk to your clients regarding other services they may need and what expertise you can offer them. Sometimes clients won’t know what they need until you tell them. Talk to your colleagues so they are aware of what services you provide.

Have a presence on social media, including a website and LinkedIn. Write articles and blogs for your own website or as a guest on larger sites.

Write about what you know and what sets you apart—tell others what makes you a “big deal.”

Whatever you want your career to look like in the future, be proactive now and plan ahead. Don’t wait until it’s raining…to buy an umbrella.WRE

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Appraisal Fee Transparency Act of 2019: Pivotal Point for Appraisers

by Isaac Peck, Editor

Ever since the passage of the Home Valuation Code of Conduct (HVCC) in 2010 and the monumental rise of Appraisal Management Companies (AMCs), appraisers have argued for transparency for consumers in terms of the fee split between appraisers and AMCs. Specifically, how much of the actual “Appraisal Fee” being paid by the consumer goes to the licensed real estate professional and how much is withheld by the AMC “manager.”

Now, over nine years later, appraisers may finally have a chance at making the goal of fee transparency a reality.

Passed the House

If there was ever a piece of legislation that has the potential to improve the industry standards for boots-on-the-ground appraisers, this is it.

26 Working RE Winter 2020

H.R.3619, the Appraisal Fee Transparency Act of 2019, is a new piece of legislation that has already passed the House of Representatives and is currently being reviewed by the Committee on Banking, Housing, and Urban Affairs in the United States Senate.

The primary provisions of the bill accomplish the following: (A) SEC. 2: Allows the Appraisal Subcommittee to establish a new formula for fees in regards to the AMC Registry.

(B) SEC. 3: Requires appraiser trainees to be placed on the ASCs registry.

(C) SEC. 4: Requirement to Disclose Appraiser Fees. Amends the Real Estate Settlement Procedures Act (RESPA) of 1974 (12 U.S.C. 2603(c)), striking “may” and inserting “shall.”

(D) SEC. 5: Adds a designee from the Department of Veteran Affairs to the ASC. Section 2 allows the ASC flexibility in determining AMC registry fees, whereas Dodd-Frank mandates a single formula for determining the fees that must be strictly followed. This provision

is intended to allow the ASC to create an alternative formula to determine AMC Registry Fees, if they deem it necessary.

Section 3 mandates that Trainees be placed on the ASC registry and is intended to help alleviate lender pushback that licensed appraisers sometimes encounter when employing trainees.

Mark Schiffman, the Executive Director for the Real Estate Valuation Advocacy Association (REVAA), a national coalition for AMCs, says that this is something REVAA supports because many (not all) lenders prohibit an individual who is not credentialed by a state from working on an appraisal assignment. “Therefore, without a credential, an appraiser supervisor can’t use a trainee to do work for assignments from those lenders. By placing Trainees on the Registry, they will have a verifiable credential that should eliminate the aforementioned barrier to lenders allowing the use non-credentialed trainees,” says Schiffman.

Fee Transparency Each of H.R.3619’s provisions is significant in its own way, but perhaps none affects real estate appraisers more than its Section 4: Requirement to Disclose Appraiser Fees.

RESPA was originally passed in 1974 but was modified by the Dodd-Frank Act in 2011 to include a seldom discussed provision 2603(c) which states: Disclosure of fees (c) The standard form described in subsection (a) may [emphasis added] include, in the case of an

appraisal coordinated by an appraisal management company (as such term is defined in section 3350(11) of this title), a clear disclosure of: (1) the fee paid directly to the appraiser by such company; and (2) the administration fee charged by such company.

The legislation currently being considered by the Senate would only change a single word, striking the word “may” and inserting “shall,” effectively making it mandatory to include a breakdown of appraiser and AMC fees in mortgage loan disclosure documents for consumers.

Richard Hagar, SRA and nationally recognized appraisal instructor (See How to Support and Prove Your Adjustments and Adjustments II: Solving Common Problems, OrepEducation.org) says that he fully supports the bill as it is good for consumers to see the separate fees being paid to both the appraiser and the AMC. “The goal here isn’t to brand the AMCs as the bad guys, they’re not, but we want everybody’s portion of the transaction to be stated and transparent. AMCs should have to negotiate their own fees with the lender. Additionally, disclosing the AMC fee and the appraisal fee to consumers upfront may help discourage much of the predatory, low-fee shopping that takes place in the industry,” says Hagar.

Hagar continues, “We’ve seen plenty of appraisal fees being offered by AMCs where the AMC takes 50 percent–60 percent of the appraisal fee. This demonstrates the need for transparency— it’s something that consumers need to see. Consumers might start questioning these fees when they find out they are paying $250–$350 just to ‘manage’ the appraiser, while the licensed appraisal professional is only taking home $300– $350. The consumer deserves to know what they are paying for,” argues Hagar.

Transparency is also important in terms of how the “appraisal fee” is defined. Many lenders have complained

that in some markets appraisal fees are “out of hand” and “too high,” but what is being represented to the public and even to lenders is not strictly the appraisal fee, but the appraisal and AMC fees combined. Yet, too often, appraisers are the ones who are blamed, according to Hagar.

Appraisal Institute Efforts Bill Garber, Director of Government and External Relations at the Appraisal Institute (AI), reports that AI has worked heavily to positively shape and advance HR3619. “Fee transparency is something that we’ve been fighting for for years and it was originally going to be part of the Dodd-Frank Act of 2010.

RESPA was amended by the House of Representatives that AMC Fees should be disclosed by mandate but when the bill reached the Conference committee at the Senate the wording was changed from ‘Shall’ to ‘May’ at the last minute.

Some of the Senate staff at the time had concerns that consumers would get confused by multiple lines on the disclosure form and that it might not be a benefit to consumers. As a result of the

law and subsequent rule making, lenders have continued to bundle AMC Fees with Appraisal Fees and the consumer is unaware of what’s being paid to AMCs,” says Garber.

The bill is consistent with suggestions that AI has been making for over a decade, according to Garber. “AI has fought for it, offered suggestions, and supported it. It will provide much needed transparency and shine a light on some of the issues appraisers are facing,” Garber argues.

One of the challenges facing the bill is that while it was envisioned to apply only to the Closing Disclosure form, it may end up being interpreted to apply to the Loan Estimate as well.

In fact, that is exactly how many are understanding the legislation. Nanci Weissgold, a law Partner at Alston and Bird specializing in national regulatory compliance, writes in her blog that HR3619 will “require the disclosure of the appraisal management fee separate from the appraisal fee on the loan estimate and closing disclosure.” page 28 8

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Both the Loan Estimate and the Closing Disclosure are governed by TRID (TILA-RESPA Integrated Disclosure) rules. The Closing Disclosure is the final loan document the consumer must sign to consummate a mortgage loan. The Loan Estimate, on the other hand, is the initial mortgage disclosure the consumer is presented with when evaluating a mortgage loan.

