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Richard Heyn, SRA and Dawn Molitor-Gennrich, SRA keep you in-the-know.
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Summer 2012 Volume 30
From the Publisher Readers Respond Lender’s Choice: Violate USPAP or Blacklisted By David Brauner, Editor
8 12 14 16 18 22 24 26 28 30 32 36 38 40
Fighting Your Way Off a Blacklist By David Brauner, Editor
When Nice Guys Finish Last (AMC Complaints Rise) By T.J. McCarthy, SRA
How to Work Successfully with AMCs By David Brauner, Editor
How Well Do You Know Your Rights? By David Brauner, Editor
Professional Appraiser Series: Other than Lender Work By David Brauner, Editor
Environmental Due Diligence by Francis Xavier (Rich) Finigan
How to Increase Volume AND Quality By Dustin Harris, “The Appraiser Coach”
Closer Look for Home Inspectors: Risk Management: Inspection Basics to Manage Risk By Michael Casey & Una Lucey, Esq.
OREP Announces New Home Inspector Insurance Program Land Value: Extraction Method By Philip G. Spool, ASA
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Moving Ahead By David Brauner, Editor
According to our OREP/Working RE How’s Business? survey (pg. 37),
most appraisers are as busy or busier than last year. There’s still a lot of discontent but the silent majority seem to be back to work. Most appraisers we talk to at OREP, to place their insurance, tell us they are scrambling to keep up. One caveat—this is being written in the spring when times are good; you are reading this in summer, which tends to be a slower time. We hear AMC fees are rising in general, especially for those who refuse to work for less. Many Many are diversifying into non-lender work which is appraisers are more satisfying and provides more security and taking this time stability. Many are learning how to fire clients who are more trouble than they are worth, or refuse to to reorganize, pay what the job is worth. AMC ranks are thinning hire help or too, but as appraisers get savvier and more surefooted, those AMCs that want the best appraisers increase their will have to compete for them. When the banks technology care about using the best appraisers, AMCs will know-how: care. Many appraisers are learning their rights and “going mobile.” responsibilities in this post real-estate-collapse world of increased state and federal regulation. It is a double-edged sword: appraisers have more protections and rights than they realize but they also are under closer scrutiny to do creditable work. It’s important that everyone knows what is expected of them as there are severe consequences for anyone who runs afoul of the rules. Many appraisers are taking this time to reorganize, hire help or increase their technology know-how: “going mobile.” In a recent OREP/ Working RE webinar, 39 percent of the attendees polled did not have a website! This issue, we take you inside all these topics in the hope that some of you will explore a new idea, exercise a new protection or pursue an opportunity when the little voice inside you says “go for it.” The profession has suffered an unprecedented assault; most appraisers lost something, some lost everything. But today most are still standing—a few are stronger than ever. The ranks are thinning but as a result, fees and opportunities are growing. No matter what happens with customary and reasonable fees or other changes which may or may not restore fairness to the profession, it feels like we’ve turned a corner and are moving ahead. WRE 4 Working RE Summer 2012
Fighting Your Way Off Blacklist After reading your article, I am in the process of trying to make the same complaint to see if it gets me anywhere. They (large bank) don’t give you a chance to rebut or even threaten you first. They simply send you a letter stating you have been placed on their ineligible list. In my case, they cited two appraisal reports. One of the reports was on MY OWN house, which I built myself a few years back and have NEVER appraised. The other was in a rural area made up of 40 acre parcels and they did not like my comp selection. I responded with the facts about my own house and asked to see a review of the rural property as yes, the comps were not great, but they were all I had available and I wondered what sales were found that were considered to be better than what I provided. I was answered with a letter indicating that their decision was final and that the issue is over. The most disturbing part is that because an appraisal was cited that I did not complete, one might assume that the reason this report was chosen was due to my name simply being placed into a computer which pulled up any reports that are not perfect reports. Further, this leaves the question of whether my report was even reviewed or just selected because it had comps over one mile or adjustments that exceeded recommended lending guidelines. Surely an intelligent person would catch the fact that the report was not even mine if they were conducting a review of my report, right? After all of this, I tried to look at things from their perspective, a business perspective. I understand the reason for blacklisting. However, a blacklist should not be a career death sentence. There should be something in place which
gives the appraisers a chance to correct the problem if there is indeed an issue with their work. I spoke to the person from (the very large bank) who wrote my letters of denial. I asked if there was anything that I could do to be removed from this “do not use” list. She informed me that there are no options—that once you are on the blacklist, you are on forever. I informed her that this decision affects ALL work for an appraiser, as indicated in your article, since AMCs cannot take the chance that it may go to one of the big four and that these decisions should be weighed carefully as this has a huge effect on a person’s livelihood. She did not seem to have any remorse and actually seemed irritated that she had answered the phone. I live in an area made up of many smaller towns, many being quite rural. Most are of second home, resort towns, made up of all custom built houses on differing sized parcels/lots. As you might imagine, appraisals completed in this area are often not great-looking reports but we are limited to the data that is available. I wish it were all cookie-cutter tract housing but this is simply not the case. I do honest work to the best of my ability which I think is also true for the majority of appraisers. Blacklisting should be reserved for cases of potential fraud, dishonesty or just plain incompetency, but only after corrective action has been attempted and an individual’s work is still lacking. – JS
When Nice Guys Finish Last Thanks to this article I probably avoided becoming a victim. An AMC told me they did an internal review on a report I completed and felt I came in conservative on my value. They asked me to consider raising the value $5,000. I said no way Jose.” —Raul Leon Editor’s Note: See story pg. (14). Story reprinted from Working RE’s Online News Edition.
I once again love appraising. I found other appraisal work for non-mortgage clients. I have taken back the control of my business. I say no to low fees, I say no to AMCs that treat me badly. AMC Rater
You would provide a good service to appraisers if you would actually rate the AMCs and provide alerts to their financial ability to pay us. I have to worry about that every month. In my area there is no work unless you go through an AMC. I am not getting good fees but fair fees—at least sufficient to keep me in business so far.
After 25 years of appraising, I can only say that if I were to pick a profession today, it would not be appraising. I have 18-year-old kids asking for things that are ridiculous. It would make for a nice article to print stories about what is asked to give the lender. I was asked to explain the damaged car parked near the property. It was a result of a hit and run the night before and belonged to the neighbor and it happened to be shown partially in one of my front pictures! And the best part, I had to find out whose car it was! Get a police report as an attachment! Now you understand why I do not like appraising anymore!
—Dennis Geist, Geist Real Estate Appraisal
Editor’s Note: OREP/Working RE’s AMC Rater Blog (at WorkingRE.com) is set up as an information exchange on AMCs. There were warning signs about AppraiserLoft, for instance, in this blog and in other forums. Also, the 2012 AMC Guide separates the good from the bad AMCs (see pg. 38), based on the experiences of the author Bryan Knowlton.
Appraisers, Bullies, AMCs and Banks Are you hearing out there that many appraisers are giving up doing review work? I used to do quite a bit but I am giving it up entirely because of DoddFrank. With the new regulations it is too much of a risk for a $375 review to get fined $10,000 if you don’t turn someone in. I do not believe it is our responsibility to be policemen. Our job is to give opinions. And if the lender and client have a beef, that is their responsibility. —Doug Quenzer, Wisconsin Certified Residential Appraiser
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25,000 homes…or something like that and the last two thousand have been awful. —George Alexa, Northern Virginia
How Well Do You Know Your Rights? I appreciate what you are stating in your article but in real life it is not going to work. I have stood my ground with AMCs and refused or put up a fight on some of their requests only to be blacklisted. I have called after 90 days of no payment and requested payment, only to be blacklisted. I have requested fee increases for complex properties, only to be blacklisted. I have scheduled appointments within 24 hours, greeted the homeowners with glee, wore slippers in their house, showed up 10 minutes early, worked weekends and holidays, only to be blacklisted for doing my job. This, after all of the tears I have shed over how poorly I have been treated and the position I have been forced into—to beg for work and just take the order because I need to put food on the table. To hate
6 Working RE Summer 2012
my job that I once loved, but at the end of the day, I am the only one who can make a change. And just like all of the articles we read, that say you can do it, just say no to the low fees and go after other appraisal work—well they are right. I once again love appraising. I found other appraisal work for nonmortgage clients. I have taken back the control of my business. I say no to low fees, I say no to AMCs that treat me badly. I say yes to my independence and to you I say take your business back and take control of your future. —Cindy Sizemore
Good News Good news for appraisers! It is so busy during the first four months of 2012 you do not have to accept low-fee work. I have successfully raised my price with the couple of AMCs that allow you to set your own and I have aligned myself with two new AMCs that pay higher. I take private party assignments. I called a local appraiser after seeing a copy of his recent appraisal, made
for an AMC: $225 for seven comps. I could not believe my eyes. I called him and told him I am in the middle of an FHA condo for $370—five comps. You appraisers who are complaining about low-fee work and are setting the fee at $225, are you kidding me? I told this appraiser all he needs to do is call the AMC and raise his price. Leaving $100 on the table for every appraisal is stupidity. You’re not going to undercut anyone but yourself. I am happy to report that life is good; I will make over $100k this year and I ride my bicycle a minimum of three-four days a week to my assignments. I’m going green. Yes, the homeowners are somewhat puzzled by this but are happy to know that they at least have a LOCAL appraiser. By the way, we are fortunate enough to have enough requests to focus on the local work and turn down the more distant orders. I have denied more than five appraisals this week alone. Good luck out there and love what you do. WRE
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Lender’s Choice: Violate USPAP or Blacklisted By David Brauner, Editor
Editor’s Note: A large lender is giving appraisers an ultimatum, saying in effect, violate USPAP or be placed on a “do not use” list. John Dingeman is one such appraiser who finds himself between that rock and that hard place. But he understands his rights and is fighting back.
