Neutral Valuation jonathan j. miller, CRE, CRP
INSIDE this issue
An Industry Veteran Says Farewell By David Feldman
The Cost of Not Doing Costs By Crispin Bennett
Owning Up to Professionalism By Jordan Petkovski
+ New Photos
in Things Appraisers See
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SEPTEMBER 2011
* LIVEVALMAG.COM | 3
co nten ts | contents |
Feature
24
Neutral Valuation Allowing appraisers to provide the service they were built for.
It is time for experienced appraisers to look for greener pastures because most retail mortgage work doesn’t require much valuation experience – in fact experience is specifically shunned by the requirements that are adhered to in the AMCdominated world.
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$
Publisher’s note
THIS WAY IN.....
On July 21, 2011, at 5:57 a.m. Eastern Daylight Time, the last space shuttle landed safely at the Kennedy Space Center after 30 years of service. The touchdown of Atlantis
brought the space shuttle
program to an end after decades of successful
A letter from the Publisher
research and exploration. All shuttles in the fleet were retired because they had met the end of
their technological usefulness. The future of space exploration will depend upon new and safer
Throughout the years of the space shuttle program I have used the URAR form for most of my
mortgage appraisal reports. Like the space shuttle, it has been a workhorse, but I think it’s time to
retire it as well. As with the space shuttle, it has
reached the end of its technological life. Sure, there
have been changes to it over the years and sections added to it, but nonetheless it is dated and needs to be retired.
By the time you receive this magazine, many of
you, if not most, will have had some experience
delivering reports with the new UAD standards (the deadline is September 1, 2011). You will
have dealt with the unusual abbreviations and nomenclature needed for most of the required
fields. Why are these required? Because they have to fit inside of the limited and antiquated field
technology.
lengths of the URAR form!
The GSEs are the publishers of the URAR.
When they introduced the requirements of the
meet the team
Uniform Appraisal Dataset (UAD), they had
the opportunity to reinvent and modernize the 1
appraisal form as well. Instead we are saddled with abbreviations and codes shoehorned into
spaces for which they were never designed. The
result is a less readable and potentially misleading
1. Publisher | Ernie Durbin II, SRA, CRP
reporting format. I am concerned that while UAD
2. Editor-in-Chief | Emily Vannucci 3. Copy Editor | Kersten Wehde
2
may facilitate better data collection, it does not
add to the credibility of the report, and it adds to appraisal production time.
4. Creative Director | Traci Knight 5. National Sales Rep. & Marketing Coordinator | Kate Sheehan
We find references in almost every section of Printer | Ovid Bell Press
3
Advertising Information | P : 858.832.8320 | E : kate@livevalmag.com
results. Will complying with the UAD mandate
add to the credibility of a report? I don’t think so.
Subscription | info@livevalmag.com
Appraisers who have been doing their job will
Editorial | ernie@livevalmag.com | emily@livevalmag.com
continue to do so, and those who have been cutting
Web | LiveValMag.com 4
corners will do so with new abbreviations.
We look forward to hearing from our readers about
© 2011 LiveValuation Magazine. All rights reserved. LiveValuation Magazine is a California limited liability company and is the publisher of LiveValuation Magazine. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in article and advertisement herein are not necessarily those of LiveValuation Magazine, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, LiveValuation Magazine is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only. Postmaster : Please send address changes to LiveValuation Magazine, 16745 W. Bernardo Drive Suite 450 San Diego, CA 92127
USPAP that relate to credibility and credible
their experiences implementing the new UAD
standards. You can email us at info@livevalmag.com 5
or leave comments on our Facebook page at facebook.com/livevaluationmagazine.
We will report on your comments in our October issue. 6
| Publisher |
Ernie Durbin II, SRA, CRP SEPTEMBER 2011
* LIVEVALMAG.COM | 5
UAD proves one thing: All technology vendors are not created equal. Other appraisal tech vendors left appraisers, lenders, and AMCs stranded with lastminute UAD solutions that crash, are costly, aren’t scalable or deployable, and don’t solve the connectivity and workflow issues of UMDP overall. Our development, support, and infrastructure superiority are obvious in times like these. You can’t solve complex workflow problems using outdated technology and a sales pitch. To roll it out effectively, support it 24x7, and prevent massive bottlenecks in the system, you have to spend the money over the long term and create a culture adept at handling exponential increases in complexity. We live that culture. With more desktop clients than all of our competitors put together, and tens of thousands of transactions every day through our appraisal management system, we don’t just “wing it”. This deadline showcases the difference that makes. Our appraisal formfilling customers, for example, have had UAD functionality since April, giving us ample time to listen, educate, and evolve. Other vendors, even in August, either haven’t yet delivered a fully functional version or they’re crashing appraiser’s systems. Complicate that by customer revolt over pricing irregularities, along with smoldering dissatisfaction over missing productivity tools (“Why can’t I gather data on an iPad or Android™ tablet like they can?”), and you have chaos. Our Mercury Network UAD/UMDP solution for lenders and AMCs stands head and shoulders over the competition for the same reason. With Native XML delivered by real workflow-centric plugins, extracting data from cranky PDFs isn’t ever necessary. And it doesn’t rely on cobbled-together solutions with converters layered on top of viewers on top of isolated websites. Data flows seamlessly from appraisers to lenders and AMCs, and vice versa, and on to the GSEs via built-in UCDP integration. It’s a superior solution for every size client, and for appraisers. If you’re an appraiser, note that our forms software, including the UAD, is free right now. If you’re an AMC or lender, most of our Mercury services are also free. But don’t switch to us because of short term savings. Switch because even though your technology may change over time, your tech vendor’s culture probably won’t. That’s a long term liability you can’t afford. 6
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We’re a better vendor, with better resources, and a better cultural ethic, proven over decades. Switch now. Get our solutions for free. Reap the benefits forever. 1-800-ALAMODE www.alamode.com Offer expires September 30th
AD CODE: MALVWT0911 a la mode and its products are trademarks or registered trademarks of a la mode, inc. Other brand and product names are trademarks or registered trademarks of their respective owners. All prices, terms, policies, and other items are subject to change without notice. Copyright ©2011 a la mode, inc.
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& Table of contents 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
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LVM09.11
16
Departments
18
30
Up Front
Inside This Month
14 Best Practices
24 Neutral Valuation
Maintaining your workfile.
Allowing appraisers to provide the service they were built for.
fran k k. g re goire , ifa, raa
J onat h an j. miller , cre, crp
16 The Chief Says
5 Publisher’s Note
30 Back to the Basics
Lost in translation.
Considering all the approaches to value.
bi l l waltenbau gh , SRA
8 Contributors
crispin bennet t
18 Women Earn More Money Than Men
10 Staiger on Stats 44 Things Appraisers See 46 Voices of Valuation
36 Professionalism: Own Up to It
A lesson from Granny still rings true today.
Doing what you need to even when you don’t want to.
ro g er staiger III
jordan pe t kovsk i
20 The Hot Seat
40 “Off to the Dogs”
Featuring Chuck Mureddu
An industry veteran retires after three decades.
E V P of business
49 CoreLogic Stats
devel opment f or Qu alit y
david f eldman
Val uation S ervices
50 Directory
LVM’s
up close + SEE PAGE 44
for strange and unusual things appraisers see in the field.
Don’t Miss This...
Finally, the death knell: “The appraiser asked if he could use my computer to pull comparable sales because his Internet was, and I quote, ‘F’ed up.’” - page 37
september 2011
cover
Neutral Valuation
Allowing appraisers to provide the service they were built for.
24
SEPTEMBER 2011
Neutral Valuation jonathan j. miller, CRE, CRP
INSIDE this issue
effects of the new compensation guidelines By Joshua Shein
PR TIPS on a budget By Justin Meise
5 ways to build your network By Timothy A. Sherman, Esq
* LIVEVALMAG.COM | 7
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The contributors
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40
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Crispin Bennett serves as Vice President of Collateral Risk/ Chief Appraiser at First Citizens Bank. His long time career within the industry has created a unique and wellrounded perspective in lending, governance, and collateral risk management.
David Feldman has worked in the real estate valuation industry for 29 years. He served in many positions in the valuation division of First American / CoreLogic including chief appraiser, head of operations and president. In the past few years, he has focused on valuation industry issues, regulation and compliance. He has served on the Board of TAVMA (Title Appraisal Valuation Management Association) and was one of the founding members of REVAA (Real Estate Valuation Advocacy Association). David is an attorney, an SRA, and has an extensive background as a writer, public speaker and teacher. davidfeldman26@gmail.com
Francois (Frank) K. Gregoire, is a former member and Chairman of the Florida Real Estate Appraisal Board and the current Chairman of the NAR Appraisal Committee. He provides valuation, expert witness and consulting services for a wide variety of local and national clients. Articles by Frank Gregoire have been published in REALTOR速 Magazine and the Journal of Property Economics. In his quest to improve the profession and keep folks informed, Gregoire authors Appraiser Active, an appraisal-themed blog.
David feldman
Crispin Bennett
Bennett is recognized as a subject matter expert actively involved in leading industry groups. He is a prominent instructor and a frequent contributor on industry panels, and has authored various articles and bulletins promoting innovative appraisal solutions and minimizing collateral risk.
frank k. gregoire, ifa, raa
contr tors | contributors |
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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 three 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
A state-certified real estate appraiser, Jonathan Miller has been providing appraisal services in the NYC metro area for 25 years. Miller authors a series of market reports covering the NYC, Washington, D.C., Baltimore, Miami and Las Vegas metro areas that are relied on by the media, financial institutions and government agencies. Miller was named “Best Online Real Estate Expert” by Money Magazine and was recognized by Inman News as one of the most influential real estate bloggers in the U.S.
Jordan Petkovski has worked in the residential appraisal industry for most of his career. Currently, he is the Director of Staff Appraisal Operations at TSI Appraisal Services®, a wholly owned subsidiary of Title Source®. Petkovski’s primary focus is the successful development of operational processes based upon a greater understanding of the industry as a whole.