The new TRID rule now classifies appraisal fees in the zero-percent tolerance category—along with all the other fees that consumers cannot shop for.

The result is that, except in very specific circumstances, the original appraisal fee quoted to the borrower cannot be changed. There are six exceptions where zero-tolerance fees (like appraisal fees) may be adjusted based on specific criteria; these instances include: (1) a changed circumstance, (2) a changed circumstance requiring eligibility, (3) revisions requested by the consumer, (4) interest rate dependent changes, (5) expiration of terms due to consumer delays, and (6) a delayed settlement date on a construction loan. The ultimate passage of the bill is not guaranteed and it may be modified further as the Senate considers it. “It’s more likely that the Senate will take up a Senateintroduced version of the bill than work with the one passed by the House. I wouldn’t be surprised if the fee transparency portion of the bill is removed or modified from the Senate bill. There isn’t currently consensus around that provision and typically they tend to favor bills with provisions that have broad consensus,” says Garber.

Even if the disclosure was only mandated on the final Closing Disclosure as Garber suggests, it begs the question of how the lender would be able to add an additional AMC Fee to the disclosures in the final hour. Since AMC fees fall into the same category as appraisal fees, i.e. fees that a consumer cannot shop for, Weissgold explains that current TRID law stipulates that “the creditor must 28 Working RE Winter 2020

not charge the consumer more than the amount disclosed on the LE unless there is a valid changed circumstance. These are ‘zero tolerance’ fees, meaning that the creditor must reimburse the consumer for the amount by which the actual charge exceeds the amount disclosed on the LE,” writes Weissgold.

While it is conceivable that the AMC Fee and Appraisal Fee could be itemized on the Closing Disclosure as an extrapolation of the original “Appraisal Fee” listed on the Loan Estimate, it remains unclear whether such a “fee extrapolation” would be compliant with TRID or if TRID would be modified in some way.

Garber adds that the Zero Tolerance is effectively off of the table in this session of Congress, as it would raise broader amendments to TRID. For its part, the Appraisal Institute has committed to the House and Senate bill sponsors to attempt to appropriate clarify the applicability to the Closing Disclosure form. “While it’s not possible to address every concern that lenders and appraisers have with TRID, fee transparency would be a net positive for consumer protection and go a long way to address other concerns of appraisers, such as the payment of customary and reasonable fees,” Garber concludes.

Appraisal Quality How the current bill ends up being modified and interpreted with respect to the fees presented on Loan Estimate and Closing Disclosure will have a significant impact on the appraisal industry. One positive side effect of requiring the separate, upfront disclosure of the appraiser and AMC fees on the Loan Estimate is that it may discourage the practice of robo-bidding or “order by email blast,” that appraisers frequently encounter. This occurs when an AMC sends out an email blast to all appraisers in a given area, detailing a particular property, and either offering a specific fee for the assignment or asking the appraisers to quote their “fee and turn time,” effectively creating

a bidding situation where too often the lowest bid wins the order.

Such practices are widely criticized by appraisers as a “race to the bottom” to find those appraisers who are willing to work for the lowest fees possible, instead of selecting appraisers based on relevant professional metrics, such as quality of work, professionalism, experience, and geographic competency.

According to Pat Turner, IFA, President of Virginia Coalition of Appraisal Professionals, this zero-sum framework allows the “appraisal fee” paid by consumers to be split in a non-transparent way between AMCs and appraisers. This incentivizes AMCs to search for those appraisers who are willing to perform the assignment at the lowest fee, instead of finding the best, most competent appraiser for the job. The lower the fee paid to the appraiser, the more the AMC makes on that particular order.

The zero-sum basis of this model prioritizes finding the cheapest appraisers, not the best appraisers, according to Turner.

“The problem with focusing on finding the lowest bidding appraiser is that it ignores the quality and geographical competency of the appraiser who accepts the bid, and the result is low quality, poor appraisals,” warns Turner. “The current lack of fee transparency doesn’t protect the public trust, and it threatens the safety and soundness of the financial system around the world.”

(Real) Turn Times Speed is another potential benefit of having transparency of appraisal and AMC fees. When AMCs are incentivized to find the lowest bidding appraiser, the search adds extra time. Many appraisers testify to seeing low-bid orders circulated for weeks before someone accepts it or the AMC raises the fee. In a world where lenders want to close mortgage loans in one to two weeks, having the AMC take a few days, to a few weeks, to shop for the lowest appraisal fee slows down the mortgage process and leads stakeholders

in the lending industry to blame appraisers for the delays.

With the recent national alarm regarding an existing or impending “appraiser shortage,” lenders have been pressuring regulators to expand appraisal waiver programs and pass legislation that would alleviate delays in the mortgage process due to what they claim is an “antiquated” appraisal process.

(Visit WorkingRE.com, searh “Bifurcated Appraising” for more.)

Appraisers say that in many cases delays are due to AMCs spending days, and in some cases, several weeks shopping a low-fee appraisal assignment.

Turner says that he frequently sees this in his local market. “We see situations all the time where the ‘appraisal fee’ actually being paid by the consumer is $600 or $650, but the AMC begins bidding out the job at $275 or $300. They may solicit appraisers via email for days with this low fee, even having their administrative staff call appraisers urging them to accept the assignment. After a few days of not being able to find an appraiser to take the low fee, the AMC might up it to $350, then $400 and so on. In some cases, the order is actually passed to a second or third AMC as they are all unable to place the order at the lower fees. We have seen certain assignments make the rounds for several weeks. If the Customary and Reasonable (C&R) fee for a given assignment is $500, but the AMCs are only offering $300 to pad its profit margins, a lot of time is spent finding the appraiser who will do it for the cheapest,” says Turner.

Solution: Cost-Plus To summarize, the fee transparency provision of bill HR3619 has the potential to significantly impact the working relationship between AMCs and appraisers by addressing the adversarial conditions that are created when an AMC and appraiser must fight to split a single “Appraisal Fee.” Depending on how the final bill is modified and interpreted, this separation of fees not only provides

transparency to both lenders and consumers, but also avoids pitting AMCs against appraisers which can have serious effects on both appraisal quality and turn-times.

In many ways, some advocates of the bill are making identical arguments to those that have been made by proponents of the Cost-Plus Model of appraisal and AMC fees. The cost-plus or “full fee” AMC model is one where appraisers and AMCs are compensated separately; the appraiser receives the full “Appraisal Fee” and the lender/ mortgage broker pays the AMC an additional fee for its management services (Visit WorkingRE.com, search “Fee Solution: Cost-Plus Model?”)