Talk about being between a rock and a
Faced with violating USPAP or the loss of business, Dingeman chose a third option: fighting back.
hard place. The new normal for too many appraisers these days is being banished to a “do not use” list by a lender, without any opportunity for rebuttal or even knowing why. Now here’s a new twist: at least one large lender is giving appraisers the chance to rebut a questionable review; the problem is that doing so may violate the Uniform Standards of Professional Appraisal Practice (USPAP). John Dingeman, a Certified Appraiser in Ariz., recently received a letter from Chase, citing “possible USPAP violations” and demanding a response within 21 days or else. The or else is exile to Chase’s Ineligible Appraiser List. Appraisers who have faced a similar fate say that orders from appraisal management companies (AMCs) dry up almost overnight as a result. Not only do orders stop that are associated with that particular lender but all orders cease. Here’s why: AMCs can’t take the chance that a loan, any loan, might end up at that lender someday—so they simply turn off the spigot and skip to the next appraiser on the call list. Since there are fewer (big box) lenders controlling a larger share of the business, running afoul of one can mean trouble.
Fighting Back Faced with violating USPAP or the loss of business, Dingeman chose a third option: fighting back. He responded to
David Brauner is Editor of Working RE magazine and Senior Broker at OREP.org, a leading provider of E&O Insurance for appraisers, inspectors and other real estate professionals in 49 states. He has covered the appraisal profession for over 20 years. He can be contacted at email@example.com or (888) 347-5273. Calif. Insurance Lic. #0C89873.
8 Working RE Summer 2012
Chase with chapter and verse of various state and federal laws protecting appraiser independence. “Per USPAP’s Confidentiality section of the ETHICS RULE, I am not permitted to discuss the appraisal or the results with anyone other than my Client or Intended User, and Chase is neither,” Dingeman said. “Even if the Client is no longer in business (Per USPAP FAQ 69) the appraiser-client confidentiality is not terminated and the appraiser is still required to comply with the requirements set forth, regardless of the status of the client.” Because, in his words, he was threatened and intimidated with “placement on the Chase Ineligible Appraiser List” if he failed to respond within 21 days, Dingeman says he was compelled to send copies of the letter and his response to various state and federal regulatory agencies for action, as well as to the FBI and the Chase Appraisal Compliance Officer. “This type of intimidation placed upon appraisers is inexcusable and should not be tolerated. Chase should be accountable for knowing what USPAP requires,” Dingeman says. Other problems cited by Dingeman are that he was not furnished with a copy of the appraisal, so he has no idea whether the bank has a true and complete copy. He also was not provided any information on the reviewer, so he cannot be certain about his/her qualifications or geographic competency. It’s good to know one’s rights, Dingeman says. In his rebuttal letter to Chase, Dingeman writes, “Please be advised that Arizona Revised Statute
32-3603 specifically states that all real estate appraisals and appraisal reviews performed in this state on a property in this state shall be performed only by individuals licensed or certified in this state. Please note that if the review appraiser involved is not licensed or certified in the state of Arizona as a real estate appraiser, he/she are in violation of state law and subject to disciplinary proceedings from the Arizona Board of Appraisal.” Richard Hagar, SRA, who advised Dingeman on the Chase issue says, “Let’s be clear, Chase is asking the appraiser to violate USPAP and talk to them about an appraisal where they were not the client. If the appraiser won’t violate USPAP and talk to them, Chase says the appraiser is violating USPAP and will be blacklisted. Talk about twisting USPAP. How do you fight back? Know more than they do and fight back with the law, rules and regulations.” Hagar, the presenter for the OREP/ Working RE webinar How to Limit Liability, Maintain Independence, and Fight Influence, says it is critical for appraisers to know and understand their rights. “John and I talked extensively about his problem including the ethics and privacy issues,” said Hagar. “He is correct. There is a difference between a ‘client’ and ‘intended users.’ From my point of view, Chase was an intended user but not the client. While they may have obtained a copy of an appraisal from someone, it does not make them the client. Since Chase did not ‘communicate’ with the appraiser nor were they identified as the client when the report was created, Chase does not appear to be the client. Issues like these are exactly why we created the appraiser independence webinars.” Dingeman wonders what’s next. “The question now is what are the nine agencies that I sent a copy of this letter and my response to going to do about it,” said Dingeman. “They have a responsibility to the public and should be knocking on Chase’s door to find out just exactly how many of these
letters have been mailed out. If these large banks are allowed to continue to threaten and intimidate appraisers and send every report to a regulatory board for complaint, as they threatened to, there will be no appraisers left.” According to Dingeman, the saddest part is that banks do have a legal and fair remedy: order a retrospective appraisal with an effective date that’s the
same as the original appraisal. “This would engage the appraiser directly and make the bank the client,” he said. WRE ___________________________________________ Learn more about the OREP/Working RE Webinar Series and Hagar’s webinar Limit Liability, Maintain Independence, and Fight Influence at WorkingRE.com.
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Fighting Your Way Off a Blacklist By David Brauner, Editor
Editor’s Note: Here’s how one appraiser fought his way off a Citibank “do not use” list.
After over two years and many tens
of thousands of dollars in lost revenue, appraiser Bill Smith fought his way off Citibank’s infamous “do not use” list. Here’s how he did it. To begin with, Smith (not his real name), has a “can you top this” aspect of how he was blacklisted in the first place: it was not even his appraisal. Smith was blacklisted over two years ago in connection with an appraisal he completed a “market conditions update” for. Repeat: he did not do the appraisal. Smith’s story is more typical in other details: a form letter arrives announcing the blacklisting without any opportunity to provide feedback or comment; work from one or more appraisal management companies (AMC) dries up, and anger and frustration set in. Smith identified a contact at Citibank and submitted a
12 Working RE Summer 2012
rebuttal. He says they have 30 days to respond and on about day 30 they did: he remained blacklisted with no further explanation—for the appraisal he didn’t do. Smith went higher up the chain at Citibank. This time, a change in status was granted: yes, his work would be accepted, as long as it was accompanied by a review. Most AMCs, no matter how much they like you, don’t like you enough to be willing to order (and pay for) a review on each order. The spigot remained closed. The frustration deepened. About two months ago, Smith simultaneously submitted an online complaint to the Office of the Comptroller of the Currency (OCC) (see below) and his state Office of Real Estate Appraising (OREA-Calif.)—after reading a story in Working RE (Suspension Merry-Go-Round, Vol. 29 pg. 26). The OCC takes complaints on banks directly from consumers, such as appraisers. Smith says one of these two levers did the trick—a few weeks ago he received a letter from Citibank confirming his removal from the blacklist. Smith says the OREA regulates the AMCs that operate in his state, but does not interact or communicate with banks. Smith confirmed that OREA sent an inquiry to the AMC that stopped sending him work (and who ordered the market conditions update in the first place). So, Smith deduces that either the OREA inquiry nudged the AMC to ask Citibank to resolve the issue or, more likely, the OCC complaint got Citibank to move.
By the time we hear anything, a decision has already been made and we have no chance or recourse to defend ourselves. “I’m pretty sure it was the OCC complaint that did it,” says Smith. “Reference to the OCC complaint was mentioned right in the letter from Citibank informing me I was removed from the ‘do not use’ list.” Smith continues, “There has got to be some method for appraisers to present their side of the story. By the time we hear anything, a decision has already been made and we have no chance or recourse to defend ourselves. It’s not right. But if my response is an indication, it looks like the Feds are taking complaints from appraisers seriously.” Smith says it pays to be persistent if you meet resistance dealing with federal agencies in an effort to fight blacklisting. He said he first contacted the agency over a year ago and was stonewalled. “Like many government agencies, they didn’t know what their own procedures are and sent me away, saying it was another agency’s job. You really have to get to the right person. I persisted and someone finally told me about the Consumer Assistance Group which is where I filed the complaint that worked.” (Here’s where to file a complaint: Helpwithmybank.gov. Or call 800613-6743.) WRE
Fall 2011 Working RE 13
When Nice Guys Finish Last (AMC Complaints Rise) By T.J. McCarthy, SRA
Be very careful in post-closing phone calls from AMCs.
Editor’s Note: Author T.J. McCarthy, a member of the Illinois Appraisal Board, sees a growing problem regarding lenders and AMCs filing complaints against appraisers. He offers this advice: be very careful in post-closing phone calls from AMCs.
You receive a call from a lender or an
appraisal management company (AMC) who wants to talk to you about an appraisal assignment you recently completed for them. The call usually comes from the quality control department at the post closing stage of the loan. They start questioning you on your line item adjustments. All the comparables are on smaller lots than the subject property and they feel your adjustment for lot sizes seems a bit high. You want to be a “good” appraiser and not upset your client so you agree that perhaps they could have been a little lower. While they have you on the phone, they also ask if you think your time adjustments are a little aggressive. Again, not wanting to upset a good client, you tell them that maybe you were a little aggressive (even though you really don’t think you were, you’re just trying to appease them), and you state that you will try to find another public data source in the future that is more conservative. Your client thanks you and even tells you to have a nice day. You hang up the phone thinking you handled that rather well.
TJ McCarthy, SRA, IFA is a member of the Illinois Appraisal Board.