Roger Staiger III is Managing Director for Stage Capital, LLC. His areas of expertise are commercial and residential real estate portfolio investing, corporate business; and strategic planning, forecasting, valuation, financial modeling, asset repositioning and risk mitigation through financial hedging for physical assets. He holds positions at Johns Hopkins, Georgetown, and Loyola universities. rstaiger@gwmail.gwu.edu
chuck mureddu
jonathan j. miller, cre, crp
ROGER STAIGER III
Jordan Petkovski
ribuBill waltenbaugh, sra
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Bill Waltenbaugh is the Chief Appraiser at Kirchmeyer & Associates, Inc. a national appraisal and valuation company. As a certified appraiser with more than 20 years of appraisal experience, Waltenbaugh has witnessed and experienced firsthand the many changes that have significantly reshaped the appraisal landscape, from the advent of licensing to the implementation of HVCC. Waltenbaugh also holds the SRA designation with the Appraisal Institute and is active in both regional and national professional organizations.
SEPTEMBER 2011
* LIVEVALMAG.COM | 9
Staiger on stats
STAIGER on STATS Industry’s latest stats
Roger Staiger III
quoted in spreads, i.e., the delta between the risk-free rate and the stated rate for the given index. All borrowing is based on a target riskfinance has been free rate, generally shaken to its core a U.S. Treasury rate. and while the Even LIBOR, an media talks of international floating debt ceilings, the metric, is quoted as cornerstone for a standard spread modern finance Through its from the U.S. federal is crumbling, immaturity, funds rate. The U.S. possibly beyond mortgage market is Congress has repair. At the most more than $10,000bn, rattled global basic level, finance which translates to a economics and is about capital, basis point adjustment, e.g., money. called into i.e., one one-hundredth In 1971 Nixon question the of a percent, costing removed the U.S. cornerstone of $1.0bn. Congress is from the gold ALL of finance, playing with real standard which money, not Monopoly i.e., the riskessentially backed money, and the free rate (U.S. the value of the consequences are U.S. dollar by the Treasury). being shouldered by belief and faith in the U.S. worker (the the government. average U.S. private sector worker Through its immaturity, Congress earned approximately $40,000 has rattled global economics and last year, while the starting salary called into question the cornerstone of a congressman is $174,000, of all of finance, i.e., the risk-free or 4.5 times that of a private rate (U.S. Treasury). sector worker). To put the salary differential in better perspective, Interest rates – whether they’re the 2011 deficit, $1,500bn, costs the U.S. domestic or global – are average private sector worker 20 percent of his gross annual salary, and it costs a congressman 4.6 percent of his gross annual salary. Who makes the decisions and who lives with the consequences?
Where does one start with economic data in today’s environment? The world of
By publication of this article the debt crisis will have been solved (presumably). My predictions are that the debt ceiling has been raised and a cohesive spending 10
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reduction has not been fully settled. Does this solve any issues? No! Has the economy become healthier? No! It just allows the U.S. to become an even greater debtor nation at the expense of future generations. The irony is that perhaps the U.S.’s actions have been Machiavellian in nature rather than in substance. It was Machiavelli who said it is more important for a prince to appear virtuous than for a prince to be virtuous. More troubling statistics come from Clear If the health of the U.S. Capital with regard to real estate-owned (REO) economy is portrayed saturation. REO is a leading indicator of housing in a single graphic, the supply held by financial institutions, which will translate yield curve is an excellent into houses for sale. metric to describe health. In 2006 and 2007 (the start of the financial is virtually free, i.e., when rates are at through accepting more and more risk crisis), the U.S. yield curve was flat. zero, how will the same institutions to enhance returns. The current yield Financial institutions were “earning” earn a return when the Federal Reserve curve, 21 July 2011, exhibits health, and yields not through prudent conservative is forced to raise key interest rates yet the growth in the U.S. is anemic. banking, i.e., borrowing low, lending to combat the ever-strengthening If financial institutions cannot make high and earning the spread, but inflation? a profit when their main commodity The Federal Reserve’s balance sheet has more than tripled since the start of the financial crisis and the U.S. annual deficit has continued to grow. Is the American public better off now than in 2007, given the massive increase in money supply and debt to support? Clear Capital graciously provided data tracking home pricing and correlated the >> SEPTEMBER 2011
* LIVEVALMAG.COM | 11
markets with the Case-Shiller MSAs: Chicago, D.C., and national composite. The spread between the D.C. market and nation has been consistent since the federal budget surplus was negated in 2005. The average house price in D.C., according to Clear Capital data, is 100 percent greater than the same national house. Again, the data supports the greatest beneficiary of the deficit spending to be Washington, D.C., due to increased government spending. Further note that the area’s greatest net creator of jobs has been the federal government. Further, this increase in expense has not been offset by increasing federal revenues but rather through deficits, e.g., the federal government borrows 40 cents of every dollar spent.
More troubling statistics come from Clear Capital with regard to real estate-owned (REO) saturation. REO is a leading indicator of housing supply held by financial institutions, which will translate into houses for sale. From 2004 to 2006, REO saturation was slightly below 5 percent, however, in 2007 it began a steady rise to the current value of slightly above 30 percent. This will lead to a rightward shift of the supply curve for housing, which will further depress values nationally.
global double dip recession. Despite China’s impressive GDP growth of over 9.2 percent each of the past three years, it will not be enough to drive the globe as the world’s largest economy, the U.S., stalls. A seldom discussed but not unimportant concern is the global knock-on effect when (not “if,” in my opinion) the U.S. loses its prized AAA rating. Borrowing costs will increase, economies everywhere will slow, and the globe may be facing its own Japanese-style lost decade.
The futures market continues to support a bottoming of the residential market in mid- to late 2012. Given the large concentration of REO saturation and expected rise in rates, with inflation close to 3 percent in the U.S., this may be optimistic. Wages in the U.S. have stagnated, unemployment is now 9.2 percent with 50 percent of those unemployed considered long-term unemployed, and Congress is unable to settle domestic and global capital markets; there is a real concern of a
The good news is that perhaps this is the wake-up call the U.S. needed to break the bad behavior of spending and borrowing, and spending more and borrowing more. Perhaps the horror and fear felt by the retired regarding the Social Security checks and pension payments will translate into holding Congress accountable for its actions, or lack thereof. Worse, perhaps generations after us will look back and say, “They got what they deserved!” 6
The good news is that perhaps this is the wake-up call the U.S. needed to break the bad behavior of spending and borrowing, and spending more and borrowing more. 12
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Up front
Maintaining Your Workfile An organized and logical workfile will prepare you for the inevitable complaint. Frank k . Gregoire , i fa , raa
Real property appraisers have had quite a bit dumped on them in the past couple of years. We endured the destruction of long-standing
business relationships as a result of the imposition of the Home Valuation Code of Conduct. We’re in the middle of the implementation of the Uniform Appraisal Dataset, which is not the most intuitive solution ever devised. Although there was a surge of optimism among some appraisers with language in the Dodd-Frank act ensuring appraiser independence and customary and reasonable fees, hopes were dashed with the release of the Interim Final Rule by the Federal Reserve.
Increasingly, large, well-known lenders and their more obscure contemporaries are actively forwarding allegations of non-compliance to state regulatory agencies. In some instances, those same lenders, along with mortgage insurers, are initiating civil action against appraisers and their firms. The Federal Deposit Insurance Corporation (FDIC) has sent hundreds of letters to appraisers demanding money for alleged inflation of appraisals in connection with loans held by failed banks and has followed up some of them with lawsuits. Borrowers, sellers and real estate agents are seeking to lay blame for failed real estate transactions and often target the appraiser as the villain. Being on the receiving end of a complaint seems to be likely, regardless of how long you have been in the appraisal profession. There is a bright spot, however. Within the standards of practice used by plaintiffs
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and state regulatory agencies to craft allegations of improper conduct and lawsuits of doom against appraisers is a requirement that the appraiser maintain evidence to defend their actions, opinions and conclusions. Specifically, the obligation is the Record Keeping section of the Ethics Rule in the Uniform Standards of Professional Appraisal Practice (USPAP), and the stated requirement to prepare and maintain a workfile. In addition to demonstrating compliance with record-keeping requirements, the workfile forms the basis for your defense. After receipt of a consumer or lender complaint against an appraiser licensee, among the first items requested by the regulatory agency or investigator is the appraiser’s workfile. If the complaint is a lawsuit, in most cases, a copy of the workfile must be turned over to the plaintiff or their counsel as part of the discovery process. When that complaint or lawsuit is filed against you, are you able to reconstruct what you did and how you did it, based on the contents of the workfile? All the appraisal experience in the world and assertions that your opinions and conclusions are correct and accurate can’t help if you did not prepare and did not maintain that workfile. Unfortunately, for many appraisers, preparation and maintenance of the workfile is viewed as an inconvenient burden rather
If you have taken steps than a means of protection. toward maintaining paperless Some mistakenly believe a workfiles, make sure your copy of the appraisal report or handwritten review, along notes, phone with a single notes and call data sheet for slips have each of the been scanned comparable and are sales included All the available. It in the report, appraisal is imperative will fill the experience in the entire file bill. Please is saved and examine the the world and maintained full text of assertions that in a format the Record your opinions certain to be Keeping and conclusions reproducible section of the are correct and and readable Ethics Rule for accurate can’t for as long as the minimum 10 years after requirements. help if you did the date of the For certain, not prepare and assignment. the attorneys did not maintain This is handling that workfile. particularly the license important complaint or in the case of photographs. civil suit against you have The extra photographs you a copy and know what to included in the workfile to expect. Wouldn’t it make document the good condition sense to throw them off and exceptional craftsmanship their game by maintaining of improvements, recent a workfile with much more repairs, or placement of information, data, and custom, built-in appliances support than they expect to don’t provide much help if the see? file is corrupted. Computers, hard drives and compact For your protection, and to disks do not last forever. Your be useful in your defense, high-tech, electronic workfile the workfile must have is of no use in your defense if enough information to it was stored on the computer support and justify the work you recycled four years ago, completed as well as your was stored on defective opinions and conclusions. media, or can only be read by You should also have enough an obsolete program. additional information to revive your memory about Information provided to the assignment, particularly if you by others is particularly trainees or contract appraisers important. This might provided assistance and are include assignment elements, no longer in your employ. assignment conditions, contracts, leases, income and
expense data, and builder’s cost information. Maintain, in your workfile, the information necessary to support your scope of work decision. It’s not unusual for alterations to be made to plans during construction, or for the improvement to be built at variance to the specifications due to decisions made on the fly. For your protection, when the valuation assignment involves an opinion of value made subject to construction of an improvement or addition, make sure the workfile includes the plans and specifications for the improvement. Either insist the client provide a copy for your workfile or make copies. The five-year recordkeeping requirement is a USPAP minimum. Because of the housing bubble and associated financial failures by individuals and institutions, complaints and suits against appraisers are often filed years after the assignment is completed. To ensure their clients can mount a defense, some errors and omissions insurers and defense specialists recommend extending your records retention three to five years beyond the USPAP minimum. It might be time to consult your attorney or insurance provider for some advice about time periods for records retention. Additionally, assure your workfile includes records created contemporaneous to the development of the appraisal and writing of
the appraisal report. State investigators and regulators raise legitimate questions about the appraiser’s compliance with standards and rules when records have printed dates indicating they were created subsequent to the date of the complaint. Protect yourself by creating the workfile record when you develop the appraisal. It’s too much to trust that the source of your data and information will be available three to 10 years after your assignment has been completed. After you are confident the workfile includes what is necessary to support your decision-making, opinions and conclusions, give some thought to the appearance of your records. Is the workfile a disorganized hodgepodge of disconnected data, implying you are disorganized and amateurish? Wouldn’t it make a much better tool in support of your defense if the workfile were neat, organized and logical, like the means by which you reached your opinions and conclusions and conveyed them in your appraisal report? The world is a dangerous place for appraisers. Many view us as easy, defenseless targets. Prepare for that inevitable complaint or suit. The content and appearance of your workfile may demonstrate your competence and professionalism, and may be the evidence to tilt the table in your favor. 6
If you have taken steps toward maintaining paperless workfiles, make sure your handwritten notes, phone notes and call slips have been scanned and are available.
