. b e y o n d
c u s t o m a r y
r e a s o n a b l e .
Are You Ready for UAD? ACI is...and we’re helping appraisers every step-of-the-way. UAD marks a significant event in appraisal history, and ACI is once again preparing appraisers for a smooth transition. In addition to creating UAD-compliant software that features UAD interactive guidance, we’re providing FREE online UAD
webinars to ACI appraisers to ensure that we’ve got you covered. As an industry pioneer, we have set the standard for valuation technology. And that is a role we take very seriously. Through our journey we have worked with tens of thousands of
ACI Clients are Invited to Free UAD Training!
appraisers who continue to inspire us to produce smarter, faster, and better technology. We look forward to the coming months and in fostering the relationships that have made us who we are. ACI- The Appraiser’s Choice™
Save Time, Get SMART™ The SMART Market Analysis solution works
Sign-up for a webinar on how you can stay UAD compliant with ACI. Visit AppraisersChoice.com for more information and to register for an upcoming session.
SHARE - SAVE - EXPLORE ACIChoiceCredits™
with your MLS* system to Import Active, Expired, Pending, Withdrawn, and Sold listings. SMART auto-populates the 1004MC. *Call to verify MLS availability. MLS providers are continually updated.
Neighborhood Boundaries in MapPoint Easily define your subject’s neighborhood boundary using geocoordinates. Add maps to your reports that include supporting visual tools to further assist in defining the representation of your subject property’s neighborhood.
SMARTER Features. FASTER Reports. BETTER Software.
You Know Value... ACI Adds Value Innovative Technology - 30 Years and Counting - ACI has been a pioneer, providing innovative tools that save appraisers time and money. Look to ACI to provide the foremost solution as the industry embarks on new compliance and delivery requirements. Visit AppraisersChoice.com for UAD updates and information.
Beneficial Partnerships - ACI features solid integration with sketching software, location maps, flood data, cost data, and market analysis tools that streamline the appraisal report writing process. It is through these partnerships that ACI appraisers have many options, and why ACI is ”The Appraiser’s Choice.” Premier Service - Toll-free technical support, LIVE chat operators, and over 140 online videos on AppraisersChoice.com provides ACI appraisers with multiple support channels. Best Value - Hands-down, ACI offers the most comprehensive real estate appraisal software package available in the industry. We invite you to experience ACI’s industryleading appraisal technology and service.
AC I2 0
699 * All Inclusive Package
A pp ra is er sC
t 800-2 34 f 386-2 -8727 46 -3811
› GPAR™ Forms Series
› Order Tracking
› ACI Sketch™
› Photo Management
› Digital Signature (One)
› Comps Database
› Free PDF Creator
› Premier eServices
Ap pr ai
34 -8 72
8 0 0 -2
oi ce .c
se rs Ch
ho ic e.
› Appraisal Forms Library
(500 to use for SMART™ Market Analysis Tool, Flood Maps, Location Maps, MLS Import Service, AppraiserBASE™, Long-Term Storage, File-Sync and more)
™ THE AP PR AISE R’S CH O
› Concierge Service (Conversion Utility) * Limited Time Offer
ACI is a division of Verisk Analytics (NASDAQ: VRSK), a leading provider of risk assessment solutions to professionals in insurance, healthcare, mortgage lending, government, risk management, and human resources. Verisk Analytics includes the holdings of Insurance Services Office, Inc. (ISO) and its subsidiaries, which provide essential solutions to the insurance, mortgage lending, and healthcare markets. For more information, visit www.verisk.com.
* LIVEVALMAG.COM | 3
co nten ts
table of contents
| contents |
Diving Deeper into Dodd-Frank Beyond customary and reasonable.
I am truly amazed to hear there are those who still question if appraiser pressure actually ever existed. Even worse, I know firsthand that it continues to this day. I do not need to point the finger at one specific group â€“ honestly, I already did that several times in previous articles.
LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM
your monthly valuation publication
Up Front 14
Diving Deeper into Dodd-Frank
Time is money.
Ke l ly McClain & T odd Rasmu ssen
Publisher’s Note 8
Staiger on Stats 46
Voices of Valuation 48
CoreLogic Stats 49
For What It’s Worth
Keep Fighting for Your Independence c h u c k mu reddu
PMI and the Housing Industry Reliable and credible appraisals
A Dangerous Area of Dodd-Frank
adam jo hnston , sra
j ef f dic kstein
The Hot Seat
Featuring Jerry Yurek
Se ni o r V i ce Presiden t, Collateral
There Are No Dumb Questions?
R i sk Manager of PNC Ban k
tim f orsyth e
Inside This Month
Valuations Other Than Appraisals
Toy Guns & Rubber Bullets
BPOs & AVMs
What you don’t know can hurt you. Jo se ph palu mb o
. B E Y O N D
Diving Deeper into Dodd-Frank
Beyond customary and reasonable.
28 JUNE 2011
C U S T O M A R Y
R E A S O N A B L E .
* LIVEVALMAG.COM | 5
THIS WAY IN.....
Today every major social media outlet has pages, topics or forums that are dedicated to appraisers and valuation topics. LinkedIn, Facebook,
Twitter and forums all
have multiple outlets for appraisers to voice their
opinions and collaborate
on industry news. As I have been perusing these
A letter from the Publisher
outlets, I have noticed that the main topic of
nothing has changed. With the vast majority of discussion around customary and reasonable
fees, other important sections of the bill have been essentially ignored.
Inside this mammoth legislation are many other
concerns that will affect appraisers on a day-to-day basis. This month in LiveValuation Magazine we
focus on the issues “beyond” the customary and
reasonable topic. Appraiser independence, brought to the forefront by HVCC, is codified inside of Dodd-Frank. The bill also requires mandatory
reporting of USPAP violations; lenders are required to inform state regulators of these deficiencies.
Also, out of the limelight is dispute resolution;
discussion is the implementation of customary
and reasonable fees as outlined in the Dodd-Frank bill. Most posts are directed at whether AMCs
and lenders are implementing presumption one
or presumption two, while other posts decry that
Dodd-Frank mandates that appraisers listen to concerns from borrowers, lenders and others
involved as intended users. Much to the chagrin of appraisers (and appraiser organizations),
the bill also defines a place for BPOs and AVMs in the valuation space. All of these issues are
overshadowed by the discussion on customary and
meet the team
I understand why the customary and reasonable fees clause is the hot topic. I have been in the appraisal business for 29 years, personally
experiencing the fee compression within the
1. Publisher | Ernie Durbin II, SRA, CRP
industry. As I stated in my publishers note last
2. Editor-in-Chief | Emily Vannucci 3. Copy Editor | Kersten Wehde
month, I do not think that the “customary” fees that are currently paid are “reasonable” for the
scope of work required in today’s marketplace.
4. Creative Director | Traci Knight
It’s an important topic and we will return to it in
5. National Sales Rep. & Marketing Coordinator | Kate Sheehan
the July/August issue of our magazine. The July/ Printer | Ovid Bell Press
Advertising Information | P : 858.832.8320 | E : firstname.lastname@example.org
Editorial | email@example.com
As valuation professionals, we need to dive deeper
Web | LiveValMag.com 4
into the additional issues affecting our industry inside of Dodd-Frank. There’s a lot below the
surface that will affect the way we do business
© 2011 LiveValuation Magazine.
different perspectives including appraisers, lenders and AMCs.
Subscription | firstname.lastname@example.org
All rights reserved. LiveValuation Magazine is a California limited liability company and is the publisher of LiveValuation Magazine. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in article and advertisement herein are not necessarily those of LiveValuation Magazine, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, LiveValuation Magazine is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only. Postmaster : Please send address changes to LiveValuation Magazine, 16745 W. Bernardo Drive Suite 450 San Diego, CA 92127
August issue will focus on the topic from several
for years to come. We look forward to hearing
your comments on these important aspects on our 5
webpage at livevalmag.com. 6
| Publisher |
Ernie Durbin II, SRA, CRP
* LIVEVALMAG.COM | 7
Jeff Dickstein, Pro Teck’s Chief Appraiser, is responsible for the detail oriented culture that is at the core of our work. His diverse twenty-nine year industry background and problem-solver mentality give him a unique perspective on the future of our trade. Dickstein is a member of REVAA, CRN and is the Current Chair of the Appraisal Foundation’s Emerging Issues Task Force. He has had multiple meetings with the Government Accountability Office (GAO), the new Consumer Financial Protection Bureau (CFPB) and the Joint Fraud Enforcement Task Force/HUD regarding DoddFrank.
Tim Forsythe, CEO of Forsythe Appraisals, LLC, has served on boards for several influential appraisal industry organizations. Forsythe Appraisals was founded in 1940 by Tim’s grandfather, and is the nation’s largest independent appraisal firm. Forsythe’s brother, John, is President, and two of his sons are branch managers, marking four generations in the family business. Forsythe presently resides in Colorado.
adam johnston, SRA
Adam Johnston has been an appraiser for 20 years. Currently, he is Chief Appraiser of Genworth Financial’s U.S. mortgage insurance business. Genworth Financial is a Fortune 500 global financial security company. Previously, Johnston was Chief Appraiser at a nationwide settlement services provider. Earlier in his career, he was a bank staff appraiser and founded his own appraisal company. He was a police officer for 10 years and previously served in the United States Marine Corps. genworth.com | 800.334.9270
Don Kelly, Executive Director for REVAA, manages the operations of the Association: an alliance of real estate companies involved in the development and delivery of real estate valuation products and services. Kelly is an author and contributor on industry panels and a member of the Board of the Bollinger Foundation, a non-profit dedicated to helping families in need. email@example.com
contr utors | contributors |
Kelly McClain is Vice President of Client Relations for Metro-West Appraisal Co., LLC. McClain began her real estate career in March of 1991 and currently holds an Associate Broker Real Estate License. She is a member of the local real estate board in Michigan and a member of the Mortgage Bankers Association. McClain is a graduate of Michigan State University. firstname.lastname@example.org
Chuck Mureddu is currently EVP of business development for Quality Valuation Services, a national appraisal management company promoting quality, integrity and transparency. Mureddu began his career in the early 80s, and has been Chief Appraiser for 3 national lenders and served as a subject matter expert for the appraisal qualifications board (AQB) participating in the development of the Certified General Appraiser exam. qualvs.com | 800.693.3521
Joseph Palumbo is currently the Director of Valuation at Weichert Relocation Resources. Prior he was a First Vice President at Washington Mutual Bank. Palumbo has spent 25 years in the real estate industry. Palumbo holds an SRA designation from the Appraisal Institute; he is AQB certified and a State Certified residential appraiser in NJ. Palumbo is on the NJ State Appraisal Board. Palumbo attended Rutgers and University of Maryland. He has traveled to teach appraisal courses in Asia.
Todd Rasmussen is Regional Director of Appraisal Services for Metro-West Appraisal Co, LLC. Rasmussen has spent the last 22 years as an appraiser with many of those spent in management and appraisal review. Rasmussen is a State Certified Appraiser in Arizona. Rasmussen frequently teaches classes and is a guest speaker at local real estate schools and industry events. email@example.com
michael Vincent John Spaziani
Michael Vincent John Spaziani is a graduate of Harvard University Graduate School of Design in Real Estate Development (AMD) and the University of Florida Master of Arts Business Administration in Real Estate (MABA), a program sponsored by the Appraisal Institute. Spaziani is a State Certified General Real Estate Appraiser RZ1167 and a Licensed Real Estate Broker with over 27 years of commercial and residential appraisal experience.
ROGER STAIGER III
Roger Staiger III is Managing Director for Stage Capital, LLC. His areas of expertise are commercial and residential real estate portfolio investing, corporate business; and strategic planning, forecasting, valuation, financial modeling, asset repositioning and risk mitigation through financial hedging for physical assets. He holds positions at Johns Hopkins, Georgetown, and Loyola universities. firstname.lastname@example.org
Jerry Yurek is an avid motorcyclist and scuba diver who has supported his need for speed and compressed air by working in the real estate valuation industry for over 25 years. In Jerryâ€™s current role as SVP - Collateral Risk Manager at PNC Bank in Miamisburg, OH, he is responsible for appraisal and collateral policy. Yurekâ€™s previous roles include FVP - Chief Appraiser at OneWest Bank (fka IndyMac Bank) in Pasadena, CA; SVP Chief Appraiser at Aegis Mortgage Corporation in Houston, TX and AVP - Chief Appraiser at Provident Bank in Cincinnati, OH. JUNE 2011
* LIVEVALMAG.COM | 9
STAIGER on STATS
As a graduate student I studied privatization at Moscow State University. “Study” is a bit of a stretch as
shortly after arriving in Moscow I met Polina on the Arbat, the main
market area in Moscow, and spent the majority of my time selling
Matryoshka dolls with her (I blew off most lectures and braved the
Industry’s latest stats
Roger Staiger III
Moscow streets each morning
to be with Polina rather than in
lecture). At the time, I worried my
professors would have issues with
my lack of studying, but they never
expressed disapproval. Rather, they would occasionally ask about how “sales” were going.