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Fast Forward To continue our hypothetical situation: a month later you receive a letter from the Department of Professional Regulation— Appraisal Division, or the equivalent in your state. Your great client filed a complaint against you, stating that you openly admitted to them in a phone conversation that you falsely inflated the value of your appraisal by using inappropriate site adjustments. You also stated that you often use non-traditional data sources to intentionally report market trends that are lower than normal to arrive at higher value conclusions. Yikes! This is really happening to appraisers. And since the Dodd-Frank Act, more and more lenders and AMCs are submitting complaints against appraisers. I serve on the Illinois Appraisal Board which is involved in all appraiser complaints. In past years, we used to say how we had never received a complaint from an AMC, which was true. We would receive complaints from lenders directly but never from their AMC. Now we receive complaints regularly from AMCs. There is no question that appraisers are getting slammed for trying to be a “stand up” guy/gal, attempting to clear up gray areas in their reports. They’re engaging in what they perceive to be an honest dialogue with the quality control department (long after the loan has been funded). Unfortunately, at the post-closing stage, the lender isn’t looking for you to have a change of heart on your final opinion of value. There are no changes that should be made, but now you have
given the quality control department ammo for a state complaint.
No Changes In addition to being careful about what you say and don’t say, you should never change parts of your appraisal because you think it will make your client happy. They don’t drive the process. Perhaps you don’t even realize that you are giving someone a reason to file a complaint against you when you agree to the slightest alteration or allow the opinion of others to dictate how you will complete your assignment. In the meantime, they are on the other end of the phone writing down everything you say as they prepare to turn you and your report into the state. I am not saying that all lenders and AMCs support this type of practice. I certainly am not telling you to
ignore errors and omissions on your reports when a client discovers them and asks for corrections. Nor am I telling you to be unethical. But by trying to be accommodating, you could be creating a problem for yourself where one never existed. I am a member of the Illinois Appraisal Board and I am involved in handling these complaints; I can assure you that the state of Illinois is receiving them. I can’t tell you which lenders or AMCs are filing these complaints, however. Just assume everyone is. It’s getting pretty scary out there, folks. We don’t have to make it harder on ourselves by being overly accommodating every time an angry client calls. We are appraisers, not pacifiers! WRE
Saving You Time and Money The OREP/Working RE Webinar Series will help you increase your bottom line and professional expertise. By bringing together experts from across the industry, OREP/WRE provides you with the opportunity to increase your knowledge and earning power. Learn more and earn more, sign up today.
Top 5 Questions Asked of an Appraiser and How to Answer Presenter: Richard Hagar, SRA
How to Limit Liability, Maintain Independence, and Fight Influence Presenter: Richard Hagar, SRA
Mobile Appraising: Saving Both Time and Money Presenter: Dustin Harris, “The Appraiser Coach”
Maximizing AMC Orders and Income
Presenter: Bryan Knowlton, Author of the 2012 AMC Guide Macbook Air
For more information and current dates and times, go to WorkingRE.com (click OREP/Working RE Webinar Series) OREP members receive priority reservations and discount pricing. Summer 2012 Working RE 15
How to Work Successfully with AMCs by David Brauner, Editor
Editor’s Note: The following was overheard in the OREP/Working RE webinar: Maximizing AMC Orders and Income, presented by appraiser Bryan Knowlton. Knowlton says it is possible to have a thriving and rewarding appraisal business working with AMCs.
If you work with AMCs or are willing
If you’re making less than customary and reasonable fees or working with AMCs who don’t seem to care about the quality of your appraisals or the competency of their staff, you’re working with the wrong companies.
16 Working RE Summer 2012
to keep an open mind about it, here are several key points from the webinar Maximizing AMC Orders and Income on how to find the best companies to work for and how to make more money with less struggle, according to one appraiser who is doing just that. Bryan Knowlton, a Certified Appraiser in San Diego, Calif., and presenter of the webinar, has been appraising over 10 years. He says he is having his best year ever—doing mostly AMC work. About 80 percent of his business comes from AMC work—the rest are private appraisals for estate purposes, date of death, divorce and bankruptcy. Contrary to what many appraisers believe, one of the keys to success for keeping well-paying orders flowing from AMCs is performing high-quality work on a consistent basis. According to Knowlton, this doesn’t mean working for sub-par fees, chasing your tail over quick turnaround times and succumbing to an endless stream of unnecessary stipulations and corrections. The opposite is true, which leads us to another key to success: find the right AMCs to work for and fire the others. If you’re making less than customary and reasonable fees or working with AMCs who don’t seem to care about the quality of your appraisals or the competency of their staff, you’re working with the wrong companies. It’s all about choices, Knowlton says. “I don’t work for less than customary and reasonable fees—I don’t have to
because there is so much work coming in these days,” Knowlton says. “I don’t work for companies who seem to want to find mistakes or who hire incompetent reviewers or overseas personnel. If a company comes back with endless corrections that I feel are unnecessary, I will ask to speak to a supervisor to explain how this is wasting everyone’s time. If it doesn’t stop, I keep raising my fees until they either stop using me or, as in some cases, they need me enough to pay the higher fees justified by all the extra time and work. Either result is okay with me.” The keys to working successfully with AMCs, Knowlton says, is finding the best of the bunch and weeding out the worst; producing quality reports all the time and having an efficient, streamlined process.
Particulars Knowlton lives and works in San Diego County, one of the most saturated markets for appraising in the nation—so it’s not that appraisers are scarce in his area. He says a customary and reasonable fee for a typical tract home is around $350. He seldom accepts less and frequently demands more, sometimes much more depending on the complexity of the property. He says he often requests fee increases and is paid more, over $1,000, for the more complex properties. He says he increases his fees for more complex properties routinely—usually $100 or so more for each extra hour of work. “Many times you’ll get your fee increase,” he says. “Sometimes an AMC might move on but again, either
way it’s okay. There is plenty of work at fair fees. The process allows you to weed out those you don’t want to work with and allows you to be a consistent producer for those you do. Just keep a cool head and don’t take it personally when you are offered low fees.” Which brings us to another key for success—negotiating fees: “You have to negotiate fees with the AMCs,” Knowlton says. You have to be able to show them why the order requires more time and effort and a higher fee. “Once they trust you, most of the time you will get what you deserve or close to it. If they move on or drop you, again, that’s fine, because that’s not who you want to work for. Remember, don’t take it personally.”
HVCC Crash Like many appraisers, Knowlton was blindsided by HVCC and lost most of his business overnight. “I had a couple of mortgages and a family to feed. There were some desperate moments when I worried about putting food on the table,” he says. Knowlton’s prior career in Internet marketing saved the day; he went to work doing one of the things he does best: scouring the web for every AMC he could find. He exchanged information freely with other appraisers around the country about the best AMCs to work for and how to work for each most efficiently. Slowly he began to build his business back up. Out of the struggle came the Appraisal Management Company
Now USPAP 7 Hour
49 hours of CE Required for Appraiser Licensing
Resource Guide which he originally gave away to fellow appraisers. He now sells and updates the Guide regularly. (See below for details.) “The first 45 listed in the AMC Guide send me 95 percent of my work. They are national AMCs that are verified and are sending orders,” he said. “I personally verify and sign up to each company listed. I call to find out where there is an immediate need for appraisers and let readers know.” He says there also are vendor specific errors to avoid so you make fewer mistakes from the beginning and get more repeat orders.” “In the new edition I removed deadbeat AMCs and all the companies that have gone out of business and lowered the number of AMCs to under 300—no need to waste your time applying to companies that don’t send work. I also updated the marketing information, tips and advice on my best techniques for getting more business and making more money in 2012.” This brings us to step one for success: finding the right AMCs to work for. “It starts with a good list,” he says. Next, he says, you must sign up with as many AMCs as possible, approaching it like a business. “I type over 100 words a minute but if you don’t, it pays to hire a family member or friend to fill out the AMC applications. Don’t get frustrated, pay someone to fill out the applications for you. Imagine the amount of work you will get if you sign up to almost 300 companies over a period of a couple weeks.”
In the webinar Maximizing AMC Orders and Income, Knowlton shares other tips for fostering relationships with AMCs—what to do and what not to do, how to streamline the submission process, improve your work product, negotiate fair fees and how to approach your vendor manager with problems before terminating the relationship. In short, how to nurture good relationships and pull the plug on the bad ones. “Now’s a great time to be an appraiser,” he says. “There are fewer appraisers and with the high hurdles now in place, fewer will be able to join our ranks.” It’s about taking action. “AMCs did serious damage to our profession, I’m not saying otherwise. And there are a lot of really bad ones out there,” Knowlton said. “I believe in advocacy to help appraisers consolidate power and speak with one voice. But at the same time, I’m not waiting around for the government to bail me out. I like appraising and am making a good living at it. With a good list you will never run out of work again, provided you use it. I just hope the webinars and AMC Guide help fellow appraisers take action. No matter what change happens, AMCs are here to stay. Find the good ones to work for, weed out bad ones; do good work and demand what you’re worth.” WRE ___________________________________________ For more on the OREP/Working RE Webinar Series and the webinar Maximizing AMC Orders and Income, visit WorkingRE. com or see page 36. WRE
Continuing Education Bundled Packages 3 Convenient (online) 3 Group discount through OREP/Mckissock 3 Appraisers, agents and inspectors approved in 49 states For course information, visit OREP.org (click Benefits, Education) firstname.lastname@example.org Summer 2012 Working RE 17
How Well Do You Know Your Rights? By David Brauner, Editor
Editor’s Note: You’d be amazed at all you don’t know regarding your rights as an appraiser. The following was gleaned from the webinar series: How to Limit Liability, Maintain Independence, and Fight Influence by Richard Hagar, SRA.
Here are some questions for you—the answers might surprise you.