SEPTEMBER 2011
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Up front
ns ig
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Lost in Translation
Many lenders have turned to third-party authorized agents (AMCs) to manage the appraisal process and ensure appraiser independence. Although this additional layer is very effective in enforcing and maintaining appraiser independence, it creates some of the challenges experienced in the telephone game. Whenever a layer is added in the communication chain, an opportunity for the original meaning or context to get lost in translation is created.
hts
from
Chief Apprais
ers
Effective communication between all parties is the key to success. bil l wa lt enbaug h , sra
I remember playing a game called telephone when I was a kid.
Although it may be known by different names, I think just about everyone has played this game. Participants sit in a circle and someone whispers a phrase or statement to the first person and then it is quietly passed to each person in the circle until it gets back to the beginning. As most of you already know, when the last person announces the statement to the group, it is often very different than the original. Although just a fun childhood game, it is a good example of how the original meaning or context can get lost in translation. Effective communication between the lender and appraiser has always been an important element in the appraisal process. Completing an independent assignment that meets a client’s specific needs is much easier when an appraiser clearly understands the objectives. For years this was easily accomplished with direct communication between the lender and appraiser through both voice and written communication. When a client had a specific need or concern, they simply picked up the phone and conveyed their message directly to the appraiser. However, with today’s appraiser independent standards, conveying these same messages has become more complex.
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I’ve witnessed this breakdown in communication many times. The client makes a request, the request is interpreted by the AMC and then it is passed on to the appraiser for a response. Sometimes the breakdown in communication can occur right here because, although the request may have been correctly interpreted, the reason it is being sent may have never been conveyed to the AMC or passed along to the appraiser. At this point the appraiser scratches his head and wonders why anyone would ever make such a silly request. Believe me, many of the requests I’ve seen are, at the very least, silly and unnecessary. Back in the day when direct communication occurred between the client and appraiser, many of these concerns would be quickly and easily resolved with a short telephone conversation. However, today these same concerns
need to be sent and filtered through a third party. Appraisers have told me that the AMC needs to step in and take care of these silly requests. However, an AMC doesn’t have the authority to speak independently on the appraiser’s behalf or make collateral risk decisions for the lender. In my opinion, the AMC’s role in these situations is to effectively manage the communication between the lender and appraiser, and ensure appraiser independence. In other words, the AMC needs to allow the communication to occur while ensuring appraiser independence is always maintained. Other breakdowns happen when the AMC incorrectly interprets and conveys
addressed; and the appraiser the client’s request to the is irritated because they can’t appraiser. Although the think of any other way to appraiser may have properly better answer responded the question. to the This is why request clear, concise sent by the and constant AMC, it communication still doesn’t whenever a is needed address the layer is added between all lender’s in the parties. When initial Communication a request is concern. chain, an re-requested, These additional requests opportunity for communication become the original needs to occur difficult on meaning or to make sure many levels context to the concern because the get lost in is properly lender is translation is understood. frustrated they didn’t created. I’m a get what firm believer that all they wanted; the AMC is communication that is wondering why they are still compliant with appraiser asking for this concern to be
independence should be allowed to take place between the client and appraiser. However, effectively managing this communication and making sure nothing is lost or meaningfully altered in translation is the key to success. As a kid, playing the telephone game was a lot of fun. Witnessing how a statement or concept could be altered and changed was interesting and funny. As an adult in the business world, these alterations in communication create problems and frustrations that aren’t funny at all. They create delays and discontent that annoy everyone involved. 6
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Up front
Women Earn More Money Than Men A lesson from Granny still rings true today.
C
roger s tai ger II I
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hildhood is so much simpler. As a boy growing up on Nevis, life was centered on the weather. When
we woke, breakfast was always on the table as Olive, our cook, was diligent, omnipresent, and completely consistent. At breakfast I would ask my grandfather what we were doing that day. He would say, “Depends upon how many men show up.” If many men showed up we might clear a field or repair sections of a fence; if just one or a few showed up, we might plant or work on the Mini Moke. The day’s tasks were entirely dependent on how many men showed up, which was directly related to the weather and, as I later learned, the prior evening’s festivities. When I was older I asked my grandfather why he tolerated an inconsistent workforce. He said, “If I try and instill consistency, no one will show up.” Caribbean culture is significantly different than the north. Wednesday afternoons were payday. Everyone that had worked for the past week, regardless of condition or commitments, came to the house. As a young boy, I was not privy to pay amounts, though I often wondered how much each person was paid. Once, when I asked about it, my grandfather pointed to my plate and said, “That is your pay.” One thing that I did notice was that Olive’s pay was always greater than the men’s. I asked Granny about this and she said, “Women are always paid more than men.” Later that
I asked Granny about this and she said, “Women are always paid more than men.” Later that evening I asked my grandfather and he said, “No, the men are paid better than Olive; trust me.” Even at a young age I knew “trust me” meant it was best to not follow up and the conversation was closed. evening I asked my grandfather and he said, “No, the men are paid better than Olive; trust me.” Even at a young age I knew “trust me” meant it was best to not follow up and the conversation was closed. This left me perplexed. Could Granny have been wrong? Later I realized why Olive’s pay pile was always larger: She worked more! Olive was there every day before I woke, and left right before dark. Nothing happened in the house without Olive. The men showed up most days and left when they chose. While they were there, they worked
extremely hard, but when they tired, they simply went home. My grandparents only paid people when they worked. This was curious to me and as a child no one would tell me numbers but the neighbors confirmed the men made more money per day. But still, could Granny have been wrong, or was she saying women made more in total rather than on an hourly basis. Several things have proved true in life: 1. The house always wins; 2. Never bet against the Fed; and 3. Granny is always right. There are two important metrics that have been circulated in the Financial Times since the beginning of this recession, with men feeling the brunt of the job loss in this economic crisis: 1. Women earn, on average, 80 percent of their male counterparts’ salaries, and 2. Four out of 5 job losses have been incurred by men. It seems apparent that men do earn more than women – 25 percent more than women. But still, could Granny have been wrong? Not so fast – always bet on Granny! Granny, while not understanding portfolio parlance, understood the concepts better than most. She would remind everyone of Olive’s higher pay stack. Olive earned more than the men consistently, as she always worked. This
translates to Olive being more “efficient.” Now, to prove Granny is correct: If a woman earns 80 percent of a man’s salary and a man earns X, then the woman earns 0.8X. Now, if men suffer four times as many job losses as women and the risk of a man losing his job is Y, then the risk of a woman losing her job is 0.25Y. To summarize:
To correctly compare which sex earns more, both risk and return must be compared. The method to complete this is to quantify the relative efficiency of each sex as measured by the coefficient of variation (risk/return). The relative efficiency of each sex’s earnings is therefore as follows:
A woman’s efficiency is 31.25 percent that of a man’s, i.e., women are more efficient! (Note: The lower the value, the higher the efficiency.) Now, given that men are four times more likely to lose their position than women but
only early 25 percent more than women, without an adjust to risk, men require a pay increase of 3.2 times to earn as much as women.
WALL
Now that we have established that, in fact, Granny was right and women do earn more than men, it is important to understand why. While it is true that women are more reliable, as exemplified by Olive in the Caribbean, this is anecdotal. A more substantial reason is more likely regulatory. Women and men are not equal in the eyes of the law. Women are considered a protected class due to the history of discrimination against them. Further, as a statutorily protected class, the anti-discriminatory laws that protect them are federal, state and local. Until the “risk” of job losses is equally born by both sexes, there will always be a disparity of wage earnings between sexes. Once again, my Granny has proved to be correct. Further, Granny always said that women were smarter. Given that society believes that women are underpaid as compared to male counterparts, this substantiates their greater intelligence. Despite the analysis, conventional belief remains that women are underpaid. Women not only earn more on a riskadjusted basis, but are also smarter due to the power of their marketing engine! 6
SHAME We know you’ve been there – do stupid requests leave you pulling out your hair!? Well feel free to let loose on our Wall of Shame. Everyone remains nameless so no one gets hurt - it’s just a good ol’ venting session.