Dart Appraisal, a national AMC which is in favor of a Cost-Plus model, argues in its blog (January 3, 2018) that the “Fluctuating Fee model,” the term it uses to describe the singlefee framework that is the status quo for most AMCs, creates a goal for AMCs to “find as many appraisers as possible to accept appraisal assignments at a fee that enables the AMC to retain the highest possible fee,” and that such a model creates “reputational and operational risks” for both lenders and AMCs as “quality and performance issues can be significant when AMC’s are solely focused on the lowest bidder.”

Furthermore, Dart points out how this model leads to less transparency for the lender as well, warning that “Banks, credit unions and other lending institutions may also discover their preapproved panel of appraisers is not being utilized at all or to the extent they prefer it be. This model is driven by finding the lowest-cost appraisal in order to increase the fee the AMC will retain. Often it is not apparent to the lender how much compensation the appraiser is receiving, and therein rests the issue of transparency.” (To read Dart Appraisal’s full blog, visit WorkingRE.com/dartblog)

REVAA on Fee Transparency Schiffman says that REVAA, the largest and most influential coalition of AMCs in the country, is not opposed to fee disclosure and is in favor of transparency. “A significant majority of states regulating AMCs already either: (i) require an AMC to report all fee split information to its customer; (ii) prohibit an AMC from restricting the appraiser’s disclosure of their fee in an appraisal report; or (iii) require an appraiser to include in the appraisal report their fee and the AMC’s fee. However, REVAA is not in favor of this provision of H.R.3619 because it does not believe it is a correct way to accomplish fee transparency,” says Schiffman.

Action Step In a world where appraisers are being blamed for long turn times and accused of charging exorbitant appraisal fees, Turner says that H.R.3619 is exactly what both the appraisal industry and public need.

Turner urges appraisers to write, email and call the Senate representatives in the Committee on Banking, Housing, and Urban Affairs, where the bill is currently being considered. “If there was ever a piece of legislation that has the potential to improve the industry standards for boots-on-the-ground appraisers, this is it! Please call and email your representatives and encourage them to make the right decision. The American Banker’s Association (ABA) and REVAA are currently against this provision of the bill and are trying to get it removed, so appraisers need to stand up and let their voices be heard,” urges Turner. “I urge every professional appraiser to contact their Senator and explain why this transparency is fair, balanced, and needed for the protection of the American homebuyer.” For a list of Senators on the Committee and their contact information, visit WorkingRE.com/Senate. WRE

Winter 2020 Working RE 29

Appraiser’s (Changing) Role Q&A with Mark Verrett, Chief Innovation Officer at Accurity Valuation

The appraisal industry is currently fac-

At the heart of the issue seems to be the increasingly central role that technology

ing a number of challenges and growing pains as powerful stakeholders (e.g.

Fannie Mae and Freddie Mac) pursue appraisal waivers, bifurcated valuations and question even the very necessity of flesh and blood appraisals. With so much uncertainty around the direction of the profession, words like “change” and “the future” are the new buzz words of the industry. Everybody is talking about what is coming next and how to prepare for it.

At the heart of the issue seems to be the increasingly central role that technology is playing in the profession. To better understand how technology is and will transform the role of the appraiser, Working RE sat down with Mark Verrett, Chief Innovation Officer at Accurity Valuation. Verrett is a second generation appraiser, focused on modernization and efficiencies in the real estate space, and is a leading voice on innovation within the appraisal industry.

WRE: What do you see as some of the biggest challenges facing appraisers today?

Verrett: While I still complete mortgage appraisals today, my perspective on challenges facing appraisers goes beyond daily practices to focus on the direction of the profession. Appraisers in the residential space will continue to have strongholds in niche markets such as consulting, green valuation, etc. for the foreseeable future, but I think the single biggest issue appraisers in the mortgage space face is relevancy. Appraisers will be hard pressed to find their place given the coming changes in the mortgage profession.

Mark Verrett is a second generation practicing appraiser, focused on modernization and

efficiencies in the real estate space. Mark was recently named the Chief Innovation Officer

for Accurity Valuation, one of the nation’s largest appraisal firms. Mark was selected to serve the Appraisal Institute nationally as 3rd Director of Region VIII and is a leading voice

is playing in the profession.

in innovation within the appraisal industry.

30 Working RE Winter 2020

I have read articles in Bloomberg, Forbes, and USA Today predicting the industry’s move toward automation and away from the appraiser. Immediately after the subprime mortgage crisis, I remember first hearing the conceptual term “desktop economist” from those who were thinking about what the future of appraising might look like. The term soon became synonymous with “bifurcation,” which brings us to where we are today. I don’t think professional stakeholders have quite figured out how to optimize bifurcation and the accompanying changes that most acknowledge need to be made.

Appraisers as a group rose to success because of their strong opinions and by not being easily swayed. Because of that, I think we are prone to resist change.

When the stakeholders are certain that modernization is necessary but appraisers hold firm that change is bad, the question becomes: how do we stay relevant if things are going to change?

And the profession has other concerns. I have seen surveys of appraisers who no longer wish to bring their family members into the business. While anecdotal, I have seen numerous trainees go through the painstaking process of licensure only to leave the profession. The reason is that the quality of life they observed of their mentor is not for them. Another big headwind in keeping a healthy number of entrants coming into the profession is how difficult it is to incorporate a trainee into a practice profitably. It seems like today’s job seekers are searching for something different than what we all found attractive in appraising.

WRE: You mentioned optimizing bifurcation, what do you mean by that? How can appraisers benefit from appraisal bifurcation?

Verrett: FNMA and Freddie Mac are seriously exploring bifurcation and it has raised quite a bit of concern. For more than a decade, appraiser trainees on residential mortgage assignments have been disallowed from inspecting a property without a supervisor present, and from signing the left side of the report. More than 12 months ago, both GSEs openly stated that this practice was no longer disallowed. Despite appraisers now being allowed to use a trainee according to the GSEs, we found that many lenders resist enabling trainees from playing a significant role in inspecting the property and signing off a report.

The GSEs simultaneously have arrived at a conclusion to bifurcate the appraisal process by splitting up the inspection and the value analysis, with openness for allowing non-appraisers to perform the property inspections. As it appears now, the issue of speed is not solved in any way by this type of bifurcation, since the appraiser won’t even know they have an assignment until well after the inspection is complete.

Unintentionally, over the last decade,

the regulatory environment has taken away the residential appraiser’s ability to pioneer their own bifurcated process by not allowing trainees working under their direct supervision to inspect and sign reports as a contributor. I believe strongly that the profession needs to encourage the appraisal firm concept to implement the bifurcated process to meet the profession’s growing need of speed and flexibility. Accurity has spent years pioneering this process and is rolling that process out nationally where it is permitted. I am excited to see positive momentum in this direction on many fronts.