If a loan fails to close, is it within the law for an AMC to withhold payment? Is the person “running” an AVM required to have the requisite experience, which means be “licensed” as an appraiser? If you include three comps in a report, can an AMC/lender demand a fourth, fifth or six comp if the engagement letter only calls for the three?
“If you’re only focusing on USPAP, you are in danger.”
Is it a good idea to “change” your report at the request of an AMC/lender after submission? Is it legal for an AMC to choose an appraiser based on the lowest fee? Is it okay for an appraiser to give a verbal “value estimate” over the phone just to verify whether there’s value? Is it legal for the fee for an FHA appraisal to include a fee for management of the appraisal process?
18 Working RE Summer 2012
and sends it back to them in writing on his letterhead along with the chapter and verse of why it is not legal or appropriate. “That stops the issue right there,” Hagar says. “The banks are scared of the regulators. I don’t threaten or yell—I just try to educate. I put their (illegal) request in writing and it almost always ends there. I typically never hear about it again. This is a way to stand up for yourself and not lose future business.” Hagar says the key is to know your rights and be able to educate your lenders about their duties and responsibilities. Appraisers also need to know what can get them in trouble—what is and is not within bounds. “Complaints are a twoway street,” Hagar says, “and appraisers are being reported to their state boards/ licensing agencies by AMCs and lenders in record numbers. This can end your career. Turning bad appraisers in is mandatory, under threat of penalty. So you need to know what you need to know to stay out of trouble.”
Stand Up for Your Rights
According to Richard Hagar, SRA, appraisers do not need to be pushed around—all they need to protect themselves is knowledge of their rights and responsibilities. “It’s like tooth decay,” says Hagar. “If you let it continue and put off action, it gets worse and worse until the tooth rots out and needs to be pulled. Standing up for your rights is the same. Early action avoids many future problems.” Hagar says that when he gets an out of bounds request from an AMC or lender, he just paraphrases the request
If a loan fails to close, is it within the law for an AMC to withhold payment? No. Is the person “running” an AVM required to have the requisite experience, which means be “licensed” as an appraiser? Yes, if the valuation is to be used by a bank for lending purposes. If you include three comps in a report, can an AMC/lender demand a fourth, fifth or six comp if the engagement letter only calls for the three? Yes, no and maybe. It depends on what has changed between
the engagement and completion of the report. A more definitive answer is included in Part 2 of the webinar. Is it a good idea to “change” your report at an AMC’s/lender’s request after submission? No. Is it legal for an AMC to choose an appraiser based on the lowest fee? No. Selecting an appraiser based solely on the lowest fee is prohibited by numerous federal regulations. Is it okay for an appraiser to give a verbal “value estimate” over the phone just to verify whether there’s value? No. This is a prohibited practice if the verbal opinion is for a “lending purpose.” Is it legal for the fee for an FHA appraisal to include a fee for management of the appraisal process? No. Crossing the Line According to Hagar, reviewers are crossing the line into influence routinely. “Think of it like a traffic cop. If you get pulled over for a traffic violation, the cop doesn’t tell you to go back and drive the road again, this time driving the speed limit,” Hagar said. “Why are reviewers doing that to appraisers? Lenders and AMCs have two options, review the work and A) accept it and fund the loan, or B) reject it based on a USPAP compliant review. Once rejected, they must turn bad appraisers in to the authorities and stop using that appraiser. But do not try to influence or instruct the appraiser! The ‘old’ banking ways are dead. Banks and appraisers better become educated on these changes, and FAST.”
to USPAP; Fannie Mae requirements, Interagency Guidelines, state and federal laws, and the Certification appraisers include in every report,” Hagar says. “If you’re only focusing on USPAP, you are in danger.” Most appraisers are not fully aware of the high standards they are being held to now. “When any lender, including Fannie Mae, discovers a bad report, even if it’s years later, they have the right to sue the appraiser for the bad product,” says Hagar. “By the time our consulting firm is brought in, the bank has selected the bad loans/appraisals, filed the lawsuits, and determined how much money they have lost due to the bad loan. Whom do they blame? Well, they don’t blame themselves. They blame the appraiser, and since the appraiser signs a Certification fully accepting liability for their work, they get sued for BIG BUCKS.”
Hagar says what matters is the quality of the appraisal, the information gathered, and the process and analysis utilized in its creation. The value conclusion is NOT the only thing. “Yes, banks and AMCs have failed to follow the rules and should be held accountable. But appraisers are responsible for the quality and information contained in their work.” And Hagar says, please don’t “shoot the messenger.” “My goal is to warn appraisers, help them understand the system, their liability and the massive toll these lawsuits take on the professional and personal lives of appraisers. All due to poor appraisal practices. The webinars convey the lessons I’ve learned over the last 30 plus years appraising and as an expert witness in dozens of lawsuits.” WRE
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Professional Appraiser Series: Other than Lender Work By David Brauner, Editor
Editor’s Note: According to Andy Anderson, with other-than-lender appraising, the pressure is for accurate, independent reports instead of being compliant.
Funny thing about doing non-lender
Anderson says the key to repeat business with other-than-lender work is producing quality reports and not advocating for or bending to the desired results of the clients.
22 Working RE Summer 2012
work: unlike what most appraisers are accustomed to when doing lending-based work, with non-lender work, the pressure is for accurate, independent reports. And these are the appraisers whose good work is rewarded with repeat orders— not those who are most compliant. “Making the appraisal assignment the focus, and uncompromised, unbiased conclusions the priority—before the wishes and desires of the client, typically results in more respect and repeat orders from other-than-lender clients—not the opposite,” said veteran appraiser and educator Andy Anderson in his webinar Other than Lender Work. Anderson, appraising 28 years in California, is author and presenter of the Professional Appraiser Series of webinars, hosted by OREP/Working RE magazine. Anderson says the key to repeat business with other-than-lender work is producing quality reports and not advocating for or bending to the desired results of the clients. You have to earn the respect and confidence of clients who in many cases do not know anything about the appraisal process. You can expect to spend more time in communication with otherthan-lender clients than with AMC and lender clients, says Anderson, who does appraisals for insurance, divorce, litigation, estate, probate, personal use, tax and assessment, eminent domain and personal property (mobile and manufactured homes). He says the work is more challenging and satisfying because the appraiser is responsible for truly identifying the problem, determining the
scope of work necessary to produce credible results, establishing charges and setting turn times. But the work can also be emotionally draining, like interviewing a family member who just lost their home to fire during an insurance property inspection. “You tend to hear people’s personal stories when having to determine the size, quality and condition of the destroyed improvements. It can be tough and very emotional,” Anderson said. He says dealing with the public also comes with a higher risk of complaints. “Other-than-lender work has a greater potential to create headaches for the appraiser and possible complaints to the state regulatory office (OREA in Calif.), not to mention lawsuits; more so than with the typical lender assignments. The reality is that those who rely and depend on the assignment results will not necessarily understand the process of development, methodology and conclusions outlined in the report. Underwriters and reviewers are more familiar with the forms and reports they read, at least we hope so, and should not need as detailed an explanation of the appraisal process,” Anderson said. But non-lender work tends to broaden an appraiser’s abilities as well as sharpen their communication skills. “The ability to communicate effectively is very important. If the client does not understand what has transpired, you have not only lost the client but any referrals as well,” he said. “It helps if you have the ability to empathize with those you will have to interview in the course of collecting data. Sitting with a homeowner and
going through personal photo albums to determine condition and quality of a destroyed structure is not for everyone.” He says that breaking into this work is not always easy because clients look for expertise and knowledge, which require experience and education. Anderson says the fastest route to non-lender work is greater education and finding a good mentor willing to train you. It takes time to learn and develop the expertise and knowledge in any of these niches. “Appraisers who want to expand their businesses need to take classes on subjects and topics they are not familiar with. I can’t tell you how many times an appraiser will tell me ‘I don’t do mobile homes’ when I invite them to take the Appraising Manufactured Homes class I instruct. Then they call me for advice when they get an order for one and don’t want to turn down the assignment or lose the extra income,” Anderson said. The bottom line for Anderson is that this work puts the appraiser in control, not the AMC and not the
lender. “The underwriter or reviewer needs to be able to prove my appraisal is less than reliable or not accurate and support their reasoning to me—not the other way around. I inspect the property, research the market and complete the report. Having to provide additional data to satisfy an uncontrollable desire for more information, not better information, is not productive. With lender work these days, the demands of many AMCs and lenders seem to have little to do with truly supporting the actual value conclusions. With nonlender work, you are in control of the process and results, and in many cases you can end up as an expert witness in defense and support of the value conclusion. Separate charges apply! See you in class!” WRE ___________________________________________
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Environmental Due Diligence by Francis Xavier (Rich) Finigan
Editor’s Note: Appraiser and educator Rich Finigan discusses liability issues connected to environmental hazards.
In 1994 Fannie Mae formally introduced
There is an old sports adage that it’s better to be lucky than to be good. When it comes to protecting ourselves from the liability associated with reporting environmental conditions, real estate appraisers have been more lucky than good.
environmental due diligence to the appraisal industry—so what has changed? The Appraisal Journal (January 1995), published by the Appraisal Institute, included an article that reviewed what was then new environmental reporting requirements put in place by Fannie Mae and the new Uniform Residential Appraisal Report (URAR) form (effective January 1, 1994). It described the newly revised comment section that requires appraisers to report on “adverse environmental conditions such as, but not limited to, hazardous wastes, toxic substances, etc., present in the improvements, on the site, or in the immediate vicinity of the subject property.” The article says the section “clarifies an appraiser’s responsibility to report what he or she discovers during the inspection of the property and the normal research.” The article identifies an appraiser’s due diligence, stating it must be “more than answering ‘none noted’ and relying on a limiting condition.” It cites USPAP and the G9 provision for guidance, sounding a cautionary note: “There are tens of thousands of known hazardous sites. Don’t be the appraiser who overlooks the site next door, or worse, the subject property.” It is my opinion that when that story was written in 1994, before the digital revolution, it was nearly impossible to gather
Francis Xavier (Rich) Finigan is Educational Director for American Continuing Education Institute, doing business as Calypso Continuing Education (see ad inside back cover). Rich has decades of real estate appraisal, environmental science and construction experience in the residential and commercial fields. He specializes in the appraisal of contaminated properties and developed a unique methodology for calculating diminution. He shares this unique and court-tested methodology with appraisers at his Environmental Hazards Impact on Value seminar. Rich can be reached at FXF@AIAQAS.com.