M I guess the weirdest request I got recently was to take a picture of the brick BBQ noted in the backyard. After explaining that I gave it no value, the underwriter suggested that I provide a picture of the no value unit, so that he could decide whether it had value or not. If I did not provide a picture of the BBQ pit, they were going to reject the report. So I drove 32 miles again to take the picture. The value was significantly different after the picture was added to the report (NOT).
M Submit your Wall of Shameworthy comments to info@livevalmag.com. We promise, you’ll feel better after you do!
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Up front
THE HOT SEAT
20 questions - things you need to know or may have been wondering september 2011
the hot seat From his favorite TV show to the most difficult property he has ever appraised, we get the personal and professional facts from Chuck Mureddu, EVP of Business Development for Quality Valuation Services, in our monthly edition of The Hot Seat. 20
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chuck
mureddu
PERSONAL
Qu a l ity Va lu ation S e r v ices EVP of business development
>
>
My favorite website is YouTube. This is a great place to search for step-by-step instructions
on projects and repairs around the house. It sometimes gets me out of a jam.
>
My favorite magazine (besides LiveValuation) is La Cucina Italiana. Cooking is a passion
of mine and this is one food magazine that, unlike most, always has something different in each issue.
I never miss an episode of Rescue Me, a drama/comedy about the employees of a New York firehouse and their
personal and emotional battles after 9/11. I highly recommend it.
>
When I was a kid, I would take the bus to my grandparents’ house every Saturday. I would help my grandmother
cook and my grandfather upholster, making buttons with a button machine, and I’d help in the garden.
> > > >
The best lesson I’ve ever learned is that family comes first.
I’ll never forget my wedding day. The best decision I ever made. Every morning I kiss my wife and tell her that I love her.
I always work hard during the week but weekends are mine.
The best lesson I’ve ever learned is that family comes first.
>
The best purchase I’ve ever made was a webcam for my son and daughter-in-law. Now we can see our grandkids
>
I can’t go without ice cream! Strawberry and coffee are my favorite flavors.
anytime we want.
PROFESSIONAL >
The most difficult property I ever appraised was a house on a cliff that was deteriorating. I was hired to appraise
the loss of view amenity.
>
The biggest challenge to the appraisal/valuation community is getting everyone on the same page. There is a lack
of consistency in engagement letters.
> >
The greatest setback for appraisers was state licensing and the lack of mentoring of new appraisers.
If I could change one thing about the valuation industry it would be to improve the respect of our profession
through better communication and connectivity of all appraisers and mentorship similar to what I had in the early ‘80s.
>
My biggest pet peeve with appraisal reports is three pages of boilerplate narrative that provides no use to the
reader whatsoever and then fails to provide any true analysis and reconciliation as to how the value conclusion was arrived.
>
The most ridiculous thing about the valuation industry is that it is still getting beat up by production. We actually
>
The biggest technological leap for appraisers was the digital camera and the Internet. We can now get most of
>
Ten years from now the valuation industry will be completely different because there will be less but more skilled
get people who threaten payment or business because of value. And … they put it in writing. our data online and it’s only getting better.
specialists using data-rich tools allowing them to provide many new products and services through innovation and technology.
> >
Before I entered the valuation industry, I was the purchasing manager for a pigment manufacturer.
Chief appraisers are necessary if a lender is to survive going forward. It’s time that they are given the value they
deserve by their institution.
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SEPTEMBER 2011
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Neutral Valuation
by :
jona t h an j . mi l l er CRE, CRP * P reside n t / C E O miller samuel i n c . *
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NEUTRAL VALUATION As a real estate appraiser for the past 25 years, I’ve always viewed my role as a provider of a neutral valuation benchmark for clients to become empowered to make more informed decisions. Of course this is a fantasy-based, in-a-perfectworld depiction rather than an actual practice. In mortgage lending, residential real estate appraisers are not able to provide an independent market value without some sort of reprisal if the results do not match the client’s needs. Since the credit crunch began with the Lehman Brothers bankruptcy that roiled the world economy in September 2008, our profession has actually strayed farther from being any sort of neutral valuation benchmark. Recent financial reforms, HVCC, USPAP and other policies and regulations, while perhaps initiated with the best intentions, have done nothing to enable the appraiser to provide the services for which the profession was created.
Over the past decade the global credit boom ultimately forced most experienced appraisers to choose between feeding their families or changing their business models and even their careers. The
refrain “always hit the number” would get you more work. After the credit crunch, the refrain was modified to “occasionally hit the number” and you get more work. The sheer critical mass of the moral flexibility of many in our profession during the go-go credit era nurtured a whole new class of appraiser: the form filler that dominates the profession to this day. They work well with the gum-chewing 19-year-old appraisal processors who call every day on the status of an assignment, having no idea what an appraiser actually does and only cares when the report will be delivered.
In 2005 I noticed I was beginning to lose my longcherished national retail banking clients because, in hindsight, I wasn’t morally flexible enough to consistently provide “the number” for them. My client mix had long been 75 percent national retail banks and 25 percent everything else. I began to realize that national retail banks really didn’t want my neutral market value opinion. Instead, banks wanted me to become a “transaction advocate” or a “deal enabler” because volume was all that mattered and the boom mantra declared that housing prices always go up. Everyone had gone mad with greed in the eventual systemic global credit crisis.
jonathan j. miller * P reside n t / C E O miller samuel i n c . *
Ov e r t h e pas t d e c ad e The former Lehman Brothers New York City headquarters, now owned by Barclays.
the global credit boom ultimately forced most experienced appraisers to
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It is time for experienced appraisers to look for greener pastures because most retail mortgage work doesn’t require much valuation experience. In fact, experience is specifically shunned by the requirements that are adhered to in the AMC-dominated world.
Despite the hard lessons of the past few years, most experienced bank appraisers operate in fear of reprisal from their banking and appraisal management company clients. Nothing has been learned, largely because executives in place during the boom have remained in charge. The lack of reliance on the process that should provide a neutral valuation benchmark to enable a financial institution to manage its mortgage exposure has not materially changed. Bank lobbying efforts and financial reform continue to debase and commoditize the appraiser within the mortgage process. Why? Because the sales function in a bank continues to overpower the underwriting function in a financial institution when the U.S. government provides a backstop. That’s the ultimate risk management for a bank. While underwriting remains at its tightest level in decades, it’s not because highquality appraisals are being performed. The constrained mortgage environment results from more attention being paid to the credit side of lending rather than the collateral side of the lending. Before the credit crunch, a respected appraisal colleague told me that in a purchase transaction, all parties were smarter than the bank appraiser because they already knew the market value: It was always the sales price. The listing agent, buyer’s agent, seller’s attorney, buyer’s attorney, seller, buyer, title company, mortgage broker, and banker were smarter than the appraiser. They already knew that if a buyer was willing to pay the price offered, then the property must be worth the selling price. The appraiser was only there to fill out the forms and simply confirm what was so obvious to all other parties 100 percent of the time. Just fill out the form. Of
course, in theory, only the appraiser was neutral to the transaction. Following the credit crunch, the valuation bias is now in the opposite direction. In fact many of the morally flexible appraisers that were biased toward higher valuations for mortgage brokers during the boom, are the same appraisers biased toward lower valuations for appraisal management companies in the post-boom world. These appraisers are rewarded for performing high-volume work at low fees and conservative values. And these values aren’t just low by a few percentage points. We have observed values from a nationally well-known appraisal management company as much as 50 percent below current market value for a property with multiple bidders, largely because the appraisers they use have no local market knowledge. It’s insane yet logical for national retail banks to view the market generically if they are trying to protect themselves to live another day. Banks don’t want to lend unless dragged kicking and screaming. “Form fillers” fit into this system because lenders view the profession as yet another way to filter out any variances or the slightest blemish on a transaction, whether actual or perceived. Banks are truly issuing AAA mortgage loans, if not AAAA mortgage loans, because they remain afraid of their own shadow. Considering the massive legacy issues of bad lending decisions during the boom, the wave of foreclosures and a weak national economy, who can blame them? With this marginalization of our profession I could see that I would be out of business within three years unless I capitulated or expanded my long-held
views of being a neutral valuation expert and seek out clients who actually wanted a neutral valuation expert. I chose the latter and I lived to tell the story and revived my business at the same time.
an AMC -
I decided to reverse my emphasis so I eventually fired all my national retail bank clients (or they fired me). Now only 25 percent of my clients are banks and these are primarily private banking or wealth management groups. These clients actually care about appraisal quality because they generally hold their loans in portfolio due to the higher price point of the collateral and disappearance of the jumbo secondary mortgage market since the credit crunch began.
The mortgage lending industry has destroyed the collective experience in the appraisal industry and this knowledge has been lost forever. >>
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It is time for experienced appraisers to look for greener pastures because most retail mortgage work doesn’t require much valuation experience – in fact experience is specifically shunned by the requirements that are adhered to in the AMC-dominated world:
?
P 2 4- to 48-hour turn times that don’t permit adequate market research or understanding,
want your expertise and will only pay for a form filler. If you don’t, they are going to fire you eventually and your practice will die a slow death. It is better to serve and expand on clients that actually want to know what “the number” really is. You’ll be surprised at how your quality of life improves and how much more business you are able to get.
P local market knowledge is not a primary criteria and
P fee splits remain in place that force corners to be cut to levels that require willful negligence or fraud. Simply review a dozen appraisals performed for national appraisal management companies and it becomes apparent that quality is paid lip service and passes muster only to the uninformed. Despite newly minted financial reform phrases such as “common and customary fees,” experienced appraisers continue to pay for bank compliance with the Home Valuation Code of Conduct. Despite the sunset of HVCC, it was long ago embedded into institutional policy.
Someone who tells a lot of lies is inconsistent in their interaction with others. From a practical matter, it is hard to keep track of what story was told to whom. When you lie to someone just once and they discover it they will never trust you again.
jonathan j. miller * Preside n t / C E O miller samuel i n c . *
from the situation and
fo c u s on t h e a p p r a i s a l i t s e l f.
I’ve found the concept of neutral valuation to be intoxicating and powerful in my business. As a result of shifting our practice toward clients that actually want to know “the number,” we have remained at our most profitable level in our 25-year history.