WRE: How can appraisers adapt to meet the profession demands?

Verrett: I think there are several ways to adapt to these challenges. The first is to work toward diversifying your practice away from 100 percent mortgage business niches. Our firm is a leader in green valuation, rural valuation, valuation consulting and litigation support and we help our offices diversify into those spaces. However, this solution isn’t for everyone.

To directly take on the challenges facing appraiser relevancy in the mortgage space, significant change is required. Appraisers need to unite to create a like-minded national voice that is not rejecting proposed changes for the profession, but rather working with stakeholders (regulators, lenders, clients, etc.) in conceptualizing, testing, tweaking, and ultimately modernizing the appraisal process on the mortgage side.

The appraisal community has a tough assignment in their role in this modernization. To be useful in the discussion, we need to challenge ourselves to be creative and open-minded, yet diligent in maintaining or, even better, improving the quality of the valuation being produced. I think it is extremely important for appraisers to listen and understand the needs of their clients and to creatively develop solutions that meet those needs.

It is notable that to date many innovators proposing concepts to modernize page 32 8

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the space are technology companies with new software or apps. Presently, I don’t think appraisers are considered to be good candidates to participate in developing new and innovative ways forward. Appraisers need to join that innovation space as the future users/ implementers of the technology, as well as to provide critical input and buy into the solutions proposed.

As I listen to stakeholders and observe other industries that have experienced extreme modernization or disruption, I see a demand for speed. If we listen and observe closely we can see that all alternatives that are proposed or in use, that call into question the relevance of the appraiser’s role, relate to speed. Other countries have arrived at an appraisal process that results in much faster valuations than we see here in the USA. It is critical for the appraiser to adapt because it’s what the public demands.

WRE: As Accurity’s Chief Innovation Officer, what role do you think innovation plays in the appraisal profession?

Verrett: Chief Innovation Officer is likely an uncommon title in any appraisal organization, yet both Fannie Mae and Freddie Mac for years have had “innovations teams” that consist of industry stakeholders, conceptualizing the modernization of our profession.

Traditionally, I have not seen appraisers having a seat at that table and we believe strongly that this is to our detriment.

Like all industries over the last 20 years, the real estate and appraisal industries have changed. For appraisers to stay relevant, it is critical that we stay involved in that modernization conversation with a cohesive voice and open mind.

I think the appraiser’s role in this modernization movement is to do what we do best, preserve the public trust. We must be leaders in finding ways to meet the foremost need of the profession, which is speed, while ensuring that our valuation product stays reliable. I think with the availability of data and new 32 Working RE Winter 2020

technology, it is well within our grasp to do what was unthinkable even a decade ago. Appraisers need to find innovative ways to deliver our irreplaceable analysis and opinions with improved support and at lightning speeds. I hope that it goes without saying that this concept is only applicable to most properties that exist in the country.

If appraisers can solve the profession’s primary need of speed, I think opportunities abound for us. Leading the way and being part of the disruption of our profession is extremely exciting and on its own solves the relevancy issue for new job seekers.

WRE: How can appraisers use technology to their advantage?

Verrett: It is easy for an experienced appraiser to automatically equate quickness with lower quality. I think the appraiser’s challenge today is to prove that this isn’t true. With available technology we are proving that it’s possible. Being completely mobile is critical. Making full use of available tools

to process data quickly and thoroughly is also a must. At this point, I believe that mobility and the use of data tools is a requirement in each appraiser’s practice. The challenge ahead is to maximize the use of those tools to increase efficiencies, improve the quality of analysis and deliver those results in hyper-quick speeds. Beyond data tools and mobility, I see technology as being able to be leveraged to assist and support the appraiser along their value analysis process. A team appraisal approach is a term coined to describe this process. The team approach can be difficult to develop and implement in a typically sized residential appraisal firm (1.5 people is that last number I saw estimated), not to mention that it runs contrary to how most appraisers work, with complete control end to end. It is critical that we partner together to explore and implement these efficiencies that can be employed not just in one market, but across the country. That coming together is largely our firm’s mission. WRE

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Why Hybrid Appraisals Don’t Work

By Richard Hagar, SRA

Bifurcated—it means divided into two

They are hoping that the rest of us will “get on board” with their new “better” process.

branches or forks. Bifurcated appraisal— appraisal process divided into two parts.

In other words, the appraiser sits in the office never viewing the subject or comparables; another person, usually a third-party that the signing appraiser has never met, visits the subject and comparables and “informs” the appraiser in the office about the quality, condition, view, and other value-influencing components of the subject and comparables.

Companies are selling the new Fannie Mae directed process as a way to “help” appraisers, a way to “free-up the appraiser so they can do more appraisals in a day by avoiding the time wasted driving to and from the subject.” They continue: “Appraisers should spend their time ‘appraising’ while someone else is trusted to inspect the subject.” Wow, it sounds like they are doing this for our benefit…with no expectation of any return for them.

We are hearing about the latest trend called bifurcated appraisals. Within the past year I’ve seen this term used more often in more diverse places than in the prior 20 years combined; it’s almost like some media company has decided that “bifurcated” is the “it” term for 2019. All sorts of people, AMCs, lenders, technology companies, and Fannie Mae are promoting this new process. They are hoping that the rest of us will “get on board” with their new “better” process.

I do not want to “get on board” because it’s headed for a train wreck.

Richard Hagar, SRA, is an educator, author and owner of a busy appraisal office in the state of Washington. Hagar now offers his legendary adjustments course for CE credit in over 30 states through OREPEducation.org. The new 7-hour online CE course “How to Support and Prove Your Adjustments” shows appraisers proven methods for supporting adjustments.

Learn how to improve the quality of your reports and defend your adjustments! OREP insureds save on this approved coursework. Sign up today at www.OREPEducation.org.

34 Working RE Winter 2020

Experiment We have run two different experiments in our office: one where we have a trainee appraiser go out and inspect the subject property, and another where the lender hired a real estate agent and sent us the inspection report of a subject property (as a test, of course). The primary appraiser stays in the office while this other “person” inspects the neighborhood and the subject and reports back.

As an added measure, we even had the “inspector” drive by comparables that we pre-selected in advance. This is a step further than what Fannie Mae is currently proposing publicly. We’ve heard that Fannie Mae has been testing having inspectors drive-by comparables, and given Fannie’s vast database of photographs and property data, it is conceivable that Fannie could, in fact, share property photos of recently sold homes with appraisers who are attempting to select comparables without actually seeing them.