24 Working RE Summer 2012
the data necessary to meet the Fannie Mae guideline if interpreted literally. Almost two decades have gone by since that article was written. In 2011, Fannie Mae revised its appraisal reporting requirements with the UAD (Uniform Appraisal Datasets) but not much has changed in reporting environmental conditions; appraisers are still hoping that they have limited their liability with the Limiting Conditions in the URAR, regarding not being an environmental expert. Appraisers are still making comments like, “not apparent,” “none obvious,” or “not applicable.”
Better Lucky than Good? There is an old sports adage that it’s better to be lucky than to be good. When it comes to protecting ourselves from the liability associated with reporting environmental conditions, real estate appraisers have been more lucky than good. In an era where Fannie Mae and lending institutions are doing retro appraisals going back to 2005 and 2006, to recover money from appraisers and their insurance companies for errors made to value, can we continue to count on our luck? According to Environmental Data Resources (EDR), “Approximately 85 percent of the subject properties appraised in United States will have potentially sensitive environmental sites within a half mile.” Over the years there have been scores of court cases against real estate appraisers who have failed to effectively report environmental contamination that resulted in loss in value. There are several factors and organizations that dictate the terms and conditions under which an appraiser must
report environmental contamination. They include regulations from HUD and ASB (Appraisal Standards Board). There are other “surrogate regulators” also, such as Freddie Mac and Fannie Mae. These big secondary mortgage market players create guidelines that have the same influence as regulations. First and foremost, we have USPAP and AO9 provision (formerly G9). The AO9 provision is about five pages long, in comparison to its predecessor G9 provision, which was about three quarters of a page long. The ASB has done a good job in the AO9 provision providing guidance to appraisers regarding due diligence for environmental conditions including: • C larifying that the Advisory Opinions are issued to illustrate the applicability of appraisal standards in specific situations and to offer advice from the ASB for the resolution of appraisal issues and problems. • C iting that both the Ethics and Competency rules are applicable. • S tating that “an appraiser need not be an expert on the scientific aspects of environmental contamination, and in most situations the appraiser will utilize scientific and other technical data prepared by others, such as environmental engineers. In these situations, the appraiser should utilize an extraordinary assumption [see Standards Rule 1-2(f)] regarding the information obtained from other experts that is used in the appraisal.” HUD has specific requirements regarding environmental condition described in the 4150.2 manual. They include the requirement to report proximity to landfills or other potentially environmentally sensitive sites. In Freddie Mac Single Family/ Single-Family Seller/Servicer Guide’s Property description and analysis section (44.15), the following directive appears: “Examples of matters about which the appraiser must note and comment include, but are not limited to: proximity of the
Appraisers are still hoping that they have limited their liability with the Limiting Conditions in the URAR, regarding not being an environmental expert. property and/or its neighborhood to a contaminated site; proximity of the property to ground water contamination, chemical or petroleum spills or other hazardous substances that are expected to impact the area for more than one year; proximity of the property to areas that may affect the value or marketability of the property including, but not limited to, the following: industrial sites; waste or water treatment facilities; commercial establishments (other than retail establishments that serve the residential neighborhood); airport approach paths; floodplains and landslide areas.”
Liability Concerns Lending institutions have faced sizeable losses over the past several years and are now conducting industry wide retroreview appraisals in an attempt to recover some of their losses from appraisers and their insurance companies. Appraisers usually disclaim any environmental expertise to explain their lack of research; however, appraisers need not be an environmental expert to have access to data and include it in their reports. Almost all is publically available or can be accessed from several national data providers for just a few dollars per appraisal. If an appraiser doesn’t want to purchase information from a provider that distills and summarizes environmental information, they can visit their EPA region website and numerous state websites to obtain some of the same information. Adding an environmental report to your appraisal will supply the information that has been previously so hard to gather. The AO9 provision provides language to more clearly describe the environmental conditions and how they may
impact the subject property. You may consider replacing comments like “not applicable, none apparent, and none obvious” with something that more clearly identifies the limitations of your observations and reporting. Something similar to the following: “There is (not) sufficient data in the marketplace to indicate or calculate stigma, reduction, or other diminution in value, unless otherwise stated herein. The appraiser is not an environmental expert but has relied on information obtained from SOURCE (Public records, private reports, etc.), attached and included by reference. This appraiser has made extraordinary assumptions regarding subject property value based on data gathered from such environmental reports.” I have included environmental reports in my appraisal reports and language similar to that above and have not received complaints from underwriters. I do not work with AMCs so I cannot comment regarding what their reaction might be. By clearly identifying the limitations of your observations and reporting, while including summaries of environmental conditions in the community, you will remove the burden of liability from your shoulders and place it squarely where it belongs—on the shoulders of a lending institution and secondary mortgage market. Other factors come into play when the site is actually contaminated. They include a determination whether or not the impact on value is solely cost to cure or is this stigma or other diminution because of highest and best use changes. I’ll explore these with you in a future article Calculating Stigma in a Contaminated Property. Good luck in doing good work. WRE Summer 2012 Working RE 25
How to Increase Volume AND Quality By Dustin Harris, “The Appraiser Coach”
Editor’s Note: “Appraiser Coach” Dustin Harris says cutting the time it takes to appraise does not necessarily mean cutting corners—in fact, he says, there are ways to save time and increase quality.
ne of my true joys in life is being fortunate enough to spend a good deal of my time teaching and mentoring other appraisal business owners. In those consulting sessions, I speak often of the “three-legged stool” approach to success. Those legs consist of both the use of technology and the implementation of systems, but the sturdiest leg comes in the form of other people. In my world people are assets. A relationship properly forged and sustained on integrity is a win-win for both parties. In this economy, they are grateful to have a job and my life is enhanced to have them as an employee. I find it interesting that a large number of appraisers still have some aversion to sharing the burden of their trade with others. Almost every other professional I can think of employs the use of help to assist in making their business a success. Doctors do it. Lawyers do it. Tax preparers do it. Real estate agents do it. But appraisers are somehow under the impression that they must do everything on their own (despite the fact that USPAP and Fannie/Freddie both allow otherwise). Consequently, most appraisers continue to get what they have always gotten because they continue to do what they have always done. As many are finding out, in today’s economy, if you continue to do what you have always done, you are likely to find yourself sliding backwards away from profitability.
Working More and Making Less As I meet with my clients I find a common theme—most are working 60+
hours a week, are turning down work because they can’t keep up, and still cannot seem to pay their bills. Sound familiar? There is a better way. I often ask them to try an experiment—for one day, carry a stopwatch wherever you go. Try it. Every time you do something that is not necessary for the appraiser to do, time yourself. They are always surprised at how much time they actually spend doing things that could be delegated to others. And what could they be doing with that time if they could hire someone else to do it for them? More volume, of course (or just get your peace of mind back if you prefer). How much are you worth per hour? If you do not know, figure it out (as my mother always used to say). Are there things that you do for $XX per hour that you could delegate to someone for $YY per hour (a lot less than $XX)? Of course there are. Here is the cool thing... when you employ help the time you save often allows you to produce more which allows you to actually pay your new employee. What a concept! For most people, one of the biggest aversions to hiring is the belief that allowing someone else to help them with their work will cause the quality to drop. The old adage, “if you want something done right, do it yourself.” Though this can be true, often the exact opposite is the case. Here’s why: if two eyes are better than one, four eyes are better than two. Having a properly trained assistant to help you with each of your appraisal reports is pure gold.
Dustin Harris is a multi-business owner but he has found most of his success as a self-employed, residential real estate appraiser. He has been appraising for nearly two decades. He is the owner and president of Appraisal Precision and Consulting Group, Inc., and is a popular author, speaker and consultant. He owns and operates TheAppraiserCoach.com, where he advises and mentors other appraisers helping them to also run successful appraisal companies and increase their net worth. He is also the founder and president of Your Appraisal Office (YourAppraisalOffice.com) which implements some of the systems he has developed.
26 Working RE Summer 2012
There is never an appraisal report that leaves my office that at least two people have not gone over with a finetoothed comb first. Thus, since I began hiring and working with other professionals, BOTH the quality of my work AND my volume have improved simultaneously. See, you can have your cake and eat it too! “But Coach,” you say, “I cannot afford to hire anyone right now.” Listen, if you are working more than 40 hours a week, turning down work, or could be doing more if your turn times and quality were better, and still not paying your bills, you cannot afford NOT to employ some help!
Mobile Appraising You can also save time and money by leveraging technology with mobile appraising. Appraisers who are truly “mobile” are using laser measurers, tablet PCs or smartphones, and software to upload reports remotely to the office to be more competitive—to save time and money. As I travel the country mentoring various appraisal business owners, I am intrigued by the fact that so many appraisers are still using a tape measure and a clipboard to gather onsite data. When I show them the mobile technology that is available to us, they are typically hesitant to embrace it. Here are the “big three” justifications I hear for not moving forward and some food for thought about streamlining your business to be more competitive.