Generally, American tourists were conspicuous. Polina would offer
one of the smaller dolls for a dollar and the American would want
two. When Polina agreed to two, the American wanted three. The
traditional Europeans, while they haggled, were not extreme, never
expecting something for nothing. I
asked Polina about this one evening while eating (I would have taken
Polina anywhere she wanted to go in Moscow but she always chose
McDonald’s) and she told me, “You American greedy. You want big
house, many car, lot stuff. You want all for free.” This was not directed at me but a general statement in which I did find some validity.
Americans are materialistic; in general
How does it affect real estate?
2011, only 25 percent of the residential
rather than later, and for a low price.
It is significant as all rates are quoted
growth rates exceeding inflation. In
The U.S. populace has largely achieved
Capital Asset Pricing Model [CAPM]
we do want more, and we want it now
the “more” goal through credit, i.e.,
borrowing, and leveraging equity with cheap capital from abroad. The U.S.’s
ability to excessively borrow was due to
global perceptions of the risk-free nature of U.S. investment and the U.S. dollar
as the global reserve currency. In April 2011, all of this was thrown in doubt. For the first time since Standard &
Poor’s began its outlook designation
in 1991, the U.S. has been downgraded from “stable” to “negative.” This translates to a 1 in 3 chance of a downgrade in the next six to 18
relative to the risk-free rate (think
from business school). A downgrade could significantly increase not just
the borrowing rates for the U.S. and its citizens but also the quantity
of borrowing and the currency for
borrowings, i.e. the U.S. has unlimited ability to sell debt denominated in
dollars, however, this could change.
Noting that the U.S. borrows 40 cents
compounded rate of about 3 percent
for the period. An equivalent amount of MSA had TOTAL growth over the
period of 1 percent or less, i.e., a house
purchased in January 2000 has had little to no price appreciation as of February 2011.
2011 was, ironically, Detroit. The
are extremely important for real estate values and for U.S. corporations.
achieving historic norms. Real estate, in
ceiling increase! Why is this important?
in the Case-Shiller index, had an annual
residential mortgages, borrowing costs
in the mainstream and financial media, congressional budget approval or debt
aggregation of all individual 20 MSAs
The high point for the Case-
borrow 80 percent for most new
Further, the realistic outlook on
it could be more significant than a
fact, the composite-20, representing the
of each dollar spent and Americans
months. While the significance of the
downgrade has received little attention
MSAs achieved compounded annual
residential real estate in the U.S. is
the long term, is an inflation hedge; it
increases at the rate of inflation. For the period from January 2000 – February
Shiller data published February only MSA to post a monthover-month gain was Detroit, which has
price destruction since January
2000 (a loss of >> JUNE 2011
* LIVEVALMAG.COM | 11
more than 31 percent). Nationally, the U.S., as measured by the
In a year-over-year basis the DC-MSA has maintained its
even the venerable DC-MSA posted a loss of approximately
2010 â€“ February 2011. The rest of the nation, as measured by the
composite-20, lost slightly more than 1 percent in value, and 15bps.
position of prominence, posting a 270bp gain from February
composite-20, lost more than 330bps during the same period.
The 600bp spread between the DC-MSA
economics, an increase in supply with
and composite-20 remains.
a corresponding decrease in demand is further evidence of future price
Most significant is the futures
declines as the market searches for a
market for real estate pricing, which experienced the largest changes in
futures values with many of the indices experiencing a 50bp futures price
reduction for 2012. The timing for
the bottom of the residential market
remained unchanged at mid-2012, but it became deeper and more pronounced. Two additional important statistics
developed in April 2011 and directly relate to future residential pricing.
Home foreclosures are increasing and
household formation is down from 1.3m in 2007 to 0.4m in 2011. The reduction in household formation is significant
as it relates to a significant reduction in
housing demand. Foreclosures relate to
an increase in supply. From basic college
The high point for the Case-Shiller data published February 2011 was, ironically, Detroit. The only MSA to post a month-overmonth gain was Detroit, which has experienced the most significant price destruction since January 2000 (a loss of more than 31 percent).
The current price corrections in U.S. residential real estate, “negative” outlook for the U.S. by Standard
and Poor’s, and expansive growth in foreclosures place greater focus on Polina’s comments regarding American greed. Polina and her
family had a simple flat just outside of Moscow. The flat’s furnishings were spartan but the family experienced no noticeable loss of happiness.
Perhaps the current price corrections in residential real estate are a larger sign
for American “values”; not the “value” of the home, but rather the “value” of happiness. 6
WE’VE BEEN AROUND ALMOST AS LONG AS THIS GUY The Herbert H. Landy Insurance Agency has been protecting professionals for more than 60 years, providing them with customized solutions for all of their Errors & Omissions needs.
* LIVEVALMAG.COM | 13
up front a report and shipped it
work on the other. Use
want to have to touch the
checklist. Nothing takes up
to your client, you do not file again for revisions or missing items within the
report. Our goal is to help
all appraisers be proactive
rather than reactive and to be at the forefront of the
appraisal industry. We can
the engagement letter as a
more time than going back to revise a report. This is
especially frustrating when it is something that was specifically listed in the engagement letter.
all find ways to save time,
increase quality and become more efficient.
AMCs offer a fee for a service. The less
time you spend on that service, the
more money you
will make. This is
simple math. The
more efficient you
are as an appraiser,
the more appraisals
you can do. Start with
Best Practices Time is money.
K elly M c C l a i n & T o d d R asmusse n
ime is money. We have all heard this bit of wisdom time and again. Let’s explore this relationship as it relates to the appraisal profession. Whether you are receiving customary
and reasonable fees (congratulations!) or not so much, you will only be paid once for each engagement. We are all finding that
the simple things. Don’t
try to reinvent the entire
Get a GPS. Many of us
feel that we would never
need one. Some appraisers have been working and appraising in the same
area for several years. This wonderful little box can
reroute you based on the
traffic in certain areas. You
would not be able to do that by looking at a map book
or Google Maps. This will
save you countless hours on the road.
Know how your multiple If you don’t have two
monitors, stop reading
this article right now to get online and buy an
additional one. Much of what you are typing on
your reports can be cut and pasted into other areas.
This will save you time and eliminate typographical
errors. You can also have
your client’s engagement letter open on one side
while you review your
listing service (MLS)
systems work. Some of
the old-school appraisers have been searching for
comparables the same way for many years. Most MLS
systems across the country have new and additional
features that they did not
have just two or three years ago. The training classes are usually free; some
MLS systems offer them as webinars as well. Another
thing to do is to export your
clients want more information and they want it in less time and
sometimes for less money. Learning to appraise faster and more
efficiently will help you flourish. We would like to share with you
some tips to help save time and money. Once you have completed 14
Learning to appraise faster and more efficiently will help you flourish.
paperwork and listing tickets
will be some of the most
saves you from wasting time
in recent and not-so-recent
from the MLS to a PDF. This
printing. It also saves a lot of paper and ink, which saves you money.
challenging and exciting If you can manage it, hire an assistant or trainee to help you save time
and concentrate on your
appraisal reports. A clerical Have a good camera.
Cameras are an extremely
important tool for appraisers. If you havenâ€™t upgraded
in the past two years, you are losing time. There are
good digital cameras for less than $100. They download at twice the speed of older models. Get a camera just for work use. Set it to the
lowest quality. Many reports these days can include more than 50 photos just to meet the requirements listed on
the service agreement. The lower-quality setting will speed up the download process and will not
adversely affect the quality of the pictures in your report.
assistant can help set up your appointments, map out your day and send status updates to your clients. Some AMCs want a status update every
day. This may require logging into two different systems for an update: your own
internal tracking system and
the website for the client. An assistant can also help with other tedious duties such
as filling out applications
for new clients or AMCs. In addition to or instead of an
assistant, a trainee could be a
big help. If you have the time and patience to work with
someone, a trainee is useful to help you increase the
quantity of reports you are sending out to clients.
They can assist with pulling Ask questions! Nearly all AMCs or lenders have a
way to contact them in the
engagement letter or order
form they send you. Use their services. Ask questions if you are not clear about what they
data and helping you during the inspection. Another set of eyes on your report can
help reduce errors. You may find that you can grow your
appraisal practice by adding
either an assistant or trainee.
memory. There are amazing
AMCs will be the driving force in our industry for years to come. Lenders and clients have a need for their services. That being said, not all AMCs are created equal. There are vast differences. Some use a QUEUE system to disperse orders. Others use the blast technique. And still others use the oldfashioned telephone. Pick the clients that best fit your needs and style.
are requesting. They are not
AMCs will be the driving
to serve us as well as the
years to come. Lenders and
And still others use the
services. That being said, not
Pick the clients that best fit
There are vast differences.
appraisal and valuation
to disperse orders. Others
The next 12 to 18 months
the enemy. They are there
client and end-user. A simple five-minute phone call could
save you an hour of problemsolving.
new products that will
completely change the way an appraisal looks and the
way the report is developed. Some are designed to save
time and others are designed to bring more business to
our profession. Why not take
advantage of the time-saving methods available? Your
income and future depend on it. If you do not learn
to evolve, you will become extinct. These days, time is money. Carpe diem! 6
Every time you touch a file, it costs you money.
Time-saving Tips: 8 Two monitors 8 GPS
force in our industry for
use the blast technique.
clients have a need for their
all AMCs are created equal.
your needs and style. The
Some use a QUEUE system
landscape is changing.
8 Multiple listing service 8 Camera 8 Ask questions 8 Hire an assistant or trainee
* LIVEVALMAG.COM | 15
up front Mortgage insurance
The private mortgage
industry with minimal
game” and thus effective
seemed like a distant
impact on or interaction with the appraisal
as Chief Appraiser of the
the collateral is fundamental
business, I was surprised
at the extensive utilization of appraisal services by a wide variety of business
functions. These business functions rely upon
appraisals as a fundamental and vital part of risk
management. Rather than
marginalizing the role of the residential appraiser, I have witnessed an environment
or most of my appraisal career, the topic of mortgage insurance rarely entered my conversations and most certainly remained fairly unimportant to me.
understanding the value of to understanding the loan risk. As stated in a recent paper by authors John McCrocklin, The Real
Estate Center at Texas A&M University, and Realtor
Property Resource, “The
value of a non performing
loan, apart from mortgage insurance, is determined
largely by the value of the property collateral.”
where the expertise of
While sufficient credit
is both appreciated and
vital to loan risk, accurate
a competent appraiser
A d am J o h n s t o n , S R A
management are vital.
As you might imagine,
U.S. mortgage insurance
Reliable and credible appraisals are critical.
risk assessment and risk
when I joined Genworth Financial two years ago
PMI and the Housing Industry
insurer has “skin in the
valued. In short, reliable and credible appraisals
are important to our daily business. For example,
appraisals are a critical part of our mortgage insurance underwriting process. In
addition, appraisal services are utilized by Genworth’s claims, investigations and
homeownership assistance functions.
As a refresher for those who may not be familiar with
private mortgage insurance, the industry is most
commonly involved with
residential mortgage loans
having loan-to-value ratios exceeding 80 percent. A
portion of the loan amount
will be insured against loss
associated with foreclosure.
and capacity are certainly collateral valuations are vital to understanding
the equity position of the mortgagor (aka “skin in the game”). Moreover,
ongoing monitoring of
collateral value provides
meaningful benefits to risk management.
As the market for low
down payment mortgages continues to evolve in
reaction to recent housing market events, prudent
lenders are able to utilize
private mortgage insurance to reduce their exposure to risk, and to help the
growing number of buyers
who want to take advantage of lower rates and home prices, but lack the
Rather than marginalizing the role of the residential appraiser, I have witnessed an environment where the expertise of a competent appraiser is both appreciated and valued. resources for a 20 percent down payment. In contrast to private mortgage insurance, government backed mortgage insurance is offered through FHA. Historically, the FHA has served a countercyclical role, expanding its market share when the housing market faces challenges. In recent years, FHA has insured a significant percentage of mortgages originated in America. As the government scales back its role in the housing market, private mortgage insurers will continue to fulfill a vital role in helping borrowers achieve homeownership. As an added benefit, some mortgage insurers offer job
loss protection. In the event of involuntary job loss, this protection (offered on some products by some insurers) may pay mortgage costs of up to $2,000 per month for up to six months. This gives the borrower some “peace of mind insurance” and provides the borrower valuable financial assistance. In addition to the role of private mortgage insurance in furthering homeownership, the private mortgage insurers work closely with mortgage servicers in foreclosure prevention programs. Since private mortgage insurance companies have their own capital at risk in a firstloss position, they have a clear incentive to mitigate losses by taking action to
WALL We know you’ve been there – do stupid requests leave you pulling out your hair!? Well feel free to let loose on our Wall of Shame. Everyone remains nameless so no one gets hurt - it’s just a good ol’ venting session. Submit your Wall of Shame-worthy comments to email@example.com. We promise, you’ll feel better after you do!
avoid foreclosures. For example, Genworth Financial completed nearly 40,000 workouts in 2010. Most of these loans were successfully cured, enabling borrowers to avoid foreclosure and remain in their homes. The private mortgage insurance has helped more than 25 million families achieve homeownership, according to the Mortgage Insurance Companies of America. The private mortgage insurance industry enables lenders and investors to mitigate their risk on low down payment residential mortgages while protecting borrowers from foreclosure. A number of factors enable private MI companies to mitigate risk. Because a company like Genworth
operates nationwide, we provide geographic diversification to reduce the effect of local or regional market declines. We also offer lender diversification to decrease the impact of lender-specific operating issues. And, because MI companies are experienced in understanding risk in a highLTV market, this experience can benefit lenders. While I don’t anticipate that this article will result in mortgage insurance being an urgent topic at your next social gathering, I am hopeful that some of the information is helpful in providing a basic understanding of the important role of private mortgage insurance in the housing market. 6
SHAME M I had a client that wanted me to write a letter
stating that the subject property had not sold within past year. The report clearly stated that the property had not sold in past 12 months, so I had to send them a letter explaining that 12 months equals 1 year.