As an industry we pay a lot of lip service to the notion of being neutral. We have USPAP, Code of Conduct, HVCC and other rules and regulations to keep us in line. If they were effective, then why is our industry reputation so poor and getting worse? All these efforts provide no day-to-day guidance or practical penalties on behavior because users of our services in the mortgage lending process are not economically incentivized to encourage better quality. It is not in their best interest, as crazy as that sounds.
Fire your retail banking clients and stop burning calories for clients that don’t
How is it in virtually every litigation and divorce case where appraisals are
Since the beginning of my career, I’ve always held out hope that most of my clients actually wanted me to provide “the number” that represented market value. Some clearly did.
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done for each side I have observed, one has a low value and one has a high value, both always consistent with their client’s needs? I see appraisers that use the same “comp” in two different reports with different physical characteristics presented. I see appraisers presenting different market conditions described within the same location. I see appraisers attack each other on bank review appraisal assignments for things they actually do themselves. What message does that send to users of our services? Being “neutral” means that you believe in your value and could care less about your client’s problems unless you made an error. It means that all interactions with your client are transparent. All information that leads up to your conclusion is disclosed. If the information is not consistent with your result, explain why. If you are providing services to several parties, all communication and presentations, as well as perceptions of communication, are completely transparent. It’s that simple. Some reading this must be thinking, “I’ll never get any work if I act this way.” Wrong. If you live and breathe neutrality 100 percent of the time, your clients and others will notice.
After firing my retail bank clients a few years ago, we expanded our more lucrative legal-related work, specifically litigation support. As a result, we perform a lot of “neutral” appraisals in divorce matters. We are hired by both parties and represent both of them. Courts regularly appoint us as the neutral appraiser for cases in front of them. Both parties have to trust that you will not omit them from any conversations. I insist that neither or both parties are
present during the site inspection. Even the perception of the appraiser favoring one party over another is not tolerated. All correspondence via email is copied to all parties and any party that sends me direct emails is forwarded to the other party. My assistant takes direct calls if one party makes an inappropriate call to sway us and directs the party to conference in the other party to the call. The engagement letter is addressed to both parties. The appraiser has to detach themselves from the situation and focus on the appraisal itself. Of course we’re human and this is always a challenge. For example, in divorce matters where there are small children at the property during the inspection, after the inspection I always call my wife and tell her I love her and my children and how fortunate we are. I get that out of my system and I proceed with the assignment as neutral as I can be. I was in a situation recently where both
parties hired their own appraisal experts for arbitration and both ended up citing my public market analysis in their reports, with one party embellishing my results. I was brought in as the neutral expert to clarify what my own market analysis actually represented. A neutral reputation is contagious. I have had many attorneys come to me after my firm was engaged to say the other party settled because they knew we would be providing a neutral valuation and there was no point in playing games. There have been many instances where a potential client will call to engage us because another appraiser involved in the matter came up with a valuation conclusion that was clearly biased to an extreme result. I beg off on those assignments and suggest they find someone else. It has been my experience that a value straight down the middle would be averaged with a biased high or biased low result, creating an unfair position for my potential client. Both
parties often end up coming back to me for a third, neutral report after the original appraisers, predictably, are significantly apart in their valuation estimates.
Maintaining your neutrality as a valuation expert is tough and requires constant review and feedback. Although I view most mortgage-related work through national retail banks and appraisal management companies as incompatible with the concept of neutrality, yet there are many other opportunities out there. Consider weaning yourself off of it and you may be surprised at how much better you view your career and profession. Neutrality is a powerful code to live by as a valuation expert. And that’s no lie. 6
I take the same route to work every single day. My clients like that. Yep, I’m predictable. When it comes to property appraisals, no one likes surprises. That’s why I maintain a reliable fee schedule and consistent turn time, so that my clients know what to expect every time. And that’s what you can expect from IRR-Residential appraisers nationwide. A commitment that ensures consistency in an industry that can be full of uncertainty. At IRR-Residential, we’re working together to make sure your biggest surprise is, well, not getting one.
Predictability is a good thing. 866.538.8935 liveval@irr-residential.com irr-residential.com
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ow It All Started At the turn of the 20th century the most widely accepted approach to value in real estate appraisal was the approach now known as the income capitalization method. By the 1920s a new economic theory was introduced and gained broad acceptance based on the principle that normal price will tend to equal normal cost to build, less depreciation, plus land. During the Great Depression when real estate prices became erratic and unpredictable, this cost method became viewed as the most reliable approach for value estimation at the time. With the addition of the market comparison approach, these three principles (the cost to build; supply and demand; and the income method) became a standard part of appraiser education and their correlation became a basis for training materials published by the American Institute of Real Estate Appraisers in 1938. During the Great Depression, banks across the United States were impacted with an unprecedented number of
Valuing mortgage foreclosures. In Chicago portfolios within a alone, housing prices reasonable tolerance fell by 38 percent, new using at least two value construction dropped approaches would by 86 percent, and ensure the long-term foreclosures surged ...these three sustainability of the 457 percent from 1927 principles (the lending process and to 1931. In contrast, cost to build; lenders’ continued ability exponential optimism supply and to provide mortgage after World War II demand; and loans to consumers on created high demand the income reasonable terms. and caused soaring home prices. These method) became In 1947 the FHA effects of supply and a standard part established guidelines demand on housing of appraiser that sought to ensure prices became a concern education and that reasonable collateral for the Federal Housing their correlation was present for the Authority (FHA), became a basis duration of the mortgage which recognized the loan by recognizing that need to determine for training sales price may vary, value in a way that was materials but appraised value irrespective of the sales published by the should remain more price. Policymakers American Institute stable. These guidelines understood that lenders of Real Estate were created to help would need to assure Appraisers in 1938. safeguard the integrity of themselves of collateral the lending community protections over time by mandating the use of more than one and that focusing only on the market approach to value. Trained appraising comparison approach as the baseline for professionals defined the synergies and collateral valuation would not provide differences between both tangible >> safe and sound lending practices.
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and intangible variables for property, including the cost of construction of the home in its local market, the cost of land using market comparison and, where possible, the translation of income into value. Sellers were often required to adjust the sales price downward if one or more of these methodologies yielded a significantly lower value that was greater than 20 percent.
How Did We Get Here? Since that time, there have been many changes in the lending process. In the late 1960s Fannie Mae broke off from FHA, and Freddie Mac was created as an alternative entity. The S&L Crisis of the 1980s created FIRREA, USPAP, and appraiser licensing, and by the mid1990s the mandated use of multiple approaches to value was all but totally abandoned. Appraisers being asked for faster, cheaper appraisals recognized that little weight, if any, was on anything but the comparison approach, discouraging the need to complete other approaches to value. The dominance of government-sponsored entities (GSEs)
in mortgage lending led to an influential position in the appraisal process as they began to dominate the housing market, and by 2006 less than 3 percent of the loans created were FHA. With the growth of the GSEs, reliance on the system of checks and balances using multiple approaches to value began to take a backseat to the primary dependence on the comparison approach. Appraisers were required to place priority of determination of value on the comparison approach to value while replacement cost and income capitalization became less and less relied upon. Many appraisers in
the industry came to believe that other approaches were not relevant and began to buy off on this new paradigm of market value. As a result, the difference between market value and sales price often became blurred. In the late 1990s, the safeguards requiring at least two approaches to value were abandoned, and by 2005 the Fannie Mae Uniform Residential Appraisal Report Form made the cost approach entirely optional. As a result of this market value paradigm, the gap between the cost approach and the comparison approach grew exponentially. Without the safeguards that FHA had put in place to control erratic value swings, this decoupling of the approaches to value increased, setting the stage for the largest boom-and-bust cycle ever experienced in U.S. history. Using retrospective data from real estate trends and cost analysis, the following graphs paint a very enlightening picture of the relativity of the comparison and cost
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Figure 5: Figure 5 is a great example of the overall picture of the housing market in Los Angeles. Notice the relatively stable cost of construction throughout the 1990s, the eventual decoupling after 2000, and the mortgage rates and employment rates relative to the values.
approaches to value through this boomand-bust cycle. Figure 1: This graph easily identifies the relativity and synergies of the cost approach to value and the comparison approach to value at a national level. As the synergies of these approaches were lost and the decoupling of these approaches began in the late 1990s, the housing bubble can easily be identified as it grows and eventually bursts. Figure 2: In Figure 2, the city of Washington, D.C., shows an oversupply of housing in the mid- and late 1990s, with the cost approach as the ceiling. After 2000 a sharp rise and fall followed as the housing bubble grew and eventually burst. Notice the possible decoupling that appears to be starting toward the end of the graph in 2009 and 2010.
growth created a false sense of values as the comparison approach exploded, while the cost approach continued growth at a more nominal rate. Between 2007 and 2008 the housing bubble had completely burst, and the oversupply of homes created undervalued properties as new construction no longer became economically feasible. Figure 4: In Figure 4, the city of Tampa indicates a relative balance of the two approaches to value through the 1990s. As the housing bubble grew and burst, an oversupply of homes created undervalued properties that cost less to purchase than to build.
As the primary use of the market comparison approach became the recommended method of establishing market value, interest-only loans fueled the belief that sales prices were reflective of market value and could only increase, regardless of the cost of land and construction. As a result a market bubble emerged that grew to exceed all prior experiences. Massive deflation of this housing bubble caused millions of consumers to face intense financial challenges including foreclosure, and many lending institutions have either failed or significantly scaled back lending activities as their market-comparablevalued portfolios have plunged in value. >>
Figure 3: Figure 3 shows the city of Phoenix with increasing values growing year over year as the population growth continued in the region during the 1990s. At the end of the 1990s the expectation of continued SEPTEMBER 2011
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The appraisal industry is being challenged in defining market values. As the appraisal industry reflects on the recent housing boom, it attempts to correct past mistakes by providing guidelines and regulatory changes that seek to minimize future problems. This issue was made part of the Dodd-Frank legislation of 2010, which mandated that the Government Accountability Office conduct a study of the various methods of the valuation process.