Too Expensive Many say the “gadgets” are just too darn expensive. Is gas for your vehicle too expensive? Well, yes it is, but we need it to do our work. From MLS subscription fees to form-filling software, we invest heavily in many aspects of our businesses that are necessary. Investing in technology should be seen as a cost
of doing business that is required to stay competitive, rather than a choice that you can’t afford. When I first started using a laser measurer, I had the thing paid for in the first three months of ownership. My first Disto cost me $650. Sound expensive? It was but it cut my inspection time by an average of five minutes. No big deal you say? With the volume I was doing at the time, that meant one more appraisal per month that I could fit into my schedule. After overhead, it took 90 days to return my investment, with the time savings it provided. My most recent toy, an iPad 2, was paid for in even less time by speeding up the time it takes me to do reports. It saves me twice the time the laser did and cost me about half as much. Though there was a short transition period—I was used to using a smartphone with about 20 percent of the screen size as compared to the tablet—I quickly caught on. I find the iPad saves me twice the time but with a similar price tag to the laser. The fact is that the purpose of technology is to make our lives easier and more efficient. Efficiency in business equals increased productivity and higher profit. Not moving forward results in no progress.
Don’t Save Time There is an argument to be made that inputting all the data on a tablet is actually more time consuming. I will concede that this is true when discussing the time spent onsite. Where mobile tools really shine is not at the inspection but when you get back to the office. Most appraisers are inspecting every home twice: once onsite and a second time on their desktop. When you use mobile tools you input all of the data at the inspection and there is no need to reenter it back at the office. This includes the front page of the URAR, the sketch, and even inputting the pictures! Without mobile tools, I spend an average of 20 minutes at each inspection (when inspecting a vacant house and have no pressure to talk to the home
owner). I then spend another 20 minutes at the office redrawing the sketch, inputting photos, and entering the data from the field into the subject sections of the major form. With these helpful gadgets, my time at the inspection may increase to 25 minutes but there is no re-entry at the office. In other words, I save an average of 15 minutes per appraisal using mobile tools versus doing it the old way. Not a big enough time savings for you? If you average one or two appraisals per day, you are saving up to 30 minutes a day. How many more appraisals can you do per week by switching to mobile technology? You know you want an iPad anyway and I just solved the question: “How do I convince my spouse?” You can thank me later.
Old Dog New Tricks I’ll admit that when I attend appraiser conferences most of the heads are either grey or balding. Like I can talk! But, as a happy client I was mentoring recently told me, “You can teach old appraisers new tricks.” Here’s the deal: most appraisers make the common mistake of not giving new technology enough of a fair shake. I sent my first laser measurer back to the distributor after only two days of use, complaining that it was just too complicated and it was easier for me to use my wheel. They sent it back to me with a note that read, “Please try our product for a full two weeks. If you are not convinced after that period of time, send it back for a full refund.” I did and I will never go back to a 100-foot tape or measuring wheel again. With a little instruction and a lot of patience, you too can learn new things that will dramatically enhance your effectiveness and your business. How hard is it? If my four-year-old can teach himself to play Angry Birds, you can surely learn how to sketch a house on a tablet. You must remember that the first few days of using almost any new technology will slow down your productivity until you get through the learning curve. But once you get the hang of it, watch out!
Warm Body Element Here is the dirty little secret: the real time-saver with mobile tools is what happens between the inspection and the appraiser arriving back at the office. The mobile appraisal software programs that I am familiar with all include the ability to send your reports back to the office remotely from the field. At my appraisal office, that is where the magic happens. While I travel from the inspection to the office, my staff is busily tweaking and strategically preparing the report for my technical expertise. By the time I sit down at my desktop PC, the report is ready for comp inputs and adjustments. This is where the power of mobile tools shines brightest! Also, an appraiser with a laser measurer and a computer simply looks more professional to a homeowner than one with a tape and a piece of graph paper. It says something about your professionalism. The fact that it keeps you in the home a few more minutes is not a bad thing either. How many times have you had a borrower complain about how little time you spent inspecting the property? As if the amount of time you spend walking through a home somehow affects the value!
Final Thoughts Let me share one or two more items that may be helpful to those of you who may already be using mobile technology. First of all, by inputting all of my data onsite, I never leave the property having forgotten an important component. My pictures are always there. If I forget to take the front photo (hey, it happens), I know before I leave. If the west side of the home does not match the east, I do not have to wait till I get all the way back to the office to find that out. On a mobile device, you know in real time as you measure. For those who have an assistant back at the office, the ability to upload reports from the field is priceless. Once I am page 29 8
Summer 2012 Working RE 27
Home Inspectors Closer Look
H o me I n specto rs
l cia e S p for
spec n I e m o
Risk Management: Inspection Basics to Manage Risk By Michael Casey, Casey O’Malley Associates & Una Lucey, Esq. Of Counsel to Casey O’Malley Associates
Editor’s Note: Managing risk should be front and center for inspectors each day: here are eight tips to help keep you out of trouble.
ost of us consider ourselves to be technically astute when in the field performing inspections. We spend many hours each year learning through continuing education classes and meetings. But how often do we think about managing our risk each day? When is the last time you updated your contract? Do you think about what you do and say every day on the job with regard to risk management? Maybe not: the following are a few of the common missteps we often see when evaluating claims that could have been prevented, or at least the exposure could have been reduced. 1) The Inspection Agreement (or contract): Bottom line— get a signed contract from the client. It is not enough merely to include language in your report stating that “use thereof constitutes agreement with the policies herein and in the contract whether or not a signature has been obtained.” In these days of modern electronic communication, it is easy to send an agreement to the client as soon as the inspection is scheduled. Email the contract or send the client to your website to download a contract to execute and return (fax, email scan, mail, etc.). In some
states a simple return email acknowledging agreement with the contract will work, as will the checked box “I agree” such as we see with software and other agreements. However, the old fashioned convention of obtaining a real signature on the document is always best. Without a signed agreement you risk denial of coverage from E&O providers and possible nonenforcement of the agreement should the contract be questioned in a legal proceeding. 2) Reporting Inaccessible Locations: National Standards of Practice by associations and those adopted by states all require the inspector to identify systems, components or locations that are to be inspected, but were not accessible for any reason. Inspectors are usually adept at noting these locations in their reports; however, we recommend that language similar to the following be added to the note: We recommend that this (location, system, component) be made accessible and inspected by a professional prior to expiration of the inspection contingency period; hidden damage may exist. We have been seeing claims where the client indicates he/she was not alerted to this possibility. 3) Reporting Magnitude of Deficient Conditions: Be sure to alert your clients to the severity of conditions discovered AND the potential implications for not taking action prior to the end of the inspection contingency period; including but not limited to the potential for hidden damage and significant cost, life safety implications, and/or potential for continued damage. This is one of the most common claims—a lack of understanding of the condition. 4) Deficient Conditions Not Cross-Referenced in Summary: Not much explanation needed here; if you prepare an inspection summary or action items, be sure to include all significant items (significant in magnitude by virtue of cost and/ or safety) in the report. Unfortunately, we see
28 Summer 2012 Home Inspectors Closer Look
many times that important items do not make it into report summaries. 5) Relying upon Verbal Disclosure: Always write what you say and say what you write. If you mention anything to the client, make sure it gets into the written report. At the end of the day, all that matters is what made it into the report. 6) Identifying Sewage Disposal as Public or Private: We have not seen any state codified or professional association promulgated Standards of Practice that require the inspector to determine if sewage is handled by private disposal or municipal. Yet we see many reports identifying septic or municipal. Don’t do it. If you really must include such a determination, please identify where your information was obtained and include the proviso “verify with seller or municipality” with the public or private comment. Better yet “this information was obtained from ___ and was not verified. This information is considered reliable; however, client should verify all information provided by third parties” or a similar disclaimer. 7) Admitting Guilt: If a client calls or emails you with a complaint, never write or say “I guess I missed that” or anything similar. Handle the complaint immediately and make sure to notify your insurance agent to get it on the record. After reviewing your report, go to the site to evaluate the claim, taking photos whenever possible, before providing a response to the claim. We’ll address the response in future stories. 8) Taking Photographs or Video: Many inspectors tell us they don’t take photos for fear of something being in the photograph they might have missed. Get some confidence, we have rarely, if ever, seen this occur! Visual documentation of the conditions at the time of the inspection has, much more often than not, immediately settled a dispute in favor of the inspector. We hope you enjoyed our risk management tips; more to come soon! WRE Disclaimer: This article is designed to be informative only and is not to be considered legal advice. Consult an attorney knowledgeable about the laws in your state for review and approval of your PSA.
Michael Casey is past president of California Real Estate Inspection Association and the American Society of Home Inspectors (ASHI). He is partner in Casey, O’Malley Associates, a national A.M. Best recommended consulting and inspector training firm based in San Diego (HomeInspectorSupport.com). He can be reached at firstname.lastname@example.org or (866) 363-1330. Una Lucey, Esq., is Of Counsel to Casey, O’Malley Associates. Ms. Lucey is a licensed attorney in CA and NY, is an accomplished insurance defense counsel and has been published in the “Pace International Law Review.” Una can be contacted at email@example.com.