M An AMC just called looking for a fee quote for a
purchase upwards of $3,000,000. When I quoted my fee the contact said our lender needs 2 appraisals and will only pay $475. I laughed and said good luck with that. (To her credit she did says thanks I’ll need it.) I should keep this email link on my desktop!!
* LIVEVALMAG.COM | 17
THE HOT SEAT
20 questions - things you need to know or may have been wondering JUNE 2011
the hot seat From the best purchase heâ€™s ever made to his outlook on the future of real estate valuation, we get the personal and professional facts from Jerry Yurek, Senior Vice President, Collateral Risk Manager of PNC Bank, in our monthly edition of The Hot Seat. 18
The biggest challenge to > You can’t always be working. Take time to enjoy life, too! the appraisal/ PN C Bank Senior Vice President, valuation > My favorite website is motogp.com. I’m addicted to motorcycle road Collateral community is Risk Manager racing at the premier level. It’s like NASCAR for motorcyclists! ourselves! We have to become > My favorite magazine (besides LiveValuation) is Motorcyclist. Keeps me up to speed on my more orgafavorite thing besides real estate valuation. nized when it > Every morning I get up and I can’t wait to get to work (except weekends). I really love my job! comes to creating appraisal > I can’t go without Diet Dr Pepper – it really does taste like regular Dr Pepper! regulations > My parents taught me how to do just about EVERYTHING! Parents never seem to get all the credit and openthey deserve! Thanks, Mom and Dad! minded to new valuation > I’ve never ridden a motorcycle cross-country or been to the Ducati motorcycle factory in Bologna, methods and Italy, but I plan to do both! services we > I always look for ways to incorporate motorcycle riding into my daily activities. can provide our clients. > The best lesson I’ve ever learned is the harder I work, the luckier I get!
The best purchase I’ve ever made was my first motorcycle. It gave me a sense of freedom and
excitement long before I was old enough to drive a car.
The most difficult property I ever appraised was the first one! I still remember it 25 years later. A new two-story
log home in a subdivision full of 30-year-old brick ranches! No comparable sales anywhere.
The biggest challenge to the appraisal/valuation community is ourselves! We have to become more organized
when it comes to creating appraisal regulations and open-minded to new valuation methods and services we can provide our clients.
The future of real estate valuation is bright because of the technology currently available and being developed to
aid appraisers in offering additional valuation services that compete directly with broker price opinions (BPOs).
The biggest technological leap for appraisers was being able to access public records and market data on the
The greatest setback for appraisers was and still is, in my opinion, licensure without adequate enforcement.
Internet. I guess I’m dating myself with this one.
Many state appraisal boards still lack sufficient funding to quickly investigate complaints and enforce appraisal regulations.
My biggest pet peeve with appraisal reports is the lack of sufficient “analysis” of the prior sales of the subject
property. Just stating that the subject property sold previously is not enough. Tell me why there is a difference between the prior sale price and today’s value estimate.
The most ridiculous thing about the valuation industry is the low fees that many appraisers are willing to accept
compared to the amount of time necessary to produce a credible assignment result. What is your time really worth?
The most fascinating thing about the valuation industry is we get paid for our opinions! How cool is that?!
Before I entered the valuation industry I was attending college and working at a bank as a teller.
Chief appraisers are invaluable. Every financial institution involved in real estate lending should have one! JUNE 2011
* LIVEVALMAG.COM | 19
An Appraisal Report So Good You’ll Want To Frame It! REAL ESTATE COLLATERAL VALUATION REPORT SUMMARY APPRAISAL REPORT CLIENT
Executive Summary. The Collateral Valuation Report was designed so that the first page presents an executive summary of your market analysis and value conclusion.
4811 Kingston Avenue
Borrower James Rogers
Address 2445 Septimus Drive
ST CO Zip
Contact Sample Appraiser
Phone (303) 875-5677
Address 4811 Kingston Avenue
City Highlands Ranch
Owner Kim Jones
R.E. Taxes $ 1,960.41
Property Interest Appraised:
Tax Year 2008
Highest and Best Use: Legal Description LOT 392 HIGHLANDS RANCH # 120C 0.093 AM/L
Photo Date and Source The date and source of the photo is indicated to ensure relevancy and reduce fraud.
Ref No. 00001563
Client TerraForma Lending
Year Built 1998
Total Rooms 3 Bedrooms 3
Design (Style) 2-Story
Car Storage G2
Site Area 3920
Appraiser Source Pictometry
Comments: The subject property is a typical improvement for the neighborhood. Given the diversity of the Highland's Ranch neighborhood, it represents a newer home within this area.
Market Trends. The trends for sales and listings for the market area are graphically shown for easy and better interpretation of the activity in the market area.
Neighborhood Name Highlands Location Built-Up Growth
Over 75% Rapid
Tr en d s Median List Price Median Sale Price List to Sale Ratio
Last 3 Mos. 299,900 235,000
Rural Under 25% Slow Property Values Increasing Stable Declining
Pred 12 380 Demand/Supply Marketing Time Shortage < 3 Mos In Balance 3-6 mths Over Supply
Appraiser’s Opinion of Value. The appraiser’s opinion of value and the effective date of the value are indicated.
Over 6 mths
Sales Prices Listings Price
300,000 250,000 10-12 Mos
Fe Drive in the southern tier of the Denver Metropolitan area. The neighborhood consists of more than 20,000 housing units and is considered to represent one of the more desirable neighborhoods in the area. Housing stock varies widely in this neighborhood, with home prices ranging from $200,000 to more than $1,000,000.
Neighborhood Sales Price Range: $
Average Neighborhood Sale Price: $
249,576 Indicated Value from Regression: $ 249,574 to $ 249,579 Indicated Value Range from Regression: $ Based on the defined Scope of Work, Statement of Assumptions and Limiting Conditions, and Appraiser's Certification, my opinion of the 12/01/2009 , which is the effective date of this appraisal, is $ 252,500 market value of the subject as of .
-2.22 3 Mos -3.33 6 Mos -4.44 9 Mos -5.55 12 Mos
-2 -4 -6 -8
$ $ $
Forecast Source Veros
Market Value 252,500 Next 3 Months 246894.5 Next 6 Months 244091.75 Next 9 Months 241289 Next 12 Months 238486.25
Comments: The forecast for the suject market is for continued declines.
Appraisal Sentry (TM)
Signature Date 02/11/2010
Name Sample Appraiser Company Bradford Technologies Address 302 Piercy Rd City San Jose State License #
Certification # Other # Expiration Date 01/01/2011
Identity Authentication. The identity of all CVR Certified appraisers has been authenticated by Appraisal Sentry using “out of pocket” credentials.
CVR Executive Summary
State CA Exterior Only
Interior and Exterior
Copyright 2009-2010 AppraisalWorld, Inc. 866-445-8367 All Rights Reserved
Page2 of 12
The New Collateral Valuation Report Produced by appraisers trained in real estate regression analysis Learn how you can profit with this new report.
Call Today 866-445-8308 20
12-Month Value Forecast. Using economic data, the value of the collateral is forecasted for 90,180, 270 and 360 days out. A trend chart for a better understanding of the anticipated values is shown.
Appraiser Identity and Data Authentication by
Value Reconciliation. The value ranges in the market area, the indicated value by regression and the range are show in one place for easy reconciliation of the overall values in the market area.
Market Area Graphically Illustrated. The market area is graphically illustrated on a map showing the subject and surrounding area
Neighborhood Description and Market Conditions: The Highlands Ranch neighborhood is located proximate to Highway C-470, between Interstate 25 and Santa
Neighborhood Demographics. The standard neighborhood demographic information typically found on a 1004 is also found on the CVR.
Property Photo. The subject photo is on the front page. Makes it easy to view and ensure it’s the correct property being used for collateral.
CompCruncher, AppraisalWorld, CVR are trademarks of Bradford Technologies, Inc.; Other brand and product names are trademrks of their respective owners.
Report Fraud Prevention Using “On Document Verification” technology, this data matrix contains all the pertinent data about the appraiser and the report. This is similar to technology used by the postal service to prevent mail fraud.
Statistically Supported Appraisals. Distinguish Yourself and Profit. Local Market Analysis File No. 4811 Kingston Avenue Ref No. 00001563
NEIGHBORHOOD DESCRIPTION AND TRENDS Property Address
4811 Kingston Avenue
City Highlands Ranch
Area Location Map
Zip Code 80126
Area: 14.815 sq miles Sq Miles
Market Area. Graphically defined on a map to visually illustrate the market boundaries and surrounding landmarks..
Regression Analysis File No. 4811 Kingston Avenue Ref No. 00001563
REGRESSION STATISTICS DETAIL Property Address
4811 Kingston Avenue
City Highlands Ranch
Zip Code 80126
Predicted Values to Actual Sale Prices 340,000
Neighborhood Name Highland Location
Census Tract 0141.18 Suburban
Under 25% south-central Denver Metropolitan area. This planned neighborhood provides excellent
linkage to employment centers, retail/shopping and other amenities. 7-9 Mos.
Median List Price
Median Sale Price
Days on Market
Sale Price / SqFt
Low Sale Price
High Sale Price
Months of Supply
List/Sale Price Ratio
Marketing Time 3.0
Sales and Listings Prices
Sales Prices Listings Price
300,000 250,000 10-12 Mos
Total Sales and Listings
100 0 10-12 Mos
Market Conditions: Given the nature of this neighborhood, market conditions have remained stable with sales and listings generally in balance.
Days on Market (Sales)
40 30 20 10
2 10-12 Mos 34 7-9 Mos 6 4-6 Mos 2 0-3 Mos
Listings to Sales Ratio
94.55 10-12 Mos 94.68 7-9 Mos 96.63 4-6 Mos 96.25 0-3 Mos
110 100 90 80 10-12 Mos
NEIGHBORHOOD VALUE TREND % Change
-2.22 3 Mos -3.33 6 Mos -4.44 9 Mos -5.55 12 Mos
-2 -4 -6
Value Trend Forecast Next 3 Mos -2.22% $ 246894.5 Next 6 Mos -3.33% $ 244091.75 241289 Next 9 Mos -4.44% $ Next 12 Mos -5.55% $ 238486.25
-8 3 Mos
12-Month Market Trends Sales and listing activity for the last 12 months is graphically displayed.
Total Sales Total Listings
Increasing 6 Mos
Neighborhood Value Trend and Impact on Subject Property:
300,000 280,000 260,000 240,000 220,000 200,000 180,000 195,048
Components of Value. Appraiser driven regression can identify the components of a property that contribute to its overall value. The value, its significance and whether its acceptable is indicated in the table.
Actual Sale Price
Indicated Value from Regression: $
Regression Output Statistics Statistical Measure
Total Properties Sold within Boundary 207
The subject is located within the Highlands Ranch neighborhood, in the
Regression Metrics and Scatter Plot. The measure of accuracy is shown in the table. The correlation of actual to predicted sales is illustrated in the scatter plot.
Adjusted R Squared
39.48% 6.94% 5.67% 5.16%
Acceptable Very Good Very Good Very Good
COV COD Standard Error
Components of Value Component
Most Likely Value $194,659.64 $23.77 $6,344.95 $.7 Excluded Insufficient Data $12.57 Insufficient Data -$1,096.78 $668.6 Insufficient Data Insufficient Data -$135.47
Base Neighborhood Value GLA Total Baths Site Area SF Garage Spaces Carport Basement Area Basement Finished Year Built Fireplaces Pool Spa Sale Date (Monthly)
Acceptance of Variable $185,417.34to$ $19.92to$27.63 $3,809.84to$ $.20to$1.19
Accepted Accepted Accepted Accepted Excluded Insufficient Data Accepted Insufficient Data Accepted Accepted Insufficient Data Insufficient Data Accepted
High Medium Low
Medium Medium Low
Top 10 Sales Address
(Most relevant to Subject and Market)
Significance of Variable
(Most relevant to Subject and Market)
Date of Sal e
Bdrms Baths Distance
10081 MACKAY Dr , 80130 4849 Kingston Ave , 80130
5,662 SqFt 3,920 SqFt
0.27 mi 0.03 mi
9689 Adelaide Cir , 80130 10086 Cairns Ct , 80130
5,662 SqFt 6,098 SqFt
0.37 mi 0.11 mi
4916 Waldenwood Dr , 80130 4914 Collingswood Dr , 80130 4851 Collinsville Pl , 80130 10338 Rotherwood Cir , 80130 5559 E Wickerdale Ln , 80130 9882 Aftonwood St , 80126
$252,500 $249,900 $243,000 $273,000 $268,000 $232,300
10/05/2009 08/31/2009 08/24/2009 09/17/2009 08/26/2009 10/15/2009
1,649 1,677 1,708 1,768 1,678 1,513
8,276 SqFt 6,534 SqFt 4,356 SqFt 5,662 SqFt 6,969 SqFt 4,791 SqFt
3 3 3 3 3 3
3.00 3.00 3.00 3.00 3.00 4.00
0.34 mi 0.41 mi 0.11 mi 0.37 mi 0.86 mi 0.39 mi
Evaluation of Data and Analysis Number of Observations Very Good (228) Data Quality Acceptable Comparison of Subject to Dataset Acceptable Overall Agreement with Model Output High
Overall Agreement with Model Accuracy Acceptable
The forecast for the subject market is for continued declines.