While the lending and appraisal industries recognize the need for change and a general consensus exists that the appraisal process is in need of reengineering, there is one thing that rings true: It is essential that the appraisal In December 2010 the OCC, OTS, FRB, process go back to the future, requiring FDIC and NCUA jointly published the a system of checks and first major revision balances using multiple of the Interagency approaches to value. Appraisal and These approaches in a Evaluation Guidelines re-engineered appraisal for the lending industry process could appear as since the initial version While the one multilayered method in the early 1990s. lending and and make better use With the heightened of the information and understanding of the appraisal data provided by the need for appraisal industries experienced appraiser. independence recognize Multi-regression standards and the focus the need for techniques that go on safe and sound change and beyond the present linear lending practices, a general and hedonic models can these guidelines stress be employed. With the the importance of consensus dawn of uniform data understanding the exists that collection, it is possible to level of collateral the appraisal identify when decoupling risk involved with process is in is beginning within a each federally related need of reregion or an area. These transaction and engineering, red flags can then be used also emphasize the there is one thing in ways that have never requirement that before been possible, appraisers consider that rings true: helping stabilize home multiple approaches It is essential that values by using proven to value in order to the appraisal economic techniques in a determine a more process go back accurate and credible proactive manner. 6 to the future, market value.
Fannie Mae and Freddie Mac enacted waves of requirement changes throughout 2010, and the Home Valuation Code of Conduct has been replaced by Appraisal Independence Requirements (AIR). The DoddFrank Consumer Protection Act now dominates appraiser discussion groups and the overall appraiser landscape as valuation management and collateral risk have become common topics of discussion at lending institutions. The Interim Final Rules, published by the Federal Reserve Board, intended to provide further clarification of the Dodd-Frank Act but have muddied the waters by seemingly contradicting some
As a result of the depressed housing market, the need for competent valuations has become paramount. Conversely, the low number of marketpriced sales and mixed market data make it difficult to determine appropriate true market values. As agencies and lenders are required to perform increasing amounts of quality control that support valuations, additional information and support for the determined value are being required at a time when the overall market data is weak.
In 2005, Richard Vishanoff, who was Chief Managing Editor for Marshall & Swift, pointed out: “Obviously, prices cannot exceed what buyers are willing to spend, but in times of housing shortages and increasing demand, it becomes difficult to gauge what a reasonable price is. If the cost approach comes in well below market prices, it may be a signal that the market is raising beyond sustainable levels.” In contrast, since 2005, when the housing bubble grew and eventually burst, these inflated properties have rested squarely on the shoulders of banks, hundreds of which have failed since late 2007. Those lending institutions that are still lending are having a difficult time determining a true value of not only their shrinking portfolio, but also of the collateral of each new loan.
Where Do We Go From Here?
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of the rules and intent of the original act, leaving the lending industry and the appraisal industry scrambling for answers.
requiring a system of checks and balances using multiple approaches to value.
American Society of Appraisers (1989). The Opinion of the College of Fellows on Defining Standards of Value. Valuation 34(2). Appraisal Institute (2001). The Appraisal of Real Estate (20th ed.). Evans, A. W. (2004). Economics, real estate & the supply of land. Oxford: Blackwell Publishing. Pollock, W. W. & Scholz, K. W. H. (1926). The science and practice of urban land valuation. Philadelphia, PA: The Manufacturers’ Appraisal Company. Federal Housing Administration [FHA] (1938). Underwriting Manual, 1938 Edition. DC. McMichael’s Appraising Manual, 4th Edition (1951) Marshall & Swift (2011). Real Estate Market Stability in the 21st Century. Marshall & Swift (2007). How the Cost Approach Shines the Light on a Troubled Market.
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| jordan petkovski |
Professi onalism : Own Up To it
Doing what you need to even when you
nt don’t wa
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to.
hese days, much of
the noise emanating from the appraisal blogosphere is specific to the customary & reasonable compensation discussion. Add to that some chatter surrounding AMCs ruining the lives of independent fee appraisers and you have an all-encompassing vision into what appraisers are talking about amongst themselves. Unfortunately, neither of the aforementioned topics deserves the limelight in lieu of discussing what will lead our industry out of the desert of lost consumer confidence we find ourselves in today. I spend more time than I care to admit pondering the future of the industry in which I work. I wonder, what will become of residential appraisers over the course of time if we as a group fail to revive the consumers’ confidence in what we do and why we do it? I ask myself if the consumer, or the mortgage lending industry, believes that the services we provide add value to their process, or if we’re perceived as an unnecessary speed bump in an otherwise efficient production line. Are we appraisers looked upon with ire and contempt? Are we already too far gone to recover in the eyes of those that matter? Do the appraisers that make up our “body politic” think about the professionalization of the residential appraisal industry? I fear these questions are overwhelmingly answered contrary to the benefit of our profession. It was only a matter of time before I took my internal dialogue to the streets. I was on a quest to canvass my peers in an effort to determine if my fears were shared by other industry leaders. Turns out, our contemporaries are currently and have been actively engaged in closing the gap between appraising as a vocation and appraising as a profession. We’re going to review some of the options being proposed by our peers later, but for now we’ll focus on the core issues as I see them.
We’ll begin our journey by examining how residential appraisers are currently perceived. Before we get started, I’d like to take this opportunity to warn all those with thin skin to skip this section … or risk exposing yourself to an unpleasant truth! This shouldn’t come as a surprise, but the consumer sees residential appraisers as a nemesis that’s hell-bent on killing their deal, whether refinance, purchase or HELOC. The worst of it is our failure to realize that EVERYTHING we do throughout the course of interacting with consumers is being picked apart and is often used to refute the appraiser’s value conclusion. We are playing right into their hands!
“The appraiser was rude
inspection. I think to myself, “We all have our bad days.” He goes on,
”
The appraiser showed up late without calling and he was wearing
“
flip-flops when he arrived. OK, so the appraiser’s cell phone died and it was hot out – not the end of the world, right?
”
While he was here, he said the AMC doesn’t pay him enough to do
”
for him since his digital camera was on the fritz. This isn’t good … Finally, the death knell:
”
believes that the services we provide add value to their process, or if we’re perceived as an unnecessary speed bump in an otherwise efficient production line.
when scheduling the appraisal
a full inspection.
He asked if I would “take pictures of my home
I ask myself if the consumer, or the mortgage lending industry,
Recently, I was privy to a discussion that transpired between a colleague and borrower regarding the borrower’s recent experience with one of my colleague’s panel appraisers. The borrower starts by stating,
“
Now that’s somewhat disconcerting.
The appraiser asked if he could use my computer to pull comparable sales because his Internet was, and I quote,
“
F’ed up. “Ugh” is all my colleague was able to muster. The sad fact is this behavior is systemic. This is not an isolated incident. The truth is, there are bad actors among us and they’re not helping our cause. I ask you, Mr. and Ms. Appraisal Professional, is this how we should conduct ourselves?
‘
’”
That behavior is not only unpleasant from the borrower’s perspective, it’s also incredibly damaging to the profession. I refer to residential appraising as a profession because it is a profession; it is not simply a vocation of happenstance. If you are reading this article and find yourself empathetic to the appraiser’s side in this story, you are in the wrong line of work! I implore you to take what you do seriously or “ease on down the road.” Professionalism isn’t simply knowing what to do and when to do it, it’s exemplified by doing what you need to even when you don’t want to. In some cases, professionalism means going the extra mile because you’re supposed to, even if that decision leads to more work without additional remuneration. When given an option of cutting a corner or >>
Professionalism isn’t simply knowing what to do and when to do it, it’s exemplified by doing what you need to even when you don’t want to. SEPTEMBER 2011
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taking a shortcut that may be received poorly by a borrower, client or a peer, stop and ask yourself, “Is my decision furthering my profession, or is it likely to be interpreted as substandard behavior?” If we all get on the same page, there is hope we will not only survive, but thrive once again in the coming years. Now it’s time for some good news. Industry leadership is bound and determined to re-engineer the process of obtaining certification through enhanced academic requirements and greater support from appraisal industry organizations that bestow designations. This is a great first step in achieving the goal of transitioning public perception from that of mistrust to that of confidence in our defined responsibilities. A lot of appraisers operating today didn’t grow up with dreams of becoming a residential appraiser. They found their way into the world of appraising by chance. Many bubbled up through their apprenticeships during a time when little more than three closed sales gave an appraiser enough information to derive a value conclusion. As we all know, those days are long gone, but the attitude that evolved from little oversight and unprecedented appreciation lives on. That attitude, and the resulting propagation of malfeasant behavior, needs to be mitigated in short order, otherwise the actions of some will negatively impact us all. In the course of my research for this article, I came across a paper that described some key principles of professionalism. The first aspect that was noted is “putting customer satisfaction first.” If you treat everyone that interacts with you, day in and day out, as a client, you’re well on your way to achieving “professional” status. This
may seem intuitive, but think about the interaction we discussed earlier. Did the appraiser in that situation treat the borrower as a client? In addition to all things customer service-related, professionalism is defined by an ethical and moral obligation to do the right thing. At my organization, TSI Appraisal®, we have an Ism or corporate tenant that goes as follows: “It’s not about who is right, it’s about what is right.” I can’t stress how important that mindset is when faced with changing the consumer’s perception of residential appraisers.