Be that as it may, what Fannie has been saying publicly about their proposed 1004P, is that the inspector will not drive by any comparables and the appraiser will have to go strictly off of what is on the MLS when selecting comparables to put into a report.

In our experiment, we had the appraiser pre-select what properties might be comparable and we sent the inspector out to inspect the exterior and interior of the subject, as well as driveby the comparables.

Results This process doesn’t lead to better or faster appraisals or to a more accurate value conclusion, just the opposite. The latest property we tested this process

with is a 1,600 sq. ft. rambler built in 1965 on a 10,000 sq. ft. site.

The “inspector” inspected the subject and also drove by ten properties I pre-selected which I thought might be good for comparison against the subject. The inspector supplied a sketch, photographs, and a description of the subject, as well as a description, and street side photographs of the comparables. This is when the process started to fall off the tracks.

Properties that, according to the photographs and inspection report, are inferior to the subject adjusted to an even lower value. This didn’t make sense!

They should have adjusted upward.

“Comparables” that appeared equal or slightly superior in quality and condition had their adjusted prices much higher than their recorded sales price.

Higher? If they are “superior” their value should adjust down, not up. I used matched-pairs and/or regression analyses in determining adjustments for site size, quality, condition, and the house’s square footage, but only a few of the adjustments helped narrow the value range. The adjusted value range was getting wider for some comparables and narrower for others—it didn’t make sense.

Finally, after spending all day reworking the adjustments, cussing, pulling my hair out, and trying to make sense of this, I jumped in the car and drove by the subject and all of the comparables—I did the job that a competent appraiser normally does. (What a concept!)

What I Discovered Comparable #1: Located only a few blocks from my subject is the same floor plan built by the same builder as mine (Yea baby! Sometimes we get lucky). While it had one additional covered parking space and looked to be in equal or maybe slightly superior condition, as compared against the subject that I hadn’t seen, it was adjusting

even higher. Why? Once I drove by, things became clear. This house was surrounded on three sides and across the street from newer, larger ultraupscale homes owned by the superrich. I didn’t know that by looking at the MLS photographs and inspection report. While I was giving this “comparable” massive weight in my appraisal, I shouldn’t have. This house wasn’t being purchased as a place for a family to live in. Its primary value was the land, i.e. a lot suitable for construction of a new home for a newly-minted Amazon millionaire. Even though it looked very, very similar to my subject, the house had no value, zip, nada, nothing.

Well no wonder the adjustments for the extra garage space and condition didn’t make sense, they were irrelevant!

And even though the site was only a few blocks away, it was located in an area far more desirable than my subject which required a location adjustment.

Comparable #2: The MLS reported a view but included no view photos. To me, that’s an indicator that the view is very limited (or only from the bathroom window). There were photographs of the interior and they appeared to indicate that the home was remodeled and superior to the subject. Is this reality? Upon entering the driveway and getting close to the house… well what do you know, this house has a nice view looking out at the lake. In this area, that view contributed hundreds of thousands to the value. I didn’t know that from the MLS photographs OR the inspector’s photographs and notes. At this point, and I’ve only viewed comparables 1 and 2, I’m cussing out the inspector who didn’t take time to drive all the way up the driveway and “discover” the view.

And while the house appeared superior in the photographs, by the time I drove by, the contractors had been there for weeks ripping out the interior.

Oh now I get it! It’s a fixer! None of these items were properly reported by

the inspector and only upon my more “hands-on” inspection was I able to perform a better comparison. For this one sale, I was missing more than $400,000 in adjustments!

A third comparable was located up a gravel driveway and behind a home in terrible condition; previously I didn’t know that fact. And while driving the neighborhood I discovered two new homes under construction. I took note, researched, and used their recent sales for establishing land value. (Sweeeeet!)

The Subject: it is located in a plat with no restrictions…build whatever you want—big or small, nice or basic.

However, less than 200’ to the South, the same street crosses into a subdivision with extensive restrictions; it has a requirement for the home to be more than 3,000 sq. ft. and the design must be approved by the architectural control committee. Even though the subject is on the same street as the nice homes, it’s located on the “wrong side of the tracks” where values are much less.

This is additional valuable information that would have been unknown unless I personally visited the neighborhood.

Once I drove by the subject and comparables, I discovered I wasn’t adjusting correctly for the components that had major impact on value. The next day, back at the office, I began the whole description and adjustment process all over again and this time things started to come together—the right way.

What I describe above is not isolated; they are examples that I have experienced in most, not all, but most, of the bifurcated appraisals that we have performed in this office over the past few years. While some lender’s “spiffy” new system might work in newer subdivisions of Phoenix or San Diego, where you have numerous similar home styles, it does not work in most of America where there are page 40 8

Winter 2020 Working RE 35

What is BIPD? (And Why Appraisers Should Care)

These types of claims are not very common but they do happen.

By Isaac Peck, Editor

I

recently attended the Appraisal Summit, a valuable conference that is co-hosted by the National Association of Appraisers and Corelogic. As always, I learned a great deal from the bootson-the-ground appraisers who attended.

While there, I had the opportunity to give an OREP presentation covering current industry news and trends— hybrid and bifurcated appraisals—as well as vital E&O insurance issues that are related.

As VP of OREP, a leading provider of appraiser E&O insurance nationwide, I was honored to share the presentation which is co-written by myself and Senior Broker at OREP, David Brauner: Appraiser E&O Insurance, Risk Management, and Hybrids. The talk covers the nuts and bolts of hybrid appraising, which I have written extensively on, as well as related E&O issues.

BIPD or Bodily Injury/Property Damage is an issue we touch on in the presentation. We’ve been writing and presenting on it for a number of years, yet I still got more than a few blank stares from appraisers at the Summit! So what is BIPD? Let’s talk about it!

As noted, BIPD stands for Bodily Injury and Property Damage, and in the case of real estate appraisers, BIPD protects them for what E&O does not cover: accidental damage to property or persons (bodily injury) which you may cause while providing your professional services at an appraisal inspection.

One example is if you knock over a valuable vase (Grandma’s favorite 100 year old vase, for instance) causing property damage or if you were to drop a flashlight (from the attic) 36 Working RE Winter 2020

breaking a homeowner’s toe (bodily injury). These types of claims are not very common but they happen.

Here are some real life examples of BIPD-related claims that we’ve seen here at OREP: • Insured exits the rear sliding door to measure the home but steps into newly poured cement that was just finished by the contractor several hours prior.

• Insured flushes the toilet and it overflows causing water damage to expensive flooring.

• Insured opens an attic hatch and (allegedly) causes damage to popcorn ceiling.

• Insured steps through a ceiling during an attic inspection.