7How to Increase from page 27
done with a report and have inserted the comp photos, I send the report directly to my office through the magic of the Internet. My assistant gets that report in a matter of minutes and begins working on tidying it up for me as I am driving back to the office. By the time I hit my desk, the pictures are all labeled, the sketch is perfected, the subject information has been transferred from page one to the grid, and I am ready to begin making adjustments. You cannot put a price on that! I have been using mobile tools in the field for almost 15 years now. Some are surprised at that statement, as most appraisers did not even know that these technologies existed in the late 1990s. They did and I increased my productivity and therefore my income by hundreds of thousands of dollars in these years just by employing them. As I look back on the antiquated instruments I used to use, they seem like relics akin to eight-track tape machines and rotary-dial phones. Isn’t it time you look into mobile appraising for yourself? Now go create some value! WRE For more, see Dustin’s OREP/Working RE webinar: Mobile Appraising: Saving Both Time and Money (WorkingRE.com, click Webinar Series).
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WWW.HOMEINSPECTORPRO.COM Summer 2012 Home Inspectors Closer Look 29
Home Inspectors Closer Look
OREP Announces New Home Inspector Insurance Program Complete Coverage: New Lower Rates Editor’s Note: Home Inspectors no longer have to pay more for the complete coverage they need. A new program from OREP includes most coverages in the minimum premium ($1,250), including Bodily Injury Property Damage (BIPD/ Premises coverage). OREP (Organization of Real Estate Professionals) is proud to announce a new insurance program that allows inspectors to have complete coverage and save money! David Brauner Insurance Services/OREP has been servicing the insurance needs of home inspectors for 11 years.
Program Highlights • Includes Errors and Omissions (E&O) and Bodily Injury/ Property Damage (BIPD)/Premises coverage, as well as most incidental coverages, such as termite, radon, and commercial coverage. • “ A” Rated Carrier, Prior Acts, Additional Insured for Agents and other Referring Parties. • C onvenient: Fast, Self-Rating Application gets you quoted and back to work in minutes. • No policy fee, no taxes. This new Home Inspector E&O program includes most coverages in the minimum premium, including Bodily Injury/ Property Damage (BIPD) or Premises coverage, for when you
are onsite at the inspection. “Home inspectors who are paying extra for ‘add on’ coverages, or worse, going without the full coverage they need to save money, don’t need to any longer. Broad coverage is included in the minimum premium, including E&O and premises coverage,” said David Brauner, Senior Broker at OREP. OREP’s new program also includes most incidental coverages, such as termite, radon, and commercial coverage. The Minimum Insurance Premium is $1,250, which provides a Coverage Limit of $300,000 Aggregate/$100,000 each Occurrence for E&O/BIPD. Choice of coverage limits and deductibles are available. Easy Financing. Find details at OREP. org (click home inspectors) or see page 31. Or call toll free (888) 347-5273. Info@orep.org. OREP is a leading provider of insurance for real estate inspectors, appraisers, agents/brokers and mortgage field professionals. WRE ___________________________________________________________________ David Brauner/David Brauner Insurance Services: Calif. Insurance License: #0C89873
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Plans available to real estate professionals on a guaranteed issue basis. Kaiser Permanente offers eleven plans including the new Tax Advantaged Health Savings Account Plans. United Healthcare offers three HMO and four PPO plans. Allied National offers four Limited Benefit PPO Plans that offer highly affordable first dollar coverage including doctor office and emergency room visits and prescription drugs. Plans available to California residents only through OREP (OREP membership not required). Please visit OREP.org/Benefits or email firstname.lastname@example.org with medical benefits in the subject along with your name and phone number in the body of the e-mail. A qualified agent will call to go over the options.
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30 Summer 2012 Home Inspectors Closer Look
You Deserve the Best
Home Inspector’s E&O Insurance Are you paying extra for “add on” coverages, or worse, going without full coverage to save money? No need to pay more or go without full coverage any longer! Broad coverage included in minimum premium. Minimum Insurance Premium: $1,250** Cadillac Coverage: Includes Errors and Omissions (E&O) & Premises Coverage (Bodily Injury & Property Damage while on site), and most incidental coverages, such as termite, radon and commercial, in minimum premium. n “A” Rated Carrier, Prior Acts, Additional Insured for Agents and other Referring Parties
r e w o L New es & Rat er Broadage Covery for fast,
n Convenient: Fast, Self-Rating Application gets you quoted and back to work in minutes. n No Policy fees, no Taxes n Includes discounts on ASHI/NAHI/stateapproved education & training, access to group medical coverage (Calif.) and more. ** $1,250 Coverage Limit is for $300,000 Aggregate/$100,000 each Occurrence. Choice of coverage limits and deductibles available. Easy Financing.
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(888) 347-5273 6760 University Ave. #250 • San Diego, CA 92115 • Fax: (708) 570-5786 email@example.com • David Brauner: Calif. Insurance Lic. #0C89873 Summer 2012 Home Inspectors Closer Look 31
Land Value: Extraction Method By Philip G. Spool, ASA
Every December I make a pilgrimage to Orlando, Florida, to observe the Florida Real Estate Appraisal Board (FREAB) hearings. This past year (2011) something happened that surprised even me.
very December I make a pilgrimage to Orlando, Florida to observe the Florida Real Estate Appraisal Board (FREAB) hearings. This past year (2011) something happened that surprised even me. One appraiser who was brought up on various charges was asked a very simple question pertaining to the cost approach in the appraisal report. One of the FREAB panel members asked how the appraiser arrived at the site value. The appraiser hesitated and then replied that the land value was based on the cost new arrived at from Marshall & Swift, then deducted that from the market value of the subject property, arrived at from the sales comparison approach. As an instructor of real estate appraisal courses and continuing education classes, I almost bolted from my seat to immediately correct the appraiser. Fortunately, one of the panel members politely corrected the appraiser. I was surprised that the FREAB panel did not require additional educational courses, beyond what the appraiser was required to do as a result of performing a faulty appraisal. I have reviewed many appraisal reports where the appraiser performs the cost approach just because the client requests it, even though it is not considered a credible approach to the market value of the subject property. I see some of the same boilerplate statements in these reports, such as “due to the lack of land sales, the appraiser used the extraction (or abstraction) method.” (By the way, both “extraction” and “abstraction”
Philip G. Spool, ASA, is a State-Certified General Real Estate Appraiser in Florida, appraising since 1973. Formerly the Chief Appraiser of Flagler Federal Savings and Loan Association, he has been self-employed for the past 18 years. In addition to appraising, he is an instructor with Miami Dade College, teaching appraisal courses and continuing education. He is also the Vice President and Chairman of real estate programs with the Greater Miami Chapter of the American Society of Appraisers. He can be reached at firstname.lastname@example.org.
32 Working RE Summer 2012
are correct. For purposes of this article, I will call it the extraction method.) An extraction method is used if there are no land sales to arrive at the site (land) value. Again, land and site in this article are interchangeable, but technically land represents the undeveloped parcel, while site represents the parcel as if ready to be built on. Going back to the appraiser’s reply to the FREAB panel, two distinct statements the appraiser made are blatantly wrong. The first mistake is subtracting the replacement cost new and the second is subtracting the improvement cost from the value arrived by the sales comparison approach. How do you calculate the site value? The three most common methods to calculate site value are (1) sales comparison method, (2) allocation method, and (3) extraction (abstraction) method. I will briefly discuss the first two methods then explain the subject of the article: the extraction method.
Sales Comparison Method The sales comparison method is probably the most preferred and reliable method for estimating site value. This method is similar to valuing an existing house, comparing the subject to recently closed sales of vacant lots. As no two houses are the same typically, no two vacant lots are the same. The most common differences include the size, width and depth of lot, location, and if the comparable lot is cleared or in need of clearing trees, shrubs, and leveling the land. All of these differences must be taken into consideration. Once the sales price per square foot is determined for each comparable sale, the reconciliation process begins. Probably the most important comparison page 348
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is the lot size differential. Basic appraisal theory indicates that smaller lots tend to sell for a higher price per square foot than larger lots, just as larger lots tend to sell for a lower price per square foot than smaller lots. However, one should consider the most ideal lot size for the end use, in this case a single family residence. For example, if the average lot size is 15,000 sq. ft., would a 10,000 sq. ft. site cost or be worth more per square foot than the 15,000 site? Not in all cases. One has to consider the demand for the 10,000 site versus the 15,000, just as one has to consider the demand for a 20,000 site. If the ideal house size is best reflected on a 15,000 sq. ft. lot in the area, then perhaps a 10,000 would reflect an inferior designed house, representing less demand for the smaller lot. If the lot size is 20,000, then the extra 5,000 sq. ft. of land could represent surplus land. Many appraisers confuse the difference between surplus land and excess land. Surplus land is land that cannot be sold off separately, while excess land can be. In many cases, a large lot that is considered to have excess land is worth more than a large lot that has surplus land, due to the fact that two buildable lots are worth more than one buildable lot. The shape of the lot is also important. All of these situations have to be taken into consideration when reconciling the value of the subjectâ€™s lot.
Allocation Method The allocation method is not commonly used, but if a newly constructed home is built on a site that was purchased recently, it can be effective. The allocation method can be applied as a percentage or proportion of the total value of an improved property. For a comparable improved sale, either the land or building portion must be determined. If the house is relatively new, estimating the cost of improvements and dividing the costs by the sales price of the house will give you the percentage 34 Working RE Summer 2012
100 Prospect Drive
230 Albondigas Ave.
Date of Sale
Sale Price (A)
Replacement Cost New
Less: Depreciation of Improvements
Depreciated Value of Improvements (B) $183,425
Site Value (A less B)
Site Value per Sq. Ft.