If you treat everyone that interacts with you, day in and day out, as a client, you’re well on your way to achieving “professional” status. Education, specifically going above and beyond what is required for license renewal, is a must. What does it say about our industry when the busiest continuing education classes are at their fullest the week prior to the renewal deadline? Is every appraiser working within the confines of our glorious nation so well informed that they only need to take the minimum requisite coursework since they couldn’t possibly learn any more about the industry in which they work? I’m not asking that all appraisers become academics; I’m just stating facts. All of us would benefit from more education if we want to
At my organization, TSI Appraisal®, we have an Ism or corporate tenant that goes as follows: “It’s not about who is right, it’s about what is right.” 38
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assist in the industry’s recovery. I was presented with a white paper recently that gives clear guidance on how to once again stimulate the residential appraisal profession. This scholarly endeavor was written and distributed by industry leaders I admire and have had the pleasure of working with. One of the key factors this group identifies as a weakness in our ability to recruit the next generation of appraisers is the lending community’s disinterest in allowing trainees to add value to a certified appraiser’s business. Not all of you will remember this, but a few short years ago, trainee appraisers played a vital role in most appraisal shops. Through practical application of valuation theory, these trainees or apprentices learned by doing. The death of the trainee appraiser is due in large part to inadequate supervision and stemmed from countless lender clients calling up the local certified appraiser with questions regarding a file, and uncovering the certified appraiser couldn’t even recall that specific report because it was completed, summarily, by their trainee. This is not the best way to show your diligence in supervising someone that’s still learning the ropes, is it? If we govern ourselves accordingly, per our interpretation of professionalism, our actions will compound and our results will be undeniable. The culmination of each and every one of us taking ownership for our behavior and the nature of our interactions is all that’s required to successfully change the public’s perception of residential appraisers. We need to set the bar higher for ourselves, holding each other accountable for our actions. In this era of regulation, let’s remind ourselves that we are the masters of our own destiny. Take it upon yourself to set the example for the next generation of appraisal professionals. If you do, I guarantee your conviction will grow with each subsequent act of professionalism. 6
Are you looking for a different type of AMC? Look  no  further  than  ULSA:   Get  more  out  of  us,  so  you  get  more  out  of  your  staff. Â
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SEPTEMBER 2011
* LIVEVALMAG.COM | 39
| david feldman |
M. Trischler
off to the
Dogs An Industry Veteran retires after three decades.
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his article is a look back
at my appraisal career, which began in 1982. Since many appraisers have been in the industry for 20 years or more, I trust that my perspective will resonate with you. I think it is helpful to clarify that when I refer to appraising, it is almost exclusively concerned with residential, mortgage-related activities. My story reflects many of the industry trends and changes that have occurred over the past 29 years: from simple to complex, from appraiser to AMC, from paper to electronic and from barely regulated to highly regulated.
My Background Before Appraising I started appraising when I was 35 years old, so I had a bit of time for some eclectic adventures before then. This prepared me for what would turn out to be a long and fulfilling career in property valuation and business management. My preparation was as follows: a “’60s” education, including growing up in NYC, adventuring in San Francisco and even pitching a tent at Woodstock; graduate school in psychology; a seven-year stint teaching law courses in a high school; renting apartments as a real estate salesperson in Boston; teaching the real estate salesperson/broker course to those wishing to qualify for a license; obtaining a law degree at night; and participating in two unique businesses with friends: a spiritual retreat center that lasted two years; and a theatrical business that is still operating after 35 years, although my wife and I retired many years ago.
Entering the Field My teaching career had ended and I was looking for a job that offered flexibility of hours and adequate money; provided a useful service; and fit my interests and abilities. A friend of mine knew a Realtor who had just started an
appraisal business (located in a loft over a little fish store in Gloucester, MA) and was looking to hire appraisers. I met the owner and he put it simply: “You
My story reflects many of the industry trends and changes that have occurred over the past 29 years: from simple to complex, from appraiser to AMC, from paper to electronic and from barely regulated to highly regulated. already have a head start knowing the law and real estate. I’ll give you basic training and you can see if this is for you.” The training was indeed very basic. The newcomers would go out with the old-timers until the newcomer, with the old-timer’s approval, felt comfortable enough to go out on his own. It definitely does not measure up to today’s standards. The appraising environment of yesteryear was very different from today. No licensing was required. That meant that anyone could simply proclaim himself to be a real estate appraiser. If they could convince a lender that they were competent and reliable, the lender could opt to utilize their services. Typically appraisers came from real estate-related trades and professions: bankers, real estate brokers, developers, homebuilders; lawyers, carpenters, etc. There were
two well-known professional appraisal organizations (at least known to me) at the time: The Appraisal Institute and the Society of Real Estate Appraisers. The Appraisal Institute concentrated on commercial appraisers. Their trademark commercial designation was the MAI (Member, Appraisal Institute). The Society of Real Estate Appraisers had a well-respected designation for residential appraisers called an SRA (Senior Residential Appraiser), as well as a designation for commercial appraisers. These designations were challenging to achieve. Thus, they were highly valued in the industry and would often be the differentiator in a lender’s decision as to which appraiser to use. The operational issues of an appraiser or appraisal shop in those days were quite basic. No computers or fax machines were around. “Cut and paste” was a literal term involving lots of glue and Scotch tape. In fact, my entry into the appraisal world was even before electric typewriters became common. Delivery was generally by U.S. mail, or by hand when clients were local. Accordingly, all aspects of the job took longer. There was also a great deal of freedom and, in a sense, romance to the job. We were highly interactive with clients, town halls, Realtor offices and other appraisers. Necessity required that all groups work well together. The secondary market was just getting under way in the U.S. and the major consolidation of banks had not yet begun. Basically, lending was a local activity. It was not uncommon for lenders to have a committee that would take a ride around the neighborhood and approve a loan with their basic knowledge of the borrower and the area. Since the lenders held the collateral themselves, there was a high incentive to make good loans. Just a few months after I started working in the appraisal industry, the 30-year fixed rate peaked in October 1982 at 18.45 percent. >> SEPTEMBER 2011
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Our New England Company – Property Financial Appraisal Services I appraised for several years as a field appraiser in the Boston area and began specializing in Boston condos (a somewhat new thing in those days), as well as high-end oceanfront properties. It was highly enjoyable work but I felt I did not know nearly enough. I decided to pursue a residential specialty and earned my SRA from the Society of Real Estate Appraisers (now known as The Appraisal Institute). As part of my wish to give back for what I had learned, I became a mentor for the next group of SRAs. From 1985 to 1988, the company that I worked for began to expand. After a friend and fellow appraiser, Steve, bought the company, he and I started working on a strategy to grow it into a New England company. We only had staff appraisers and we grew by establishing offices in strategic locations. At our peak, we had 10 offices and 100 appraisers, making us the largest appraisal company in New England. After the boom of the mid1980s, the inevitable bust and decline in the market began. There had been overaggressive lending, especially in the condo market in our area. Properties were losing value precipitously, which led to a defining moment in our company. By 1989, we had found our footing as a company. We had established offices with experienced appraisers/managers; I was an SRA and a well-known teacher to lenders throughout the area; and we had a rigorous training program and a quality control department reviewing all appraisals. We had started a commercial division, hired an MAI-certified appraiser to run it and were even growing our own MAIs. We had devised an original way to send appraisals to a central review location and our lenders were quite happy with our performance. We even had 42
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computers, fax machines and a good strategy for going forward.
We were the first appraisers to begin noting such a decline. While our lenders understood, they told us that they would not be able to give us any more work. We argued with them but to no avail. Within one week of indicating declining values on our appraisals, we lost half of our business. However, the market was declining and it became quite clear that it was necessary to indicate this fact on our appraisals. In fact, part of our training focused on how to verify and determine a declining market. We were concerned by how our lenders – mostly credit unions, community banks and mortgage bankers – might react. Therefore, we called our lender contacts to tell them what was happening. We were the first appraisers to begin noting such a decline. While our lenders understood, they told us that they would not be able to give us any more work. We argued with them but to no avail. Within one week of indicating declining values on our appraisals, we lost half of our business. Steve and I kept a high-quality bottle of brandy for
momentous occasions (both good and bad) and this certainly merited a large drink. We agreed we would give it a week or two but would probably have to close. It had been a good ride. That was on a Friday. We came into the office on Monday and on our fax machine was a list of 50 properties with a note from a senior vice president of a very large New York lender asking that we call him. What could this mean? He told us that he was in charge of their REO division and they were going to need appraisals on thousands of properties throughout New England. He had heard about us as a company that would not work with their retail division because of the pressure these divisions indicated they would exert. Within a few days, several of our other lenders called us. Our contacts that had cut us off from origination work now were in the REO division and they wanted to use us. So it came to pass that for the next three years, 70 percent of our work was REO. During this time, I also became the appraisal representative in the northeast for Freddie Mac and met monthly with a group of industry leaders to strategize and help Freddie Mac with its portfolio.
First American Appraisal Services /eAppraiseIT/ CoreLogic Due to a fluke, my company met First American Title at a convention in New Hampshire. It turned out that both of us were selling the same flood certification product that lenders were obligated to obtain. More interesting was that First American had just purchased the flood company. This led to a memorable meeting in Boston where we agreed on a successful strategy to work together. For several years thereafter, we became First American Title’s exclusive appraisal company in Massachusetts and they helped us establish an appraisal division focusing on lawyers.
We always thought we got the benefit of the bargain but as it turned out, they thought they got the long end of the stick. This was a wonderful relationship because both partners felt they caught the gold ring. In 1995, First American decided to start a national appraisal management company, and we were one of the three companies they selected to purchase and mold into a unified company called First American Appraisal Services. This purchase was a rocky road for us. It took us nearly two full years to conclude the actual deal because we were concerned about losing control of our company. In addition, we had almost no idea what a multibillion-dollar company was really like. It took us a few years to really understand and appreciate a national perspective and a national rhythm as First American Appraisal Services became one of the major appraisal management companies in the country. Our dreams of a highly integrated, serviceable company, both to our lenders and appraisers, became a reality. What we had fashioned through electronic duct tape and glue in the 1980s and ‘90s was now available through highly advanced networks and software, allowing appraisers to efficiently work from home at their own rhythms. In addition, the electronic access to data increased exponentially so that the idea of literally driving to a town hall or county seat (except in some rural areas) became a thing of the past. I was given many opportunities to help grow the company as chief appraiser, head of operations and eventually president. I often reflected on how helpful my legal and psychology background turned out to be in this new adventure as a senior-level executive.