Property damage such as described above is not covered by a traditional appraiser E&O insurance policy. E&O is malpractice insurance against errors or omissions made in reporting/professional services, such as using the wrong zoning, failing to report an easement or unpermitted improvements, measuring square footage incorrectly, or making other mistakes or oversights in your reports. E&O insurance alone does not, however, cover you for BIPD-related claims.

With FHA appraisals now requiring more and more from appraisers, including testing appliances, flushing toilets, and inspecting attics and crawl spaces, awareness about the need for BIPD coverage is increasing. For this reason, more and more appraisers are purchasing General Liability (GL) policies, in addition to their E&O, that includes coverage for BIPD at the subject property. GL

policies, which also can cover an appraiser’s own office in addition to coverage for the inspection site, can range in cost from between $200–$500. OREP’s new E&O program includes (at no additional cost) $100,000 of BIPD premises liability coverage (bodily injury/property damage). OREP insureds in their new program, in most states, now enjoy this valuable coverage at no charge when renewing their E&O insurance with OREP. “By offering $100,000 of BIPD coverage at no additional cost, we are meeting the needs of most of our OREP insureds while saving them hundreds of dollars,” Brauner said. “For the ones who have an office and want the additional coverage a GL policy can provide, we offer that too,” Brauner said.

Most OREP appraisers also enjoy a zero deductible. In addition, OREP offers 14 hours of free online continuing education (CE) to all of its insureds/ members (approved in 46 states), which includes two valuable courses: FHA Appraisal Standards (7 Hours) and How to Raise Appraisal Quality and Minimize Risk (7 Hours). These courses are designed to improve your professional skills, lower your liability and help you protect your business. Brauner says, “the benefit for our insureds is twofold—it makes them more careful, more successful appraisers and lets them keep a little more hardearned money in their pockets, saving them over $200 in education costs.”

Visit OREP.org for more and don’t forget to ask your agent about BIPD coverage. It’s included at OREP. WRE

Professional MARKETPLACE info@orep.org (888) 347-5273 Insurance Services, LLC. Calif. Lic. #0K99465

Like us on Facebook Coverage for AMCs: Many national AMCs are finding the comprehensive and affordable E&O coverage they need at OREP. Call OREP for more: (888) 347-5273.

Free BIPD, Zero Deductible Appraiser E&O Insurance: Save with OREP

Calif. OREP Insureds—Group Medical $10,000 Life Insurance Included

If you’ve been with the same E&O provider for years (and years) expecting that you still enjoy the best rates and coverages available, you may not. OREP has been serving appraisers over 18 years and now is the best time to shop. Many appraisers save with OREP—sometimes $100 or more. And now OREP is offering 14 hours of free continuing education to all of its insureds, saving OREP members over $200. Available in most states, OREP members can enjoy 14 hours of free ONLINE CE. Call us now—we answer the phone! (888) 347-5273.

OREP insureds in California enjoy group access to several medical plans, including certain Kaiser Permanente and Blue Anthem plans. The group plans provide benefits not available to individuals and at no extra cost. Those who purchase their medical coverage through the OREP group plan, also enjoy a $10,000 life insurance policy included at no extra cost.

The policy, written through Mutual of Omaha, is guaranteedissue without any exclusion for medical conditions and pays double in the event of an accidental death and dismemberment (AD&D).

Also included is the New Dental Choice Special Discount Plan that gives you significant discounts of 15–60 percent for dental services.

There is no cost above the medical plan itself for these services, including expert help navigating Covered California. If you are a California resident and an OREP insured please email info@orep.org for more information. WRE

Valuable Support: OREP insureds enjoy Working RE magazine, over 10 Hours of Free Training Webinars, discounts on the new FHA Checklist and eBook, the AMC Guide, the Expert’s Guide to a Defensible Workfile, and more! Each is designed to help you grow your business and sharpen your skills. OREP members save!

Combine E&O: Appraiser and RE Sales One low premium covers both your appraising & sales/brokering work. Pay for one policy instead of two. Visit OREP.org for details or call (888) 347-5273. WRE

OREP Offers Free Risk Management Continuing Education for Members (14 Hrs./most states) OREP, a leading provider of appraiser insurance nationwide, announces two free continuing education courses (14 hours of approved CE) for OREP members, designed to help them improve their professional skills, lower their liability risk and protect their businesses. OREP members now enjoy the following online courses FREE:

How to Raise Appraisal Quality and Minimize Risk (7 Hours CE) Presented by: Tim Andersen, MAI Learn the common charges brought against appraisers, with real world examples of specific civil and regulatory cases. Andersen shows you how to avoid potentially risky situations with time-tested steps to “bulletproof” your appraisal reports and workfiles. Learn proven techniques to protect yourself from state regulators and plaintiffs, while reducing your liability and exposure.

FHA Appraisal Standards (7 Hours CE) Presented by: Lore DeAstra, MBA, MRICS, SRA, CDEI Lore DeAstra unpacks the LATEST 4000.1 FHA Standards and shows you what to look for on an FHA appraisal, including how to handle complex assignments and the forms to use for unusual situations.

“OREP has always been committed to providing insureds with the latest news, information and risk management education via Working RE, so offering free continuing education is a natural next step for us,” said David Brauner, Senior Broker at OREP. “We chose veteran appraisers and renowned authors and educators to share with insureds their proven and effective strategies on how to limit liability, follow appraisal standards and protect themselves. The benefit for our insureds is twofold—it makes them more careful, more successful appraisers and lets them keep a little more hard-earned money in their pockets, saving them over $200 in education costs.”

Details The classes are online, allowing appraisers to take the coursework at their convenience.

Current insureds, please email info@orep.org for enrollment details. Appraisers not currently insured with OREP can visit OREP.org for low rates, broad coverage and free CE! OREP.org: 888-347-5273. Courses not approved for CE in all states. Appraisers must be currently insured with OREP at the time the class is begun and paid in full any applicable OREP/RPG fees.

OREP insureds/members also enjoy guaranteed delivery of Working RE magazine, discounts on approved continuing education (find bundles up to 49 hours at OREPEducation.org), free consulting on how to effectively handle state board complaints from Bob Keith, former Executive Director at the Oregon Appraisal Board, and much more. WRE

Winter 2020 Working RE 37

Industry NEWS VA Puts Reins on Bifurcated Appraisals The Department of Veteran Affairs (VA) recently issued guidance on VA bifurcated appraisals which further demonstrates the caution with which many regulators are taking when approaching this new form of “bifurcated” appraisal. In June 2019, Congressional Bill H.R. 299, the Blue Water Navy Vietnam Veterans Act of 2019, included this provision: “The Secretary shall permit an appraiser on a list developed and maintained under subsection (a)(3) to make an appraisal for the purposes of this chapter based solely on information gathered by a person with whom the appraiser has entered into an agreement for such services.”