Co m m en t s : There was a sufficiency of sale data to produce an appropriate indication of value from the regression analysis. With 177 sales, this dataset was appropriate and rich enough to provide ample evidence of value. The R squared and Adjusted R squared were both
CVR Neighborhood Summary
Copyright 2009-2010 AppraisalWorld, Inc. 866-445-8367 All Rights Reserved
Page 3 of 12
12-Month Value Forecast Using economic data, the value of properties in the market are forecasted.
adequate for a well-designed model. The measures of dispersion in the COV and COD, in tandem with the Standard Error at 5.16% were both determined to represent a highly predictive valuation with minor error.
Copyright 2009-2010 AppraisalWorld, Inc. 866-445-8367 All Rights Reserved
Page 4 of 12
Let There Be No Doubt Who The Valuation Expert Is Introducing CompCruncherTM and the New CVRTM Appraisal Report Now you can profit in the billion dollar alternative valuation market
Welcome to the next generation of appraisal software and the ability to produce statistically supportable appraisals. Introducing CompCruncherâ„˘, a new class of software called Computer Aided Appraisal Software. Three years in the making, it provides appraisers with the ability to statistically analyze markets quickly and produce supportable and accurate valuations. This is not an AVM embedded in a form-filler, this is software that puts the appraiser squarely in the middle of the analysis and gives them complete control over the data analysis and the valuation process. CompCruncher is free software, but you must be certified to use it. You must successively complete the CVR Education and
Training curriculum. One-on-one training is provided to ensure you have the skill and confidence to properly apply the analytics. All the data and imagery is provided. Up to 500 comps with 3 year sales history; MLS integration. 1004MC market analysis, location maps, flood maps, census tract, property imagery, aerial photos, regression analysis, trend analysis, fraud prevention service, unlimited support and software updates. Expand Your Appraisal Business Learn how you can take advantage of this opportunity to expand your appraisal business into the alternative valuation market. Visit www.appraisalworld.com Today
Join the Experts. Join AppraisalWorld Today.
www.AppraisalWorld.com JUNE 2011
* LIVEVALMAG.COM | 21
& | joseph palumbo |
What you donâ€™t know can hurt you.
You may have heard
“What you don’t know won’t hurt you.” O b v i o u s l y , th at i sn ’ t t ru e a l l o f t he t im e .
As we continue
to spin the perpetual let’s-try-to-fix-the-realestate-market wheel, some self-serving, shortsighted
b e en pro po sed. Some of these solutions involve changing laws. Four states recently proposed legislation that would prohibit appraisers from
using REO and/or short sale properties
as comparable sales in appraisals. Those states are Illinois, Maryland, Missouri and Nevada. First we had the HVCC (Home Valuation Code of Conduct),
then licensing of appraisal management companies (both appraisal process
related changes), and most recently the
proposed interference with the appraisal itself (the latest proposal was actually telling us “how” to do our analysis).
What’s next? Do we tell lawyers what kind of evidence to use? Do we tell
doctors to examine us and properly
and accurately diagnose, but only do a
cursory exam? Fortunately for all of us, as of this writing, these bills are dead
or stalled. Two bills missed procedural deadlines, one has been amended and
the other was withdrawn by its sponsor. Still, I believe it is worth the effort to
explore why these bills would not have been a good thing for the profession or the public.
education and 2,000 hours of practical
required due diligence? Of course there
cannot be gained in less than 12 months.
can show you how many of those lost
experience. The practical experience Anyone who has
are, but any homebuilder sales office
deals exist compared
to the anemic
down this road
knows that the
criteria and the exam (which
was made more challenging in
2008) are not easy to conquer. The understanding
and development of what the
valuation process is and what it
takes is not an
overnight reading exercise. Looking
What’s next? Do we tell lawyers what kind of evidence to use? Do we tell doctors to examine us and properly and accurately diagnose, but only do a cursory exam?
at appraisals over several years as
and short sales
these laws were
seeking to prohibit from being used
in appraisals were
sown in the gardens of the builders and
Realtors who believe these laws are the
panacea for all U.S. housing woes. It wasn’t long ago
when the builder’s
increase adjustment was the fill-in-the-
a builder, lawyer, Realtor, underwriter
gap solution for making sense out of
expert on appraisals, just as working in
Remember when the Realtor would
or loan officer does not make one an
a garage does not make one a mechanic. Photos, sketches, market grids and
commentary are not indicative of what the appraisal process is.
These proposed laws were being
brought forth by builders and Realtors who just can’t adapt to the new world. Noteworthy sources have published
article after article detailing why people can’t afford new homes and why they
the inferno-like price appreciation. meet you at the property and say,
“Good luck with this one; it sold higher than anything in town”?
Moving away from the root cause, let’s
look at the practical and legal premises behind these flawed bills: the market,
existing USPAP (Uniform Standards of
Professional Practice) requirements and common sense.
are losing their homes. I won’t say the
Here is a very practical reason involving
reality is that the entire mechanism
Many markets, including the real estate
dynamics of why are simple, but the of lending, selling, investing and
building is forever changed. Are there appraisals that contain less than the
supply, demand and economic theory. market, work on the basic premise of
substitution. Substitution means that the market will gravitate to the best >>
Let’s look at several areas of this
pragmatic solution. The Appraisal
Qualifications Board of the Appraisal Foundation (AQB) criteria to become a licensed appraiser is 150 hours of
* LIVEVALMAG.COM | 23
substitute property at the lowest price.
conditions. Using the indicators (sales
definitions of market value that contain
market is to acknowledge reality. Forced
Further, it is arguable that the current similar criteria are still subject to
interpretation. For example, two items
extracted from the definition of “market value” state: 1
and listings) available in the defined
Lenders seek a market value appraisal,
the current definition of “market value”
a sale, but the appraisal should still
will create a false market picture using via the Federal Register required by
be constructed as if it would be tested in the relocation business. 95 percent the actual sale of the property. These relocation appraisals, which are not
market value but contain some similar
Both buyer and seller are acting in what they consider their best interest “Well advised”? “Best interest”? These terms can mean different things. Are
we saying here that buyers and sellers aren’t advised (i.e., consult experts)?
And in selling, while not at the desired price, are they not acting in their best
interest at any point in time? Surely they can try to sell at a different price, wait out the market or even counteroffer.
When the prevailing economic situation is not favorable, sellers are motivated by the need to sell and a specified
time period can affect the net result. Well advised can be taken to mean
many things for both the buyer and
seller, but the bottom line is the sellers generally know market conditions are favorable or unfavorable. Regardless,
they want the most they can get for their property. By logical extension, the buyer is motivated by similar forces on the
opposite side, which is to not pay too
Mandating that appraisers exclude certain types of sales from their analysis is like giving our soldiers toy guns and rubber bullets. They look good and take on the appearance of what they need, but in reality they don’t work.
force. Market activity takes place and the appraisers interpret the activity.
The fact that prices drop as a result of
buying and selling is a result of market
elements of the market value definition, need to be especially accurate because these homes will be out there among the competition. It is a common
misconception that the use of sales and listings of short sales and foreclosures in appraisals are unfair benchmarks
at face value. Here is why this is not
practical thinking: Buyers see prices of
homes sold and expect the same prices; they do not care how the prices were
achieved. Prospective buyers also see listings and sales and negotiate the
best price they can regardless of the
seller’s situation. As long as all sales
and listings are exposed in the market
through the same mechanism (i.e., MLS, open to the masses, willing buyers, and willing sellers), everything becomes
relative, and market forces will prevail. Short sales or foreclosures not exposed in this manner should be analyzed to
determine if they should be discarded just as sales outside the market norm should be.
In the end, it is the appraiser’s job to interpret what the market is, not to
make the market. The appraisal process
much. This dynamic is an immovable
which in reality, is never tested without
of all appraisals will be tested via
typically motivated or well
exclusion of some of these indicators
Both buyer and seller are
fantasy valuation that is useless when
lenders. Simply put, either you want an
analysis that accurately reflects what the true value of the home is or you want a
involves analysis of large amounts of
data, some relevant and some not. In the end there may be several sales that are not used for many reasons. To exclude
Looking at appraisals over several years as a builder, lawyer, Realtor, underwriter or loan officer does not make one an expert on appraisals, just as working in a garage does not make one a mechanic. 1 Federal Register- Volume 73 No 224 11/19/08 page 69661 Office of the Comptroller of the Currency (OCC), Federal Reserve Board (FRB), Federal Deposit Insurance Corporation (FDIC), Office of Thrift Supervision (OTS), and the National Credit Union Administration (NCUA).
these sales exclusively based on the reason they are being sold or listed is nothing more than adverse selection. Especially
since distressed sales, foreclosures and short sales account for 34 percent of total market sales2.
Now let’s look at the messy legal argument that would force
with the Uniform Standards of Professional Appraisal Practice
appraisers to break the law. Appraisers are required to comply in federally related transactions. If these bills were enacted into law, appraisers would be put in the difficult position of having to choose which law to violate. USPAP Standard Rule 1-4 (a) mandates that appraisers “must analyze such comparables sales as are available.” The standard cannot be voided by a
state or local government. Not following USPAP could subject the appraiser to action taken against their license. Appraisers
would have to decide to commit a USPAP violation – which in
Relocation Appraisers & Consultants RAC is a nationwide organization of Independent Appraisers who are trained professionals in relocation appraising.
the case of federally related transactions would be a violation
of state law – or to violate the law prohibiting the consideration of distressed sales as comparables.
Also important is the issue of credible results. Appraisers have
What distinguishes RAC from all other appraisal organizations l
Our exclusive focus on relocation appraising and consulting.
discretion in choosing data and performing their analysis. But
the responsibility of the end product is that the results must be credible.
activities are devoted to education, research, and client outreach.
as defined by the Appraisal Foundation is:
Worthy of belief3.
The majority of our organizational
Credible assignment results require support, by relevant
evidence and logic, to the degree necessary for the intended
Each of our select group of members is considered the relocation appraisal experts in their respective markets.
use. For those who think the alternative is a value based on a hypothetical condition, think again because those need to:
Fall into one of the acceptable categories for valuations with hypothetical conditions (see USPAP Standard Rule 1-2 (g). Be credible like all valuations. A valuation not based in reality, absent of being done as part of a legal mandate is hardly credible. So I ask you, how believable is a value determination of a
property using only certain types of data and ignoring others? It looks good on the surface but in reality, it is likely to be
flawed because it is nothing but a façade. Mandating that >>
2 Bloomberg News, November 24, 2010. 3 Uniform Standards of Professional Practice, 2010 The Appraisal Foundation 1155 15th Street, NW, Suite 1111.
For more information visit our web site at: www.RAC.net
* LIVEVALMAG.COM | 25
appraisers exclude certain types of
appraiser, a simple phone call or
our soldiers toy guns and rubber
is passed that requires the appraiser
sales from their analysis is like giving
discussion could take place. If a law
bullets. They look good and take on the appearance of what they need, but in
reality they don’t work. Just so we are
clear, I am not advocating the arbitrary use of distressed sales in a valuation.
I am merely suggesting that the entire
data set is examined and the best data is used and ultimately decided by the appraiser. The scenario of “just use
certain data” is not a new one to the
appraisal business. The difference this time is that the request to exclude or include certain data in the past has been a client-imposed assignment condition. If not acceptable by the
to forgo impartiality and objectivity,
The bottom line here is
the appraiser would have to adhere to
that taking the impartiality and objectivity out of the appraisal is creating an unacceptable assignment condition.
Assignment Conditions, which severely
such a law creating an Unacceptable
Assignment Condition. Unacceptable limit the scope of the assignment and
prohibit the appraiser from rendering
credible results, exist in other situations. A list of a few examples can be found in USPAP in Advisory Opinion 19.
The bottom line here is that taking the impartiality and objectivity out of the appraisal is creating an Unacceptable Assignment Condition.
An Assignment Needs
that many lenders/investors
a property inspection,
are these investors anyway
Since the recession started, there have been several attempts
a quality and condition rating
at fixing the appraisal industry. It started with the HVCC (Home Valuation Code of Conduct) and the licensing of
appraisal management companies was next (see LiveValuation Magazine article “The Fool’s Gold of AMC Licensing,”
April 2010). From there, the Dodd-Frank legislation was the
solution; I guess fixing the appraisers will last for a while. As a problem solver, I always try to bring a solution to the table.
Solution No.1: Pass a Federal Law that allows any appraisal user to take an existing appraisal, cross out the conclusion and make one of their own. Of course they would be the liable party. This is a great idea for those perpetual second-guessers.