Offshoring In the late 1990s and early 2000s, offshoring was becoming more prevalent in the country. Now it is so common that there is even a TV sitcom about it (Outsourced). But at that time it had a negative connotation due to American job loss. First American already had a presence in Manila and India. We (the appraisal company) were asked to explore the opportunity to offshore some of our processes and utilize Manila and India as a backroom. This would provide positive results in efficiency, ‘round-the-clock coverage, a financial advantage and improved quality. Such exploration and eventual adoption of offshoring had an enormous impact on our company and on me personally. I saw up close and personal how the global market would impact every aspect of international commerce. I had the opportunity to travel to India and Manila many times doing both training and consulting and it was enlightening. For those of you who have read Thomas Friedman’s The World Is Flat, I had a similar epiphany at just about the same location in Bangalore. I could clearly see many countries already participating in a global market and some of the challenges that lay ahead for our country.
Now and Future Throughout the past decade, AMCs have become a major force in the residential mortgage business. This was a natural consequence of large lender consolidations that resulted in perhaps 60-70 percent of all mortgage originations being handled by five
major lenders. All of these lenders utilize AMCs and are generally pleased with the services provided by AMCs. The AMC model has produced challenges for some appraisers who have never worked with AMCs. In fact, it is an ongoing issue in the industry. The American economy is currently challenged, the housing market is slow and there are too many appraisers for the amount of work available. Many appraisers are leaving the industry. Additionally, there will be attrition because the average appraiser is in his or her mid-50s. It is also more challenging to become an appraiser than it used to be. In light of a decreasing appraiser population, the lending industry as a whole will need to confront the importance of reliable and credible property valuations. This has already begun with automated valuations, alternative valuations, valuations done by real estate brokers and improved electronics for appraisers themselves. I further suspect the market will develop even more sophisticated products utilizing data and appraisers to service future needs. As for my own future, my wife and I have had a mission with helping animals and people for many decades. We take our dogs to nursing homes, work with horses and people with special needs, volunteer at our local animal shelter, etc. I have been studying and will receive my certification in therapeutic dog massage in November, so I am “off to the dogs.” I wish all participants well as you work through the many challenges and opportunities facing the appraisal industry. Having worked with many industry leaders, I know there is great passion and intelligence to create solutions that work well. Most importantly, thanks for three decades of opportunities and friendships! 6 SEPTEMBER 2011
* LIVEVALMAG.COM | 43
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From 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. Things Appraisers See features all your personal bear and aircraft moments.
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It’s on -Scott the run again! Sc hra m m 44
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So go on, and shoot us over your photos to info@livevalmag.com or simply log on to our website to upload them under Things Appraisers See and look for them in an upcoming issue. For even more strange photos go to facebook.com/livevaluationmagazine.
Now that takes skill. -Anony mous
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SEPTEMBER 2011 LIVEVALMAG.COM | 45 * Troy, MI 48098
< september 2011 > Last month’s articles sparked a lot of debate. Here are some responses from our readers.
valuation
voices
do you have something to say?
www.livevalmag.com 8
The Franken-Dodd Monster Great job Bruce! Not sure there will ever be ‘the solution ‘ - that would entail price fixing which is mentioned to make all appraisers happy. The marketplace sets the fees and it has always been appraisers who bid lower and lower ... while hourly attorney fees and such always go up. The problem with residential appraisals will always be dealing with the issue of 95 percent + of appraisals coming in at the contract price or higher. It is tough to ask the market to pay for something that it has the answer given to them for free 95 percent of the time. But that digresses ... hopefully everyone in every profession can get paid an income that makes it worthwhile to be a professional.
Livevalmag.com is your #1 source for news. Here is feedback from the story that received the most chatter this past month.
Testimony in Support of Marketplace Control of Appraisal Fees
- George Mann
Dodd-Frank did nothing to help appraisers. Some fees are lower than before it was past. AMCs except you to do a $2 million home for $225.00. As appraiser’s, we should all stand up to them and make them pay us what we are worth. If we all did that, fees would have to increase.
- Richardlebby
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Customary and Reasonable … Really? It appears to me that customary & reasonable means different things to different people. I constantly get requests for fee & turnaround quotes. They claim they are trying to ‘place’ the order for a fee of ___ (from the 1980s) I respond with my customary fee that I have been charging for he past three years, along with a very FAST turnaround. They NEVER place an order ... EXCEPT when they have a gawd-awful WHITE ELEPHANT hundreds of miles away ... that nobody wants! It’s amazing how they can suddenly pay a higher fee when that happens...
- Common Sense
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I applaud Mr. Kirchmeyer for stating that his AMC company pays C&R or close to it. Problem is, he’s not one of the top 3 or 4 AMCs in the country who have well over 75 percent - 80 percent of the mortgage business. All of those individual mortgage businesses that existed a few years ago that were our clients that we used to get mortgage appraisals from no longer exist.
- concernedFLAppraiser
“Appraisers control this. As long as someone is willing to do the work for nothing and the bank is willing to accept the poor quality they are paying for. It will not stop. I for one have refused each and every appraisal that has been ordered at less than my full fee. And will continue to do so. If that means I don’t work so be it. I can’t afford to spend the gas, paper, toner and time doing work that is not profitable. There are too many other things I can do. If you refuse to accept the fees. They will increase them. I know. I am still in business and charging a fair fee higher than what the local appraiser group is saying is the standard. And getting it.” - Howell
Why Is the Average Appraiser 50?
Something on your mind? Need to get something off your chest? Hate something we do? Love something we do? Letters to the editor may be e-mailed to emily@ livevalmag.com.
Everyone in the appraisal profession knows that we are living through hard times right now. But times will change and it is up to the next generation of appraisers to take the reigns and start making the changes that will lead to a brighter future for our industry.
- Chausseeappraisals
I am excited that we have some talented and well educated appraisers coming into the field. Go Harvard! I believe that the entire educational process should be revamped. The Appraisal Institute supported a Masters Degree Program for real estate appraising in the late 1980s through 1995. I was one of those graduates from the University of Florida. This is the way the appraisal field should be educated, just like other PROFESSIONS.
- Michael Spaziani
When I read this article it really brings back memories! I’ve been working in the appraisal industry since I was 17 years old. I became certified at age 22. Other older local appraisers look down on you and don’t even give you an opportunity to prove yourself! It takes hard work to make good money, but is so well worth it. I enjoy homes and plan on staying in this field for a long time!!
- Young and hard working!
WALL
SHAME
We know you’ve been there – do stupid requests leave you pulling out your hair!? Well feel free to let loose on our Wall of Shame. Everyone remains nameless so no one gets hurt - it’s just a good ol’ venting session.
M
Need even more LiveValuation Magazine in your life? Well, it’s a fingertips’ reach at www.facebook.com/ livevaluationmagazine. Not only can you find all the latest industry news here, but you may come across other goodies ... like this photo of our Publisher’s impromptu wilderness-inspired office.
Testimony in Support of Marketplace Control of Appraisal Fees “All this being said if you think the market is going to change and some huge government entity (because they are real efficient and non bias) is going to swoop in and force big banks to pay us more, than more power to you. I personally don’t think anything is going to change and I am developing an exit strategy. I like you, am not happy with this fact, but I also admit that it is fact and have chosen to move on.” - jw purdy
I got a call from a third party company to do an FHA appraisal 73 miles one way from my office. They wanted to pay me $280. I politely declined the order stating that an FHA appraisal is $400 and it would be an additional $50 trip fee. They promptly rescinded the order. Three days later, I got the same request with a fee of $350. I again, stated that my price for the appraisal has not changed and was STILL $450. They again, rescinded the order. Two days later, I again got the request, finally agreeing to the $450 fee, however, it was now a RUSH order and they needed it in 2 days. Just AMAZING!!! Until we as appraisers start turning down these low fee orders, these companies are not going to get a clue!
M Submit your Wall of Shame-worthy comments to info@livevalmag.com. We promise, you’ll feel better after you do!
SEPTEMBER 2011
* LIVEVALMAG.COM | 47
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CoreLogic stats
june highlights 2011
alaska
+0.1%
nebraska north dakota
+1.2%
+0.1%
minnesota
-9.6%
illinois
-12.2% idaho
new york
-12.3%
+3.3%
nevada
D.c.
-12.4%
+2.4%
arizona
-12.3% Including distressed sales, the five states with the highest appreciation were: New York (+3.3 percent), the District of Columbia (+2.4 percent), North Dakota (+1.2 percent), Alaska (+0.1 percent) and Nebraska (+0.1 percent).
Including distressed sales, the five states with the greatest depreciation were: Nevada (-12.4 percent), Idaho (-12.3 percent), Arizona (-12.3 percent), Illinois (-12.2 percent) and Minnesota (-9.6 percent). North dakota
+5.9%
minnesota
vermont
-6.8%
+2.6%
new york
+4.6%
delaware
-6.7% nevada
-9.9% arizona
west virginia
-8.0%
+3.6% texas
+2.8% Excluding distressed sales, the five states with the highest appreciation were: North Dakota (+5.9 percent), New York (+4.6 percent), West Virginia (+3.6 percent), Texas (+2.8 percent) and Vermont (+2.6 percent).
mississippi
-7.3%
Excluding distressed sales, the five states with the greatest depreciation were: Nevada (-9.9 percent), Arizona (-8.0 percent), Mississippi (-7.3 percent), Minnesota (-6.8 percent) and Delaware (-6.7 percent). SEPTEMBER 2011
* LIVEVALMAG.COM | 49
CoreLogic stats
june HPI for the Countryâ&#x20AC;&#x2122;s Largest Core Based Statistical Areas (CBSAs):
| Cbsa |
June 2011 12 month hpi changed by cbsa
single-family
single-family
excluding distressed
Chicago-Joliet-Naperville, IL -13.4% -4.7% Phoenix-Mesa-Glendale, AZ -11.4% -7.9% Atlanta-Sandy Springs-Marietta, GA
-7.4%
-1.3%
Los Angeles-Long Beach-Glendale, CA
-6.7%
1.4%
Riverside-San Bernardino-Ontario, CA
-6.0%
-3.4%
Houston-Sugar Land-Baytown, TX
-3.2%
4.3%
Philadelphia, PA -2.9% -1.8% Dallas-Plano-Irving, TX -0.6% 3.4% Washington-Arlington-Alexandria, DC-VA-MD-WV
0.4%
3.3%
New York-White Plains-Wayne, NY-NJ
2.0%
3.5%
2
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