To accommodate this requirement, the Department of Veterans Affairs (VA) published guidance outlining the rules for its Assisted Appraisal Processing Program (AAPP). The VA does not require its appraisers to participate in the AAPP process, but leaves it up to the appraiser instead. The VA makes it clear that the AAPP process will only be allowed in cases where assignments are non-complex, where the sales price is below one million dollars, and where the appraisal is not for new construction. Ultimately, the VA will have discretion on which assignments the appraiser may utilize the AAPP process.

Additionally, the outside “person” the appraiser contracts with to gather information must be “an individual who may perform appraisal-related work in compliance with VA policies, USPAP, state, and local laws,” such as “another VA fee panel appraiser licensed in that jurisdiction, a non-VA fee panel appraiser licensed in that jurisdiction, or an appraisal trainee/apprentice registered or otherwise authorized to provide valuations in that jurisdiction.”

This removes any doubt that the outside “person” must be another appraiser or trainee.

The VA goes even further, writing “To be a person acting in the capacity as an agent of the assigned VA appraiser, the person must be otherwise permitted to sign an appraisal report as ‘Appraiser’ on any of the approved VA forms.”

The AAPP process also has the following stipulations: •

Any person the VA appraiser contracts with to gather information is acting as an agent for that appraiser.

38 Working RE Winter 2020

•

• •

•

•

•

Upon request, the VA appraiser must provide the VA with all relevant information concerning the person they contracted with to gather information, including a copy of the agreement and all evidence relied upon in determining that such person met the ethical and moral character requirement.

The VA appraiser must pay all fees charged by the person gathering information.

The person gathering information must attest that they are knowledgeable in all VA requirements for Minimum Property Requirements (MPRs).

The person gathering information is required to understand and follow guidance from USPAP and USPAP Advisory Opinions (AO), with particular attention to AO2, 21, and 31.

The VA panel appraiser must communicate to the point of contact (i.e., real estate agent, Veteran, home owner, etc.) who is conducting the site visit and that such person is working on behalf of the VA panel appraiser.

In any case where Tidewater is invoked, if the assigned VA appraiser did not conduct the site visit, the VA appraiser must make a site visit to the subject property at no additional fee to the lender or Veteran.

The VA also makes clear that its appraisers will remain fully responsible for all loss, damage, or other harm caused by the person whom they are in agreement with to gather information. The VA appraiser must include a statement in each appraisal report that reads: “I participated in VA’s Assisted Appraisal Processing Program to complete this appraisal report. The final opinion of value for the subject property is based upon my supervisory status and analysis of all available information. The person who provided information to me to assist in the opinion of value is: Full name (First/Middle/Last), license number, date of expiration, state of issuance of the person. I take full responsibility for any errors in and/or omissions from this appraisal report.”

Lastly, VA indicates that “to reduce risk of the program and to ensure quality, VA may limit the VA fee panel appraiser on quantity of weekly appraisal assignments or on geographical areas covered.” In other words, the volume of each individual VA appraiser will be monitored and limited per the VA’s discretion.

The VA’s AAPP guidelines have been heralded by many boots-on-the-ground appraisers

as a responsible and thoughtful approach to the increasing promotion of hybrid appraisals by Fannie Mae and Freddie Mac, as well as some appraisal management companies (AMC) and technology companies.

The AMC Clear Capital has been lobbying Congress for the last several years to begin accepting bifurcated/hybrid appraisals. In April 2017, the House Committee on Veterans Affairs held a hearing on “Assessing VA Approved Appraisers and How to Improve the Program for the 21st Century,” where Russell Johnson, Chief Revenue Officer at Clear Capital, argued that the VA should consider “the use of a desktop appraisal, based on the physical inspection of a subject property by an industry professional... such as a real estate broker or agent, performing a visual inspection of the subject property and providing other market insight and analytics.”

Clear Capital has taken heat in the press and on Appraisal Blogs in the past for low appraisal fees, with one hybrid report being posted to AppraiserBlogs.com showing a $25 fee paid to the appraiser for the valuation analyst portion of the assignment.

As it stands now, the current AAPP guidelines that will take effect January 1, 2020 will make it very difficult for promoters of bifurcated appraisal products to inject themselves into the VA appraisal process, as the appraiser remains wholly responsible for (1) contracting with the person, (2) all loss damage and harm caused by the person, (3) paying the person, (4) re-inspecting the property at no additional fee if Tidewater is invoked, and much more. Additionally, the person must also be an appraiser or a trainee.

The guidelines discussed here will be rescinded December 31, 2021, presumably because the VA will revisit the issue and assess the appropriateness of these requirements. Whether the VA decides to implement more flexible guidelines at that time remains to be seen. This is a developing story; please visit WorkingRE.com for the latest news and information. WRE

Quality Coursework Wanted OREP Education is conducting a national search for quality education coursework to add to its roster. The course should be current, top notch and designed for online delivery. Please email Isaac Peck at Isaac@orep.org or call 888-3475273. WRE

Are You Paying Something for Nothing?

+ OREP Endorsed by National Association of Appraisers (NAA) OREP, a leading provider of appraiser E&O insurance nationwide, has been endorsed by the National Association of Appraisers (NAA) as the preferred provider of E&O insurance for NAA members. OREP is the proud publisher of Working RE magazine and has served real estate appraisers’ insurance needs for over 18 years. The NAA is an appraiser organization with over 2,000 Members dedicated to uniting appraisers for the purpose of exerting a beneficial influence upon the profession and advocating for appraiser interests.

“I feel very comfortable with our first alliance of this kind because the focus of both organizations is the same—supporting and helping appraisers,” said OREP/WRE founder and Senior Broker, David Brauner. Craig Morley, 2019 President of the NAA, says, “We are pleased to have OREP working with NAA to provide information, education and professional liability insurance (E&O) to our membership. NAA is an association that is intended to be a low-cost professional association that likewise provides information to its members and representing our membership at both a state and national level in an effort to benefit the typical appraiser.”

Congress Wakes Up? It is not only appraisers who see the folly in a recent decision by the Appraisal Subcommittee (ASC) to waive appraiser certification requirements in North Dakota. Recently, two members of Congress expressed their concerns, which is noteworthy as appraiser-related issues typically go unnoticed or ignored, no matter how detrimental they may be to the public trust. Lenders also wield a big stick. But given this response, Congress seems to be waking up to appraiser issues. The September 24 letter from Senator Sherrod Brown (D-OH) and Representative Maxine Waters (D-CA) to the ASC says in part: “Congress has repeatedly recognized the essential role that appraisals play in both safety and soundness and consumer protection. That is why it is so concerning that the ASC, the primary federal organization with oversight over appraisal and appraiser standards, has acted to waive appraiser certification requirements with minimal justification.”