Solution No.2: Change the way loans are underwritten so the lender can make a decision based on the adjusted value range. No single value point would be selected by the appraiser.
Solution No.3: :
Get rid of appraisals as we know them today and ask the appraiser to fulfill an Assignment Needs Request.
Request would include measurement of the property,
and it would supply sales that meet certain lender-defined
criteria. This new Assignment
Needs product would contain no value conclusion or range of value and would not
are seeking these days. (Who and what planet do they live on?) The lender/investor
would then have to make
their business decision (how much to lend) based on the
information provided in the Assignment Needs Report.
involve the judgment of the
In conclusion, it is clear that
no selecting or determining
are all still challenged with
appraiser. There would be
comparability or any analysis
of the sales, just a listing of the features as described on MLS. An analysis of comparability would have a net effect of
producing an appraisal, so it would have to be avoided. The Needs Assessment
Report form could include the 1004MC- type data without any trending conclusions.
This new valuation product would allow the appraiser
to provide the highly sought after (Utopian) data report
going into summer 2011, we the new economic reality.
Appraisers, builders, Realtors and tax assessors all work
together in many areas. Does anyone out there believe the
appraisal community is happy to see 34 percent of the sales
data available in a distressed
category? In working together there needs to be a regard for
professional core competency. Let’s work together to make
the new economic reality into an understood reality. 6
* LIVEVALMAG.COM | 27
The Dodd-Frank Issue A pprai s e r I nde pe nde nce
Mandatory report in g
Dispu t e Resolu t io n
Bpos & avms
Apprais er I n d ep en d en c e
Diving Deeper into
1. Chuck Mureddu Keep Fighting for Your Independence
2. jeff dickstein A Dangerous Area of Dodd-Frank
Mandat ory r e port i n g
Dispute R e sol ution
B pos & avms
Appraiser In depen den c e
M an dat ory reporti n g
3. tim forsythe There Are No Dumb Questions?
4. don kelly Valuations Other Than Appraisals
* LIVEVALMAG.COM | 29
The Dodd-Frank Issue A ppraise r In de pe n de nce
Apprai s e r I n d e p e n d e n c e
Apprai s e r I n d e p e n d e n c e
Keep Fighting for Your Independence Dodd-Frank empowers appraiser independence.
Appraiser independence has been a topic of conversation for many years before HVCC and DoddFrank were ever conceived, and why not? After all, independent
pressure on appraisers will continue.
institution shall take appropriate steps
industry has been inundated with
independent judgment and that the
foundations of our profession. Yet
to see that Dodd-Frank and the Interim
Since the mortgage meltdown, our
regulatory reforms that in some cases make good sense and in some cases
do not. HVCC was a good start and
analysis and reporting is one of the
although it has sunsetted, I am happy
we continue to struggle to convince
Final Rule support the spirit of HVCC.
job independently, without coercion,
As I mentioned earlier, appraiser
pressure was practiced almost
been around for some time. They first
agenda. In the end, this compromised
Federal Regulations Title 12 – Banks
truly amazed to hear there are those
of FIRREA. This section requires that
actually ever existed. Even worse, I
of the lending, investment and
day. I do not need to point the finger at
say that if the only qualified persons
did that several times in previous
involved in those functions of the
others that appraisers need to do their control or undue influence. Appraiser
independence requirements have
routinely in order to satisfy one’s
popped up in 1990 under the code of
the integrity of our economy. I am
and Banking chapter 5, section 564.5
who still question if appraiser pressure
a staff appraiser must be independent
know firsthand that it continues to this
collection functions. It goes on to
one specific group – honestly, I already
available to perform an appraisal are
articles. But I do feel strongly that
regulated institution, the regulated
to ensure that the appraisers exercise appraisal is adequate. It also states
that if an appraisal is prepared by a fee appraiser, the appraiser shall be engaged directly by the regulated
institution or its agent, and have no direct or indirect interest, financial
or otherwise, in the property or the transaction. Again, this section had very good intentions, but let’s face it, it was significantly abused and
its enforcement was almost absent. In order for any regulatory code to be effective it must be enforced. In
the case of Dodd-Frank, I believe the enforcement may finally have some
teeth, as there are now civil penalties
involved. As much as I believe pressure will always exist, I also believe that
these penalties may finally deter many from the act.
It is always
interesting to get a
on a topic that is
challenged constantly. A topic that is easily
In the case of
In reviewing old
times are good.
textbooks to see how
finally have some
teeth, as there are now civil penalties involved. As
much as I believe
decided to look for
exist, I also believe
published in 1978. I
pressure will always
anything that would
that these penalties
may finally deter
many from the act.
The Code of Ethics section references
in 1984 was described in the Real Estate
but I would bet that
affiliation to one of
I believe the
Encyclopedia of Real
It’s a scary thought,
not tied to any code.
some direct or indirect
the years, I found my
in any of the text, but it was definitely
many appraisers had
they changed over
they were most likely
at the time. Reading this section, I could only find two
paragraphs that can
be tied to promoting independence. The first reads: “When
performing a real estate appraisal assignment,
a member must render his professional
services without advocacy for his
client’s interest or the
codes established by several appraisal
accommodation of his own interest.”
with us today in one form or another.
to accept an assignment to appraise a
organizations, most of which are still Uniform Standards were not written yet and would not be until 1987. If
an appraiser was not a member of a
professional appraisal organization,
Another section states, “It is unethical property for which his employment or fee is contingent upon his reporting of a predetermined conclusion.” I could
not find the word “independence” once
implied. The definition of “appraiser”
Appraisal terminology revised edition as one who conducts appraisals;
specifically, one who possesses the
necessary qualifications, ability, and experience to execute or direct the
appraisal of real or personal property.
In 1985 and 1986, hearings held by the House Subcommittee of Consumer
and Monetary Affairs regarding faulty and fraudulent appraisals found that
between 1983 and 1985, the real estate portfolios of more than 800 federally insured thrifts, and 25 percent of all
such institutions were found to have “significant” appraisal deficiencies. It was found that as much as 40
percent of the VA home loan guaranty program’s $420 million loss in 1985
was caused by dishonest or inaccurate appraisals. Much of this was tied to
users of appraisal services and pressure on appraisers. Soon after, although
always expected, the requirement for appraiser independence was clearly brought to light and added to the definition of >>
the history of appraiser independence ?
1984: Appraiser: one
Soon after: Appraiser
who conducts appraisals; specifically, one who possesses the necessary qualifications, ability, and experience to execute or direct the appraisal of real or personal property. -Real Estate Appraisal terminology revised edition
independence was added to the definition of “appraiser,”: “One who is expected to perform valuation services competently and in a manner that is independent, impartial and objective.”
Effective date of the original USPAP.
1985 & 1986:
House Subcommittee of Consumer and Monetary Affairs found that between 1983 and 1985, the real estate portfolios of more than 800 federally insured thrifts and 25% of all such institutions were found to have “significant” appraisal deficiencies.
percent of the VA home loan guaranty program’s $420 million loss in 1985 was caused by dishonest or inaccurate appraisals. Much of this was tied to users of appraisal services and pressure on appraisers.
Standards Board unanimously approved USPAP and adopted it.
Fast forward to present day
Dodd-Frank was proposed and passed within months and signed into law.
Governors of the Federal Reserve Board published an Interim Final Rule designed to ensure that real estate appraisers use their independent professional judgment in appraising homes without influence or pressure from parties interested in the loan transaction.
* LIVEVALMAG.COM | 31
The Interim Rule implements amendments made to the Truth in Lending Act (TILA), which was enacted as Section 1472 of the Dodd-Frank Wall Street Reform and Consumer Protection to establish new requirements for appraisal independence for consumer loans secured by a consumer’s principal dwelling.
“appraiser,” which is simply: “One
increasing at a very rapid rate; in
to “doing the right thing.” Morality
services competently and in a manner
new conforming product. New exotic
taught at a young age.
who is expected to perform valuation that is independent, impartial and objective.”
The bottom line is that it took the thrift crisis of the mid- and late 1980s to
discover that appraiser independence broke down. As a result, the most
significant change to our industry is the creation of the Appraisal
Subcommittee (ASC) pursuant to Title
XI of the Financial Institutions Reform, Recovery and Enforcement Act of
some instances, subprime became the loan products were being introduced
almost daily. Who in their right mind
Fast forward to present day.
in a no-income, no-asset, 100 percent
starting in 2007, the most significant
thought that taking a calculated risk LTV loan made sense? I still cannot
believe it today. Looking back during my chief appraiser days, the lack of
independence was not only an issue
for appraisers but it was clear that loan processors and underwriters were pressured as well.
1989 (FIRREA). The ASC monitors
I remember sitting in a meeting when
activities, and organizations structure
that an underwriter should be fired
and reviews the practice, procedures, of the Appraisal Foundation.
The effective date of the original
USPAP was April 27, 1987. In 1989, the Appraisal Standards Board
unanimously approved and adopted
it. It is now developed, interpreted and amended by the Appraisal Standards
Board of the Appraisal Foundation. As for independence, USPAP requires the
appraiser to perform assignments with impartiality, objectivity, independence and without accommodation of
personal interest under the Ethics Rule. You would think that we learned
our lesson in the 1980s, but here we
go again in the early and mid-2000s. Mortgage lending was becoming
more aggressive again. Brokers and
correspondents were becoming more abundant and many were loosely
regulated at best. House prices were 32
and ethics are easy concepts to learn if
a senior level sales manager insisted for not ripping up a W-2 income
statement that disclosed half of what
the borrower was reporting. The loan was supposed to be a no-income
verification product and the sales
manager felt that it was completely legit to still make the loan on the
higher amount. Everyone was being pressured to get that deal closed.
Those who know me can imagine the
choice words I used that morning and I am very happy to say that we did
not close the loan. More surprising,
the same sales manager kept his job
and continued to constantly pressure whomever they could to get the next
deal closed. Of course, those of us on the risk side kept fighting the fight,
acting as the internal watchdog. Did we act more appropriately, like the
parent teaching their child right from wrong? After all, it all comes down
Responding to the mortgage meltdown change affecting almost every aspect of the nation’s financial services industry was signed into law. Dodd-Frank was proposed and passed within months and signed into law July 21, 2010.
Furthermore, on October 28, 2010, the
governors of the Federal Reserve Board (FRB) published an Interim Final Rule (the Interim Rule) designed to ensure that real estate appraisers use their
independent professional judgment in appraising homes without influence or pressure from parties interested
in the loan transaction. The Interim
Rule implements amendments made to the Truth in Lending Act (TILA),
which was enacted as Section 1472 of the Dodd-Frank Wall Street Reform
and Consumer Protection to establish new requirements for appraisal
independence for consumer loans
secured by a consumer’s principal
dwelling. The Interim Final Rule is also broader as it does not limit coverage to closed-end loans and includes Home Equity Line of Credit. It should also be noted that the Interim Final Rule
applies to persons that provide services without regard to whether they also
extend consumer credit by originating
mortgage loans. They include creditors, appraisal management companies,
appraisers, mortgage brokers, realtors,
title insurers, and other firms that provide settlement services.
The Interim Final Rule requires lenders to have the valuation management
functions independent of the lending, investment and collection functions.
Valuation management functions are defined as, recruiting, selecting or
retaining an appraiser, contracting
with a person to prepare a valuation,
managing or overseeing the process of preparing a valuation, and reviewing
or verifying the work of a person that prepares a valuation.
There is a mandatory reporting
requirement. Creditors or settlement service providers who have a
reasonable basis to believe that an appraiser has not complied with
USPAP or ethical or professional appraiser requirements under
As you can see, although HVCC is
So what is independence? The
the Interim Final Rule are consistent
very gracious to allow me to quote
now sun-setted, certain provisions of with HVCC. In fact, Dodd-Frank and
the Interim Rule strengthen its original purpose by establishing the Consumer Financial Protection Bureau, which
will provide a hotline for complaints and will be tasked to investigate
those complaints. It will also have the
authority to assess substantial penalties for non-compliance. Those penalties are significant to the tune of $10,000
per day for the first offense and $20,000 per day for subsequent offenses. The
jury is still out to see if function of the
Consumer Financial Protection Bureau
will be effective but this is the first time I’ve seen something that may finally have teeth.
contributors of Tin Can Films were their definition. Their website reads, “For us it is the desire and ability
to freely create, not without input,
not without teamwork, but with the freedom to tell a story the way we
think it is meant to be told.” This is
such a simplistic way to communicate a strong message that I believe is the
right one. The need for independence
should be a no-brainer and frankly, we
should not need regulations to promote and enforce it. Nevertheless, the
reality is unfortunate, as we do need
regulations based on past experiences. Dodd-Frank moves us in the right direction. 6
The Interim Final Rule Prohibits:
federal or state law, must report such a failure to the appropriate state
licensing agency, where it is likely
to significantly affect the valuation.
Unfortunately, the timing to report a
violation is somewhat vague. “Within a reasonable time” can be open to interpretation.
Lastly, the rule does not prohibit a
person with an interest in a real estate transaction from asking an appraiser to consider additional appropriate property information, including
information regarding additional
comparable properties to make or
support an appraisal. A person can also ask the appraiser to provide further
detail, substantiation or explanation
for the appraiser’s value conclusions
or correct errors in the appraisal report. I understand why this is allowed but I also think that there needs to be a
standard policy, process, and even a
standardized form for Reconsideration of Value (ROV). This may be a good future topic.
4Any person directly or indirectly to engage in coercion, bribery, extortion, inducement, intimidation, or other similar actions designed to cause appraisers to base the appraised value of properties on factors other than their independent judgment.
4A creditor from extending credit based on a valuation if the creditor knows, at or before consummation, that coercion or other similar conduct has occurred or that the person who prepares a valuation or who performs valuation management services has a prohibited interest in the property.
4Mischaracterizing or suborning any mischaracterization of the appraised value through misrepresentation, falsification, alteration or inducement.
4Influencing an appraiser or otherwise encouraging a targeted value to facilitate the making or pricing of the transaction.
4Withholding or threatening to withhold timely payment for an appraisal report or for appraisal services rendered when the appraisal report or services are provided for in accordance with the contract between parties.
4A person preparing a valuation or performing valuation management functions for a consumer loan secured by the consumer’s principal dwelling from having a direct or indirect interest, financial or otherwise, in the property or loan for which the valuation is or will be performed (called “a prohibited interest”).
* LIVEVALMAG.COM | 33
The Dodd-Frank Issue M a n datory re portin g
Mandat ory report ing
Man datory r e porti n g
Ma n datory r e porti n g
Ma n datory
A Dangerous Area of Dodd-Frank Mandatory reporting raises concerns for everyone involved.
State appraisal agencies and the Appraisal Subcommittee (ASC) have been tasked with a large and
important assignment as a result of
the passage of Dodd-Frank: to make
sure that appraisals reflect the actual
value of a property, as well as market
Lenders, bankers, brokers, real estate
4Title XIV: the Mortgage Reform
companies should all be concerned
and Anti-Predatory Lending Act
4Subtitle F: Appraisal Activities 4 Section 129E: Appraisal Independence Requirements
brokers and appraisal management
about the mandatory reporting section of the act. Most concerning is that as we come closer to the one-year
anniversary of the passage of Dodd-
Frank, rules are still confusing and/or
conditions and condition of the subject
Section 129E addresses appraiser
incomplete as written.
an important “C” in the three of
of interest, mandatory reporting, no
The original draft of the
and one of the most important
portability, customary and reasonable
reads as follows:
home ownership. Without confidence
penalties for violations. While
‘‘(e) MANDATORY REPORTING. –
entire housing market comes into
been given most of the attention, it is
mortgage banker, real estate broker,
of any item in this act carries the same
of an appraisal management company,
$10,000 for first violation and not more
estate transaction involving an appraisal
property. The appraisal is once again
independence, prohibitions on conflicts
lending: credit, capacity and collateral,
extension of credit, appraisal report
documents in the lending of funds for
fees, the sunset of HVCC and outlines
in the appraisal, the finances of the
customary and reasonable fees have
Any mortgage lender, mortgage broker,
important to point out that a violation
appraisal management company, employee
The Dodd-Frank Financial Reform
penalty of a fine of not more than
or any other person involved in a real
Within the act are a number of changes
than $20,000 for subsequent violations.
in connection with a consumer credit
Act was signed into law July 21, 2010. that impact our profession.
mandatory reporting section
transaction secured by the principal dwelling of a consumer who has a
reasonable basis to believe an appraiser 34
is failing to comply with the Uniform Standards of Professional Appraisal
Practice, is violating applicable laws, or is otherwise engaging in unethical or
The Interim Final Rule attempted to define the statute as passed, however did ask for additional comments be submitted to the
that approximately 20 percent of all
complaints are filed by a borrower/
homeowner. Another 45 percent come from regulators or lenders, including
Federal Deposit Insurance Corporation,
unprofessional conduct, shall refer the
certifying and licensing agency.”
“…whether reporting should be required
Comptroller of Currency, mortgage
the value assigned to the consumer’s
appraisers for banks. Appraisers
that would have been assigned had the
complaints and the remaining 15
Office of Thrift Supervision, Office of
matter to the applicable State appraiser
The first feedback I saw from the
appraisal community on this issue was the concern around “unprofessional conduct.” What
would be considered
principal dwelling to differ from the value
file approximately 20 percent of the
D ic k s t
brokers, loan officers and review
J e ff
is it defined? If an
only if a material failure to comply causes
Lenders, bankers, brokers,
shorts to inspect a
real estate brokers and
that be considered unprofessional? If
the appraiser didn’t
companies should all be concerned about the
take off his shoes
while completing an
section of the act.
or if dust was spread when inspecting an attic, would those instances be
“unprofessional” enough to warrant reporting the appraiser to the
applicable state appraisal agency? Mortgage lenders, brokers, bankers, real estate brokers, appraisal
management companies and others
would have to wait until the Interim Final Rule were released to see how
the board would define this section of the act.
In December 2010, the Interim Final Rule for section 129E was released. The Interim Rule implemented
Section 129E of the Truth in Lending Act (TILA), which establishes
new requirements for appraisal
independence for consumer credit
transactions secured by the consumer’s principal dwelling. This set of rules went into effect April 1, 2011.
material failure to
percent fall into the “Other” category.
by more than a certain tolerance, for example
California frequent allegations include:
comply not occurred
by 10 percent or
It would appear the
Property description errors; errors
setting a tolerance
errors in valuation; payment disputes;
failure, but couldn’t
obnoxious behavior/rudeness; and
board is considering
in comparable sales information;
level for material
non-delivery of pre-paid appraisal;
a material failure
untimely delivery or non-delivery of
also be a USPAP
violation and have to be reported
regardless of tolerance levels?
Unwillingness to correct errors in
The Interim Final Rule does go further
provide operating income statement;
to define reporting required, reasonable basis, examples of material failures to comply, coverage of reporting
report; altered license; failure to and failure to return phone calls.
4From Appraisers Failure to recognize professional
requirements and timing of reporting.
assistance by others; signing reports
“Reporting required” is defined as
over-valuation; and fraud.
failure to comply with USPAP, or of
without reviewing them; competency;
an ethical or professional requirement
As you can surmise, mandatory
statute or regulation, only if the failure
number of challenges. I have spoken
likely to significantly affect the value
currently performing forensic field
and GSEs. Because the act states
California is one state that publishes
estate brokers, AMCs and “any other
found in complaints filed against
covered transaction” are responsible
the items outlined in mandatory
state licensing boards, >>
under applicable state or federal
reporting as it currently stands has a
to comply is material – that is, if it is
with many appraisers who are
assigned to the consumer’s principal
review work for lenders, servicers
that creditors, brokers, bankers, real
a table of most frequent allegations
persons providing a service for a
appraisers that might fall outside
for reporting appraisers to appropriate
reporting in the rule. California states JUNE 2011
* LIVEVALMAG.COM | 35
many are confused about when to get
If appraisers wish to perform appraisals
appraisal under review that contains
real estate-related transactions, appraisers
involved. Is the reporting of a historic material failures the responsibility of the reviewing appraiser, the lender, servicer or GSE that requested the
review, or all parties responsible? Also,
in such federally related transactions and can choose to become certified/licensed and submit to the state’s regulatory jurisdiction.
by a creditor on or after April 1,
actions and enforcement from state to
performed today for foreclosures and
state. Some states require additional
loan buybacks, when one uncovers
education based on infractions, some
the value assigned to the consumers’
States that are shown to be voluntary are:
overstated” in an earlier appraisal, appropriate state agency if the credit
4Alaska 4Iowa 4Massachusetts 4North Dakota 4Oklahoma 4Wyoming
That being said, some of these
The other challenge will be the actual
license or certification in these states.
appraisers might not have a valid
the various state agencies. As we all
The other challenge in reporting to
have the number of resources needed
most creditors, brokers, AMCs and
know, most state agencies do not
to effectively enforce regulation and
investigate enforcement issues within their states. This was addressed in
an open letter from the Association of Appraiser Regulatory Officials
(AARO) to Chairman Christopher
Dodd on June 14, 2010 (aaro.net/pdf/ SenatorDodd.pdf).
It should also be noted that per
the appropriate state agency is that servicers operate on a national level
in all American states and territories.
Currently there is no consistency in the reporting criteria for each state, and
these national companies do not have
the resources to keep up with all state and territory reporting requirements.
Some examples of the differences between states
the Appraisal Subcommittee State
are still a number of states that operate
4Texas Two copies of the
Operations and Requirement, there on voluntary license/certification programs.
appropriate complaint form as well as any documents that assist the board need to be compiled and submitted.
Voluntary status is outlined as follows:
4California A five-page complaint form with detailed information and data needs to be filled out and
Certified/licensed appraisers not required
for any appraisal/evaluation assignments. 36
agreements, closing statement,
There is also an issue on disciplinary
2011. With so many appraisals being
reporting of these occurrences to
form and any judgment/civil lawsuit.
mandatory for all applications received
application was dated before April 1,
checks (front and back), lease/rental
correspondence, agency disclosure
Final Rule, states that compliance is
does it have to be reported to the
limited to: sales contract, canceled
repair bills, monthly statements,
Compliance Date in the Interim
principal dwelling to have been
documentation including but not
multiple listing printout, appraisals,
item V, Effective Date and Mandatory
“material failures which contributed to
must be submitted, along with
4Florida A complaint form
states simply fine the appraiser, and others do both.
State agencies have been given access to grants through higher fees paid to the Appraisal Subcommittee by
appraisers and AMCs. We can only hope that the states will be able to
properly staff and respond to these changes. Only time will tell if state agencies will see an increase in
reporting and if there will be any consistency in enforcement and
disciplinary actions if violations are uncovered.
State appraisal agencies as well as the
ASC have to make sure that appraisals reflect the actual value of a property.
Most good appraisers, AMCs, brokers and lenders have no issue with the
tighter rules – most have been doing
it right for many years. Unfortunately, after the financial meltdown, we will
all need to “do it right” to bring back confidence in the market.
Here’s hoping that through a
combination of more consistent appraisal practices, increased
enforcement, education and some
long-needed economic good news, the housing market will soon once again be the engine that drives our economy. 6
Peace-of-mind is just one of the advantages we offer. In addition to our unsurpassed real estate appraiser E&O program, we offer coverage for: AMC Professional Liability (E&O) coverage, worded by LIA specifically for AMCs Bonds for appraiser client contracts and state regulatory AMC requirements – extremely competitively priced General Liability coverage for real estate appraisers including additional insured options required by HUD and other clients E&O insurance for high risk real estate appraisers Health insurance for appraisers and their families through the same exclusive program endorsed by the AMA for its 400,000 physician members – includes 3-year rate guarantee options
n n n n n
LIA’s products are in response to requests made by real estate appraisers and other valuation professionals, seeking to meet the day-to-day challenges of the appraisal industry. In addition, LIA remains to be the leader in loss prevention and appraiser liability education.
For more information, visit our website at www.liability.com, or contact: Robert A. Wiley, Asst. V.P. firstname.lastname@example.org, 800-334-0652, Ext. 128 Peter Christensen, General Counsel email@example.com, 800-334-0652, Ext. 148
Serving the Appraisal and Valuation Industry since 1977
LIA Administrators & Insurance Services 16oo Anacapa Street, Santa Barbara, CA 93101 Ph: (800) 334-0652 Fax: (805) 962-0652 www.liability.com
JUNE 2011 LIVEVALMAG.COM firstname.lastname@example.org
CA License #0764257
The Dodd-Frank Issue Di s p u te Re solu tion
D isput e Resolut io n
D isput e Re s o lu tio n
D i s p u te Re s o lu tio n
D i s p u te Re s o lu tio n
There Are No Dumb Questions? The new bill says questions can be asked.
Dispute resolution is a complex topic that is full of land mines for appraisers, lenders and AMCs. The purpose of this article is to clarify and simplify the subject of dispute resolution so that appraisers can feel safe as they follow new guidelines.
On the other hand, appraisers will try to “hide” behind recent regulations:
Dispute resolution has always been a challenge for
“How dare you question my value? I’m
trying to get me to change my value.”
Before we look at recent regulations
Appraisers are becoming overwhelmed
acknowledge that dispute resolution
starting to ‘feel pressure’ that you are
with the number of changes in the
industry. We have more regulations and changing interstate guidelines,
and more analysis is required on every
It is no wonder appraisers are angry
report. My heart goes out to the sole
Many appraisers feel that they simply
up on all these challenging changes;
they are asked to provide 10; if they
like a secondary goal. Fortunately,
comps, they are asked to discuss the
often have chief appraisers; smart guys
appraisal fees and the tendency of
safe by carefully monitoring all the
report and nitpick appraisers with silly
resolution is on the short list of things
that impact dispute resolution, let’s has always been a struggle for
appraisers. This will never change. My grandpa started Forsythe Appraisals
71 years ago and I contend that dispute resolution probably caused him hair
when it comes to dispute resolution.
proprietor appraiser who needs to keep
can’t win. If they use eight comps,
earning a living must sometimes feel
carefully explain why they selected the
those of us with larger appraisal firms
comps they didn’t use. Between lower
that can keep an appraisal company
AMCs and investors to tear apart every
moving parts of our industry. Dispute
In fact, they don’t even want to be
requests for more addenda, how does
causing stress in the appraisal industry.
reputation for being stubborn and bull-
an appraiser make a sustainable living today? 38
loss (he was bald by the time I was
born). There are a number of reasons
why appraisers have always struggled with dispute resolution.