A convenience fee just to pay for your insurance? Apparently this is a growing trend with E&O providers other than OREP. This type of “junk” fee, charged as the very last step of checkout, and where you receive no added benefits at all, are not usually present in the financial services world, but lately appraisers tell us they are encountering junk fees of $25 or more- just to use their credit card or ACH debit to pay! This is paying something for nothing. According to Julia Merigan, Senior Agent at OREP, she’s had appraisers complain to her with some regularity of late. “Appraisers who switch to OREP complain about it, or even some of our own insureds who shop, mention other E&O checkouts that try to stick them with a convenience fee at the very end of the transaction, but provide no benefits. I guess, it’s for the privilege of paying,” Merigan jokes. “When they refuse to pay the junk fee and submit their application to me, my response to them is always, welcome back!” OREP provides 14 hours of free continuing education and many other benefits, including free risk management webinars, Working RE magazine and moneysaving discounts on education and business services. OREP has a new online application that takes just minutes to complete and bind. Minimum premiums are $401. Policies include a zero deductible to avoid out of pocket expenses, free bodily injury and property damage coverage for the subject inspection and much more. (Coverage may vary by state, so please ask your OREP agent for details.) If you’ve paid a “convenience fee” recently at checkout or been asked to, just to pay for your insurance, surf on over to OREP today and get something! WRE

And also from the letter, “It is extremely troubling that the ASC would grant such a waiver, over the objections of the Congressionallyrecognized nonprofit seen as the entity best able to establish appraisal and appraiser standards (The Appraisal Foundation), as well as the North Dakota Real Estate Appraiser Qualifications and Ethics Board. Moreover, the waiver that has been granted only provides a waiver of the requirement that an appraisal be performed by a certified or licensed appraiser. The appraisal must still meet Uniform Standard of Professional Appraisal Practice (USPAP) requirements and any other standards established by the regulator. It remains unclear how an individual without the appropriate training will complete an appraisal that meets these standards.”

According to appraiser and educator Richard Hagar, SRA there is no shortage of appraisers.

“Numerous states have asked for appraisal waivers and in most of these instances the pressure

for the waivers comes from the banking industry, sometimes the very same banks that would like to eliminate the requirement for appraisals (no conflict here!),” Hagar said. “In every state that has asked for these waivers there does not appear to be a shortage of appraisers. From the lenders I’ve talked to, they are upset that appraisers are not accepting their appraisal orders offered at below $500 or so. These lenders do not seem to understand that appraisals cost more than they did 10 years ago.” Hagar continued, “It doesn’t appear there is a shortage of appraisers, just a shortage of appraisers willing to work for low fees, which is why some are complaining about ‘an appraiser shortage’.” Appraisers are encouraged to let their Representatives know that the move toward replacing them poses a serious threat to the public trust. Read the full letter to the ASC by visiting WorkingRE.com/Congress. WRE

Winter 2020 Working RE 39

7page 35

widely varying neighborhoods and houses. I learned so much more than I got with the MLS or inspector’s photographs.

Local Expert If you haven’t visited the neighborhood how do you know what remodeling or new construction is taking place, if any? New construction can be researched and used to establish land value for the subject but you won’t spot new construction unless you drive the neighborhood.

• Are neighboring properties being properly maintained or is a loud local motorcycle gang living next door and causing neighbors to flee?

• Is the neighborhood being updated or driven to abandonment? For instance, the city of Baltimore has 17,000 abandoned homes and is planning on tearing down more than 2,000 of these by the summer of 2020. Are some of the abandoned homes next to the subject? How about down the street, or next to the comparables? FHA and VA strongly suggest (if not require) photographs of anything that might impact the value of the subject…like an abandoned factory in a residential neighborhood of Cleveland. Will Fannie Mae’s neighborhood report, that’s spoon fed to us…or the inspector we are forced to “trust,” inform the appraiser of the issue? No! • Part of the appraisal process is reporting on conditions within the market area and neighborhood. Appraisers won’t have an up-to-date clue unless they inspect the neighborhood.

• How do you value or compare different view amenities—based on what someone else “sees” or “feels” about the subject or comparable’s view? How do you verbally, or via a lender’s checklist, convey a view amenity? Is there a 180 degree lake view or is it filtered through trees or limited by a roof across the street— for the subject, or the comparables?

40 Working RE Winter 2020

• Was the inspector looking north or south when they took a photograph?

And don’t expect more than “a” photograph from them, it wastes their time. Was the view from the deck, bedroom, living room, or bathroom?

• Is that a high bank bluff waterfront or gentle slope? Don’t you dare trust Google Earth 3-D to get it right. How does that compare with the comparables?

• Does the subject’s granite countertop smoothly blend the slabs together or are there big ridges showing inferior workmanship?

• Is the sheetrock triple coated smooth Venetian Plaster or are they thick stucco covering the flaws?

• Do you feel a gentle slope to the floors indicating possible foundation problems or maybe a big bump under the carpet suggesting that the seller is hiding something?

Does the seller or the agent “let you in on a little secret about…….?”

Don’t expect the inspector to stand still long enough to listen. They don’t care; they are paid $50 per inspection.

• Are you really going to trust what some fast-moving property inspector says about the neighborhood and subject?

Won’t Work This system absolutely will not work for properties with view, acreage, waterfront, outbuildings, unusual style homes, or in neighborhoods where widespread remodeling is taking place.

Part of the appraisal process is comparing the subject to the potential comparables. How do you properly “compare” when you have no basis, or starting point, for a comparison? Is this one better or is that one inferior? Why, and by how much, and for what reasons, right? Because you have to “prove” your adjustments; you can’t pull them out of the air based “on my 30 years in the business” attitude.

Allow me to be very blunt: anyone who promotes or suggests this is a “better way” to provide residential appraisals: A) has never properly appraised a residential property, B) doesn’t know what they are talking about and/or, C) has a financial incentive to rip apart the appraisal process.

Does all of this really sound like a valid appraisal process?

The pressure has begun...all they need to do is convince a few over-eager appraisers that this bifurcated system complies will all state laws (it doesn’t), all federal laws (it doesn’t), and USPAP (maybe). So to convince appraisers to “get on board” they use the bifurcated term often, touting it as the “newest thing” at appraisal trade shows.

Remember it is your Certification that’s on the line here. Don’t trust them to tell you what is legal—they are just telling you their fantasy of how they want it to be.

Fannie Mae, Freddie Mac and others think technology is a solution. If their spiffy computers and algorithms failed to predict the crash of 2008 I bet they won’t predict the next one, until a year after it happens. Can you hear that?

Do you feel the rumble? It’s a train going 80 mph toward a 25 mph curve. WRE

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