Appraisers don’t want to admit when they are wrong
questioned. Many appraisers have a
headed. On the other hand, I contend
that appraisers are courageous. Every
time they do an appraisal, they put
decisions when it was time to “fire a
their conclusions are wrong, they could
I’m guessing most readers heard
their neck on the chopping block. If
It is understood that the appraiser
client” in order to stay ethical.
must always have control over the
lose credibility and their reputation
statements similar to this from a
dispute resolution response. To share
could lose a good client and future
you give great service and
could be damaged; if this happens they business. An appraiser could even be
put on a “do not use” list (a black hole for appraisers).
We are human and we make mistakes. We need to teach appraisers that it’s
OK to be wrong. We remind them that we are already “sold on them” or they would not be working for us. When someone questions an appraiser’s
analysis or the quality of the appraisal,
appraisal and to have final say in the
mortgage broker: “We love you guys, great quality, but this
you’ve ‘come in low’
going to work with you anymore.” Thankfully
these conversations seem to be a thing of the past.
The appraisal industry is still
at our company: Forsythe
is the second deal
this month so we’re not
an idea that has been very successful
It is no wonder
when it comes to dispute
a healthy balance
spend too much energy supporting
While we all celebrate
been a lot quicker to take a fresh
industry is better when
is too short. We have seen appraisers a shaky analysis when it would have look and respond in a detached, professional manner.
Even after a thoughtful analysis and
thorough support, good appraisers will sometimes be wrong. This was true 71
years ago and it is true today. Forsythe Appraisals, like good appraisal firms everywhere, is committed to ethics
and quality. However, one of our core values and beliefs is “We are human and we make mistakes”.
The appraisal is a critical step in the
underwriting process and developing a
the fact that the
an appraiser can give
feel that they simply can’t win. If they
undue pressure, we still
provide 10; if
need to have a process
they carefully explain why they selected the comps,
additional support or a
they are asked
crying foul or claiming
better analysis without
to discuss the
they’re being pressured
to change their value.
appraisers have a tendency to be bull-headed and will
find data that supports their
original opinion. Sometimes
opinion of value with no
to ask for clarification, or
works in the same
respects. Even the best
are asked to
that a client has the right
another appraiser who
peer that the appraiser
Let’s start by agreeing
resolution process. Our
feedback from an unbiased
for dispute resolution.
as part of our dispute
neighborhood to provide
attempting to find
participate and invite
We are all too busy, and frankly, life
is very effective to do a
chief appraiser will
let’s not waste time being defensive.
Appraisals found that it
a peer taking a fresh look is beneficial.
We at Forsythe Appraisals have also found that it is helpful to send the
client our Appraisal Data Concerns Request. This
provides a structure for the
client to provide their input and concerns in writing.
The readers are welcome to use this document.
If we want better dispute
professional and ethical way to handle
Let’s also agree that it is human nature
resolution, we are going to need
process is going to work.
the opinion that he or she worked so
industry, underwriters, appraisal
dispute resolution is important if that
Less pressure since HVCC Clients have always questioned
appraisals and until HVCC, mortgage brokers were often very aggressive in their attempts to pressure appraisers to change their value. Most good
appraisal firms have occasionally made
for an appraiser to find support for
hard to support in the first place. Part
of being a professional is being honest and willing to admit when we are
wrong. We owe it to the borrower, the
loan officer and the bank to effectively and professionally participate in the
dispute resolution process and to admit when we are wrong.
participation from the appraisal
management companies and Wall
Street investors. Everyone agrees that there are too many “touches” and
too many addendum requests. The
redundancy borders on the ridiculous.
Any good appraisal firm has a real live human being do a line-by-line review
as part of their internal quality control process. The appraisal then >> JUNE 2011
* LIVEVALMAG.COM | 39
Here is how to do it APPRAISAL DATA CONCERNS REQUEST
The proper response for effective
DATE: LENDER/CLIENT: INQUIRER’S NAME/TITLE: TELEPHONE: EMAIL: FILE or ORDER NUMBER: BORROWER: SUBJECT ADDRESS:
dispute resolution is to include an
analysis that explains why you feel
different sales or different adjustments to the original appraisal would lead to a more accurate value estimate.
The key is to provide a thoughtful
If you find material discrepancies in the appraisal report and you can supply information to Forsythe Appraisals that indicates an Appraisal Data Concerns Request is appropriate, please provide that relevant information below. Please note: In order to ensure the appraisal was obtained in a manner compliant with Appraisal Independence Rules, no expression of value is to be communicated to the appraiser.
analysis of the data. For example,
if comparables used were from an
adjoining neighborhood, an analysis of MLS data may suggest that over
1. PHYSICAL DESCRIPTION Specifically note items felt to be inaccurately stated in the appraisal, what you believe to be the correct information and your source (i.e., tax records, blueprints, pictures, etc.).
the past two years, the neighborhood sold for 8 percent less than the
subject neighborhood. As a result, the indicated adjustments for the
2. COMPARABLE DATA Supply data for up to three comparable sales for consideration below (sales should be
neighborhood difference are $15,000.
Underwriters would welcome this type
at least as proximate and recent as used within the appraisal):
Address City Distance from Subject Sales Price Date of Sale Age Above Grade sq. ft. Basement # of Garages
of response from appraisers. It would be far more effective than simply
coming back with an endless number of comparables, none of which are
as meaningful as the ones that were originally used. Adding layers and
layers of more data, more comps, and
3. OTHER (Note objective, factual errors and what is believed to be correct.)
more current listings is not nearly as
effective as a thoughtful explanation of the appraisal analysis. gets sent to an appraisal management
so an appraiser has to do each report
Finally, the report is sent to the
many pages of instructions to the
Act is an attempt to level the playing
“boilerplate,” but if the appraiser does
It gives the SCC the broad authority to
meet minimum guidelines and they
arbitration agreements and to design
more frustration, and of course, more
satisfies the demands of investors
company where it is reviewed again.
investor and they do their own review. That’s three separate reviews; each time an individual is being paid to
pick apart the report and to question a beleaguered appraiser. To make
matters worse, each investor has their
own list of instructions to the appraiser
differently, and there are sometimes
Recent legislation in the Dodd-Frank
appraiser. Much of the instruction is
field to litigate disputes with brokers.
not read it carefully, the report will not
prohibit or limit the use of mandatory
will fail. The result is more addenda,
a dispute resolution mechanism that
for fairness as well as the desire of
industry participants to arbitrate rather than litigate in court.
Per the Dodd-Frank Wall Street Reform and Consumer Protection Act, any person with an interest 40
in a real estate transaction can ask the appraiser to provide a response to one or more of the following:
4Request that the
errors in the
detail, support or
explanation for their
4Request that the
A dispute resolution policy
policies for a dispute resolution process
for your appraisal firm
Recently, TAVMA, the (Title/Appraisal
â€˘ A ppraisal firms should encourage their appraisers to make reports of inappropriate contact on the part of clients to appropriate regulatory authorities.
Vendor Management Association), wrote a list of policies that a good
AMC should follow. I feel that with
some editing, this list is applicable for
appraisal firms. Following these bullet points is a good start for a dispute
resolution process for an appraisal
â€˘ A ppraisal firms should spell out what actions on the part of their clients are not acceptable and would result in a decision to terminate a business relationship with that client.
Because appraisers are human, dispute resolution will never be easy. An
appraiserâ€™s fears and insecurities will always be a challenge. In addition, the clientâ€™s requests often seem
unreasonable and silly; following a
â€˘ A ppraisal firms should only utilize dispute resolution processes outlined as part of an agreement with their appraisers.
thoughtful and well-defined dispute
resolution process structure eliminates some of the frustration and keeps appraisers safe. 6
â€˘ Appraisal firms should attempt to resolve disputes through an internal rather than public process whenever possible. â€˘ Appraisal firms should ask clients to provide written notice to their appraisers if they are subject to possible removal from an approved appraisal panel. â€˘ Appraisal firms should permit any of their appraisers who have been identified for possible removal from a lenderâ€™s panel to respond in writing.
Weâ€™re Hiring. Join Us! TSI AppraisalÂŽ is hiring 200+ staff appraisers to supplement its existing appraisal
numerous open staff appraiser positions. Our focus is on major metropolitan areas in the following markets: Alabama, California, Colorado, Connecticut, Georgia, Indiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New York, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Virginia, Washington and Washington D.C.
877.762.5342 tsiappraisal.com TSI Appraisal 1450 W. Long Lake Road, Suite 400 Troy, MI 48098
* LIVEVALMAG.COM | 41
The Dodd-Frank Issue B pos & avm s
Bpos & avms
Bpo s & avms
Bpo s & avm s
Bpos & avm s
Bpos & avm s
Bpos & avm s
Valuations Other Than Appraisals Dodd-Frank says BPOs and AVMs have their place.
“No tree grows to Heaven.” - Ancient Persian proverb
alternatives to business as usual and
are demanding valuation techniques and approaches that deliver greater
Innovation was needed; efficiency was imperative.
In a meeting with the Federal Home
efficiency and reliability.
The Real Estate Valuation Advocacy
Doug Lovell commented prophetically
Dodd-Frank anticipates valuations
by innovative real estate valuation-
tree grows to the sky.” He was referring
credibility to Automated Valuation
values which ultimately lead to the
Opinions (BPOs). The law allows
1990s. I’ve always remembered that
than origination loans on a primary
given the prediction it unveiled.
BPOs rose to prominence during the
Today we have our new or latest
facility to meet the need for valuation
has played a central role in facilitating
mortgage delinquencies. Financial
Not surprisingly, collateral valuation
need to adapt to changing regulatory
hopeful recovery underway. But this
criteria. The record is that the old ways
investors and regulators are looking for
to be inadequate in their great test.
Loan Bank Board officials in 1986,
to those of us in attendance that “no
other than appraisals as it gave
to the dramatic increase in real estate
Models (AVMs) and Broker Price
collapse of the “Thrift Industry” in the
BPOs to be used in transactions other
observation, albeit with mixed feelings
residence. Even before Dodd-Frank,
financial crisis, owing to their special
Association (REVAA) was formed related companies committed to improving the entire valuation
industry. These companies deliver alternative valuation services, as
well as appraisals, that address the
weaknesses revealed by the mortgagedriven financial crisis of 2008. REVAA
promotes high ethical and professional standards conducive to a flourishing
real estate valuation industry including
financial crisis and real estate valuation
services required by the surge in
the incredible escalation that occurred.
institutions increasingly realized the
From the outset, however, REVAA had
is playing an important part in the
requirements and due diligence
that, with its AMC members, it was
time around, financial institutions,
of doing things showed themselves
to address those who were convinced designed to lower the compensation of traditional appraisers, if not
eliminate them entirely. Dodd-Frank’s
k e l ly
and reasonable appraisal fees seem to some
The reality is that the
plot. The reality is that
the environment had changed. Efficient, reliable value and
price assessments are
in high demand. Bank
reliable value and price assessments are in high
rely on the efficient
institutions need and delivery of valuation services provided by
in today’s marketplace. Such efficiency benefits
demand. Bank and financial institutions need and rely on the efficient
financial institutions and
as it is the consumer
that pays for the various services attendant to any given mortgage transaction.
more work than they can handle. In
the situation to the
chagrin of the dedicated
professionals. Even without were overwhelmed by
demand they could not
meet fast enough. Consider the numbers. Only a tiny
companies in today’s marketplace.
States serve the crucial
residential market. In 2009, more than ten million
BPOs were called for to fill the pressing demands of
areas, where qualified
critical for buyers, sellers and lenders to fall through for the lack of timely valuation.
desired pre-determined value or lose
and alternative valuation products are especially useful in this work, deftly
identifying value trends and property
characteristics consistently and reliably. A static or even declining number of qualified appraisers have struggled
to meet the surging demand brought by the housing collapse. Inept or
shocks inevitably are producing a more varied array of valuation tools must
respond fast to an impatient market. There is no reason that AMCs, BPOs
and fee appraisers cannot all benefit by cooperating in a resurgent American real estate industry. It will take time
and experience for the marketplace to work things out, as it always does.
regulations as well as the demand in
must deal with the troubled assets,
losses rather than making gains. BPOs
need for time-sensitive
Appraisers have long complained
even though that amounts to cutting
expertise that well-qualified appraisers
With the recognition of alternative
finally revving up, the
to ensure that the disastrous mischief
of recent years cannot be repeated. We
responsibility mandates the kind of
generally. With activity
and delayed transactions
alike. No one wants a good transaction
but also on designing new processes
for the integrity of their products. This
but it bedeviled markets
eruption that engulfed the worldwide just on recovering from past disasters,
AMCs are responsible to their lenders
Advocacy for BPOs… State Activity
appraisers are spread thin,
alternatives becomes progressively
economy. We need to concentrate not
appraisers—to succeed in their work.
responsive marketplace, where a more
their way through a mountain of
toxic assets; debris remaining from an
credentialed, highly educated, ethical
appraisers in the United
licensed or certified
sparsely populated rural
fact, AMCs need good appraisers—
Our recent bad, though less violent
was especially acute in
appraisers often find themselves with
portion of the 100,000
the market. The shortfall
today are chipping
provoke the crisis in the
many of whom helped
the crooks, appraisers
agencies and financial
Far from facing extinction, good
conspiracy theorists to be part of this alleged
of pressures to “come in” with a
business. The recent legislation has
sought to contain such real abuse, but
valuation in federal law and
the marketplace, pressure for the states to refine outdated restrictions on BPOs
has increased. Enactment of the federal Dodd-Frank law has spurred the states to respond with their own regulations and legislative activity. REVAA
has developed and offered model legislation, which has influenced
many states in their consideration of
alternative valuation methodologies.
the pressure is often subtle and hard
Here is where matters stand at this
leads some to take alarm at the
state authorities realized that their
to prove. Perhaps that experience
implementation of the Dodd-Frank
mandates as unwittingly containing
another invitation for abuse. Yet, the reliance upon objective data makes
subtle skullduggery comparatively easier to document.
writing: Upon examination, many
codes were unrealistically outmoded, offering safe harbors for real estate professionals providing brokerage
related BPOs, but ignoring the issue regarding lien-holders and third
parties. Arkansas, Minnesota and >> JUNE 2011
* LIVEVALMAG.COM | 43
Mississippi responded with laws that
for lien-holders, and thirty-five others
as for lien-holders. The law lists the
of BPOs in most contexts other than
third parties or otherwise broadly
and provides rules for their electronic
adopt the Dodd-Frank recognition
as the primary basis for residential loan origination. New Mexico was considering a similar bill when its legislative session had to adjourn.
Only in Connecticut was comparable legislation killed in committee.
Nevada, in 2009, as well as Nebraska, in 2010, passed permissive BPO
legislation in advance of the federal
law, allowing BPOs for a wide range
of transactions unrelated to brokerage or listing purposes. Other states acted quickly in response to Dodd-Frank.
Thus, by the end of the 2011 legislative session, 43 states and the District of
allow for BPOs to be performed for
permit their use. Seven states provide for safe harbor protection for BPOs in a brokerage context, but are silent as
to their permissibility for lien-holders.
contents necessary for a valid BPO submission. The new Nevada law
clearly addresses the current needs of the market relative to valuation.
One factor in this diversity is that
State legislative sessions are usually
the financial crisis magnified the
year. Nonetheless, states will continue
most state laws were enacted before importance of BPOs. The real estate
crisis of the 1980s prompted licensing
for appraisers but that system proved inadequate to address or anticipate
the current mortgage meltdown. The
Dodd-Frank current-crisis legislation
and new state laws reflect awareness of the use of BPOs in a restructuring real
short. Some occur only every other
to respond to the need to adapt, and as the opportunity unfolds, those
state legislatures that have not already modernized their regulations will be well advised to consider the Nevada
approach. Clearly, the tide is running
in favor of broad acceptance of BPOs.
The Dodd-Frank landscape; the success
sanctioning or allowing BPOs for
One of the states hardest hit by the
crisis and draining the toxic swamp;
purposes. Broad recognition of the
responded promptly to ensure that
Columbia will have laws broadly
lien-holders, third parties and other utility of BPOs and similar instruments obviously resonates throughout the nation.
State laws vary in details. No states have authorized BPOs as the sole
basis of value in loan origination yet; and, the current demand is on the â€œservicingâ€? side of lending where
BPOs are most useful. Nine states
explicitly allow BPOs to be performed
435 States Broadly Allow for BPOs: Alabama, Alaska, Arizona, Colorado, District of Colombia, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, New Hampshire, New York, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin
mortgage crisis was Nevada, which the outdated law did not retard its recovery. Eager to meet the crisis,
the Silver State did not wait for the
federal statute. Effective since 2009,
the stateâ€™s broadly permissive revised law authorized licensed real estate professionals to prepare BPOs for
existing or potential buyers and sellers of real property, for third parties
making decisions or performing due
diligence for potential listings as well
49 States Allow BPOs for Leinholders: Arkansas, California, Hawaii, Minnesota Mississippi, Nebraska, Nevada, New Jersey, Oregon
BPOs enjoy in addressing the mortgage and the precedents in various states
offer a strong impetus to reformers in
those states where pre-crisis laws have yet to be amended. REVAA continues
to work constructively with real estate professionals, financial institutions,
consumer groups and other interested
parties in the 2012 legislative sessions. Updated and modernized state laws
sanctioning realistic and appropriate
use of BPOs are needed to help emerge from our current mortgage crisis. 6
47 States Provide a Safe Harbor for BPOs in Brokerage Context: Connecticut, Delaware, New Mexico, North Carolina, Pennsylvania, Rhode Island, Wyoming
BPO Information by State
Earn Your Residential Accredited Appraiser (RAA) or General Accredited Appraiser (GAA) Designation and Show Your Customers Exactly What You’re Worth. What Is Becoming an NAR Designated Appraiser Worth to You?
Residential Accredited Appraisers (RAA)
• The opportunity to build a more selective client base
and General Accredited Appraisers (GAA)
• Marketplace positioning as an appraisal expert
are the only designated appraisers backed
• Sound credentials backed by the strength and tradition
by the strength and tradition of the
of the National Association of REALTORS
National Association of REALTORS®.
• Access to information via the largest concentration of real estate material in the country • More referrals from an expanded network of colleagues
To find out how to become a RAA or GAA designated appraiser, visit realtor.org/appraisal.
* LIVEVALMAG.COM | 45
VOICES OF VALUATION
VOICES OF VALUATION Last month’s articles sparked a lot of debate. Here are some responses from our readers.
The Hunt for Credibility
“Good article. Had a lot of good reminders that many of us have either forgotten, slipped out of their use, or just didn’t think about it. I’ve gone back into my templates and entered note blocks for myself to make sure I address the simple things that you mentioned that can keep me from conditions later. Nice job of summarizing.” - mallen
do you have something to say?
The Key to Local Search Marketing
“Thanks for the great tip. I saw the mapped listings so many times and was never sure how it all got submitted. In a week or so I should have my own places listing thanks to you.” - phil kline “Great article Bryan. Now please don’t talk about this anymore business is tough enough as it is... shhhh!” - terrenence P. kelly
Best Practices - Working with AMCs
“The reason for the new forms is so it can be scanned and read by a computer program. You won’t have underwriters anymore and the whole business is gone. Appraisal Management Companies have done this and the appraisers have let them. If anyone is left they will be form fillers. I think the lenders and their clients should realize that they will get what they pay for and nothing else. Of course the appraisers have been working for nothing for a long time.” - gerryc_2000 46
LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM
an aircraft parked on the front lawn to a run-in with a bear, appraisers come across many photo-worthy sights on a day-to-day basis. We are
bringing back the section Things Appraisers See to feature your personal bear and aircraft moments. So shoot us your photos at email@example.com or simply log on to our website to upload them under Things Appraisers See and look for them in an upcoming issue.
david hoffer claudia conger JUNE 2011
* LIVEVALMAG.COM | 47
march highlights 2011 alaska
+3.5% West Virginia
Including distressed sales, the five states with the highest appreciation were: West Virginia (+7.7%), North Dakota (+4.1 %), New York (+3.5%), Alaska (+2.4%) and Maine (+0.4%).
Including distressed sales, the five states with the greatest depreciation were: Idaho (-13.3%), Arizona (-12.3%), Michigan (-11.9%), Florida (-10.6%) and Illinois (-10.6%). alaska
-6.6% new york
Excluding distressed sales, the five states with the highest appreciation were: West Virginia (+11.5%), New York (+4.5%), Mississippi (+4.4%), North Dakota (+4.1%) and Alaska (+4.0 %).
Excluding distressed sales, the five states with the greatest depreciation were: Nevada (-8.9%), Idaho (-8.8%), Arizona (-6.6%), Maine (-6.6%) and Minnesota (-5%).
march HPI for the Countryâ€™s Largest Core Based Statistical Areas (CBSAs):
| Cbsa |
march 2011 12 month hpi changed by cbsa
Phoenix-Mesa-Glendale, AZ -12.0%
Atlanta-Sandy Springs-Marietta, GA -11.1%
Chicago-Joliet-Naperville, IL -10.5%
Los Angeles-Long Beach-Glendale, CA
Riverside-San Bernardino-Ontario, CA -3.3%
Houston-Sugar Land-Baytown, TX -2.7%
Philadelphia, PA -2.6%
Dallas-Plano-Irving, TX -1.8%
New York-White Plains-Wayne, NY-NJ
Pro Teck Valuation Services
Michael Vincent John Spaziani
LIA Administrators & Insurance Services
Quality Valuation Services
Metro-West Appraisal Co., LLC
Relocation Appraisers and Consultants
Weichert Relocation Resources
Genworth Financial 800.334.9270 genworth.com
Stage Capital, LLC
* LIVEVALMAG.COM | 49
FOR WHAT IT’S WORTH
FOR WHAT IT’S WORTH
This law was passed subsequent to the
achieved, experience, sample appraisals,
Licensing and Certifications to combat
Membership in a nationally recognized
Federal Government requiring State
the public’s perception that appraisers were not educated enough and lacked supervision from the government.
Although both the Federal and State Governments passed these laws,
discrimination continued within the appraisal field. Federal and State
Governments and their subsidiaries such
Michael Vincent John Spaziani
with designations extra points on their applications to do business with them.
Review appraisers, who most likely were designated members of the Appraisal
Institute, would in turn give preferential job opportunities to their members (MAIs).
Appraisers who were not designated consistently complained to these
government entities and placed pressure on these groups to stop the blatant
assignment under these criteria.’’
So there are some questions that remain unanswered:
decade and now it’s not?
government requires in order for
appraisers to perform assignments, such as additional education,
experience, etc., that are offered by the organizations, then why aren’t these factors part of the licensing of the appraisal profession?
3) H ow can government agencies
and banks regulate the appraisal
requirements when the government does not have oversight of these
independent appraisal organizations?
discrimination. Numerous calls to the
There are thousands of independent
were often fluffed off by the attorneys
members and believe this is a blatant
FDIC describing this discrimination
the appraisers wanting to perform the
appraisals were often eliminated from the Banks’ appraisal lists.
of the Federal Reserve System passed
The new Dodd-Frank Bill was recently
that, “Financial institutions may
“CONSIDERATION OF PROFESSIONAL
from consideration for an appraisal
Section 1122(d) of the Financial
lacks membership in a particular
Enforcement Act of 1989 (12 U.S.C.
hold a particular designation from an
not exclude’’ and all that follows through
the following: ‘‘may include education
SR92-13, which specifically states
passed in July 2010; page 823 states
not exclude a qualified appraiser
assignment solely because the appraiser
Institutions Reform, Recovery, and
appraisal organization or does not
3351(d)) is amended by striking ‘‘shall
appraisal association, organization, or
the end of the subsection and inserting
sole bar against consideration for an
2) I f there are important items that the
quoting the discrimination, and in turn,
of membership therein shall not be the
Internal Revenue Service, Department of
they would send an email to the banks
be a criteria considered, though lack
1) W hy was it discriminatory for over a
Protection, Water Management Districts,
who represented them. In some cases,
In April 1992, the Board of Governors
professional appraisal organization may
as the Department of Environmental
Transportation and Banks gave appraisers
Dodd-Frank Bill HR 1473 Promotes Discrimination
and references from prior clients.
appraisers who were once designated display of discrimination. They have all worked hard, obtained college
degrees, satisfied the required appraisal classroom hours, and passed their work experience as well as a State
Certified test. The government lending
institutions are adding additional points for designations even though this was a
form of discrimination and punishable by law for over a decade. The Dodd-Frank
Law should be repelled to represent the proper appraisal qualifications and to
exclude any mention of designations in
the bill unless the government is willing
to oversee these private organizations. 6
Appraisers: Make compliance laws work FOR you not AGAINST you
Start your own AMC today. eTrac Enterprise Edition is a hosted, ready-to-use business-in-a-box appraisal management solution that gives independent appraisers everything they need to start operating as an AMC-all in as little as 24 hours. Custom designed specifically for AMCs, eTrac Enterprise streamlines and manages the entire appraisal process, from the initial request to MISMO-formatted delivery and everything in between.
• Workflow Management • Automated Compliance Safeguards • Automated Reviews • PDF - MISMO Conversion
• Network of Appraisers • ASC.gov License Validation • Automated Appraiser Scoring • State Regulation Validation
1816 West Point Pike, Suite 210, Lansdale, PA 19446
Visit us at www.e3amc.com LIVEVALMAG.COM | 51 or *call 1-877-891-2620
Need a new angle on sketching? ACISketch™ is newly enhanced to include features appraisers asked for. Create professional floorplans in minutes using ACISketch’s dynamic tools. Use your mouse or keyboard to quickly draw a floorplan and automatically calculate the total area and perimeter of the property. Sketches import directly into appraisal reports and measurements automatically populate the forms. It’s just that easy!
now $ only
Call ACI Sales Today!
Complete Area Tool
Auto-close your sketch using the F9 key.
Unit of Measure Trace scanned ﬂoor plans with Photometrics.
Switch between standard feet or inches and standard decimal or metric units, quickly and easily
ACI and its products are trademarks or registered trademarks of ACI. | Copyright © 2011 ACI | Other brand and product names are trademarks or registered trademarks of their respective owners.