$17.35 table 1
* Based on Building-Cost.net ** Based on an Effective Age of 15 years and a Total Economic Life of 60 years (15/60 = 25%) *** Based on an Effective Age of 20 years and a Total Economic Life of 60 years (20/60 = 33.3)
of the improvements to the purchase price of the comparable. The allocation method is not as reliable to apply on an older house because estimating accrued depreciation is too subjective. If new developments are being constructed nearby, consultation with the developers is helpful if the developers can provide the building costs associated with the houses being sold. This includes site improvements, such as landscaping, driveway, open patios, and swimming pools. For example, a relatively new house sells for $300,000 and you determine the cost of the building improvements and site improvements to be $200,000. The improvements represent 66.7 percent of the overall purchase price. That leaves 33.3 percent attributable to the land. If houses that are recently sold nearby the subject property range from $270,000 to $320,000 and are overall similar to the subject improvements (land-to-building ratio, age/condition and extra features), applying the 33 percent would indicate a land value ranging from $89,900 to $106,600, rounded. While an allocation as a ratio of land to total sale price
indicates a ratio of one to three in this example (land portion is $100,000/total sale price $300,000), it is easier to apply the allocation method as a percentage of land to total sale price.
Extraction Method In a nutshell, site value is the difference between the sale price of a property and the contributory value of its improvements. So how do you determine the contributory value of the improvements? There are several ways to do this. The contributory value of the improvements is the same as the depreciated value of the improvements as observed in the market. In other words, it can be construed as cost new, less the accrued depreciation. Accrued depreciation is calculated as the effective age divided by the total economic life of the improvements. If you still have your appraisal books from your basic appraising course, look up Accrued Depreciation. An excellent reference book you should always have is The Appraisal of Real Estate, currently the Thirteenth Edition, by the Appraisal Institute. When valuing the subject property the appraiser calculates
the effective age by an onsite visit to the property and observes any physical deterioration in order to arrive at the effective age. However, the appraiser does not have the luxury of visiting the interior of a comparable sale or even walking around the outside of the comparable sale that is a good candidate for the site value by the extraction method. But if the property is listed on the Multiple Listing Service, there is a possibility that there are photographs of the interior and exterior of the property. You can also contact the listing agent to get additional information regarding the physical condition of the improvements to arrive at a more supportable effective age. Remember, effective age of a property is based on the appraiser’s judgment and observation. Therefore, the proper procedure would be for the appraiser to calculate the replacement cost new of the
improvements first and then subtract the depreciated value (contributory value) of the improvements. But what about the site improvements such as the swimming pool, driveway, landscaping, etc.? Yes, that too has to be subtracted from the replacement cost new of the improvements. Where do you get your replacement cost figures? There are several sources. One is Marshall & Swift (also referred to as Marshall Valuation Service). Another is Building-Cost.net, which is free. Another method, though one that is not supportable, is to obtain the Property Assessor’s estimate of the depreciated value of the improvements of a recently closed sale. The land value would be the sales price less the property assessor’s estimate of the depreciated value of the improvements. I indicate that this is not supportable because an owner can have his/
her property assessment successfully appealed resulting in a reduction in the improvement portion of the assessment while another recently sold house may not have had its property assessment appealed, resulting in no reduction. Just remember assessments are based on the mass appraisal system and not looked at individually. You can prepare a chart to fill out and maintain in your workfile. A good example is found in table 1 (page 34). In conclusion, the next time you explain how you arrived at your site value in your appraisal report and you state that you used the extraction or abstraction method, be sure you use the correct procedure in addition to having your support in your workfile, or better yet, indicated in detail within the text addendum of your appraisal report. WRE
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35 Summer 2012 Working 1/13/11RE 9:54 AM
Visit WorkingRE.com, click Webinar Series for schedule
Industry News Lender Makes Good on AppraiserLoft Bad Debt The argument is unsettled to what degree lenders are responsible for the agents they hire to administrate valuation services—appraisal management companies (AMCs). The case of the AMC AppraiserLoft kicked off a heated debate when it closed its doors last year, leaving an estimated three million dollars or more in unpaid appraiser fees. In the meantime, one major lender, Metlife Bank, made good on the bad debt created when its agent, AppraiserLoft, shut its doors. In the wake of the shutdown, Working RE reported that many appraisers believe lenders are responsible under federal law for bad debt left by their agents. (WorkingRE.com, click Library, Vol. 29 AMC Bad Debt-Lenders Responsible?) A follow-up story reported some appraisers actively pursuing the banks that hired AppraiserLoft in an effort to recover lost fees (WorkingRE.com, click Library, Vol. 29 Success Collecting AMC Debt from Lender). In the wake of this mess, MetLife Bank stepped up to pay appraisers for unpaid work completed for AppraiserLoft. Specifically, any appraiser who completed work for AppraiserLoft on behalf of MetLife and was left with an unpaid invoice was given the chance to collect the fees owed. Sue Potteiger, Chief Appraiser at MetLife Bank, told Working RE, “We did this because we made the decision to work with AppraiserLoft. We did our due diligence on this vendor and engaged them to provide appraisal reports to mortgage brokers that we directed to them.” According to Potteiger, “It’s not the appraisers’ fault that AppraiserLoft didn’t pay them. If an appraiser did the work and we made a decision based on the appraisal provided—the appraiser should be paid. We did pay AppraiserLoft all monies we were billed for. We paid the appraisers the money they would have been paid. These same appraisers are vendors that we might be working directly with on our fee panel. It’s important to us to maintain an open and respectful relationship with our appraisers,” Potteiger said. Potteiger explained that MetLife’s stance is a product of a pretty straight forward philosophy – “Treat people with respect and keep your word.” The offer to pay unpaid invoices ended March 30, 2012. How other lenders handle this issue, only time will tell. — By Isaac Peck, Associate Editor
OREP.org/WorkingRE.com Blogs & Surveys Challenging Low Fees This blog is an information exchange by and for appraisers seeking help with the customary and reasonable fee appeal process. Visit WorkingRE. com and under Blogs click Challenging Low Fees (left column).
36 Working RE Summer 2012
“That was a great seminar!!! I learned some new cool ways to save time and be more efficient. Keep up the great training!” —M. Maddox
Don’t Miss Your Opportunity to Know More and Make More Industry leaders share their expertise with you at prices you can afford. The topics are useful, the costs are minimal. OREP members/Working RE paying subscribers always enjoy reduced fees. Recorded webinars also are available on demand for your convenience.
Top 5 Questions Asked of an Appraiser and How to Answer Presenter: Richard Hagar, SRA After an appraisal is delivered, the job isn’t always complete. Learn how certain AMC and lender requests are illegal and find out the right way to help clients, answer questions, and stay in business.
Mobile Appraising: Saving Both Time and Money Presenter: Dustin Harris, “The Appraiser Coach” “Wow! Wow! Wow! The seminar was very helpful and encouraging in time saving mobile applications!” –J. Weseman Learn about the technology and techniques that can keep your business profitable and competitive. If you think you’ve heard it all before, you haven’t. Dustin does it successfully and enjoys showing others how.
Maximizing AMC Orders and Income (two-part series) Presenter: Bryan Knowlton, Author of the 2012 AMC Guide “We learned so much on Tuesday, we decided to come back today and bring our office manager.” —Lu Waara Appraiser Bryan Knowlton is busy with well-paying AMC work. How does he do it? He knows the best AMCs to work for and the techniques for being profitable. Learn proven strategies for maximizing orders and income when working with AMCs.
How to Limit Liability, Maintain Independence, and Fight Influence Presenter: Richard Hagar, SRA “I listened to all 3 of Richard’s Webinars and wanted you to know that they were great! I just don’t see how any appraiser can afford to miss any seminars put on by Richard Hagar!” —T. Turner Learn how appraisers can, and must, stand up for their rights and refuse to let AMCs and lenders influence their values or violate their appraisal independence. In this three part series, Hagar shows appraisers both how to limit their liability and live up to their new responsibilities—or else.
Do You Need General Liability Insurance?
Insurance: How Saving Money Can Really Cost You
Do you need general liability insurance? You just might. Business Owner’s/General Liability Policy has been compared to a homeowner’s policy for your business. Coverage includes but is not limited to Property Damage to others, Bodily Injury, Business Interruption and Loss of Income coverage, Personal Property Coverage (computers, client records, buildings) and employee dishonesty. Inspectors, appraisers and real estate agents/ brokers need this coverage. Minimum premium is $500. Workers Comp also available. Call OREP. org for details and a free quote (888) 347-5273 or email: email@example.com with your request.
If you are considering letting your errors and omissions (E&O) insurance policy lapse (not renewing or canceling) to cut expenses or thinking about switching to a company that does not provide “prior acts” coverage for your past appraisals just to save money, you should think again. Appraisers are being sued in record numbers today—even the careful ones. No matter the merit, appraisers have to spend time and resources defending themselves— even if they did nothing wrong. As most claims involving appraisers take several years to surface, letting your Claims Made insurance policy lapse or willingly giving up your prior acts coverage to save
We're on Twitter! http://twitter.com/workingremag a few dollars could be very costly indeed should a claim arise from the past and you have no coverage. Call your insurance agent to find out what is really at stake. For more on E&O insurance issues, see Insurance: Insight and Advice from the Inside, an interview with OREP.org Senior Broker David Brauner, who has been point of sale for appraiser E&O insurance for 20 years. visit OREP.org.
AMC Rater This blog is an information exchange by and for appraisers about working with the various AMCs— read the good but mostly the bad and ugly about which AMCs to avoid, such as the following: “Boy, are you right! I had to chase (AMC name removed for publication) for months for a check. We have friends that had to chase them for 120 days for $3,000+. They are supposed to be run by an ‘ethical’ appraiser but I think not! I did an appraisal for them, busted my rear to get it in in their turn time and then I got an email back saying they had cancelled it and utilized one of the appraisers in the area that does most of their work. I never got a cancellation email. So, I was out two days’ work and $375. Nice!” Learn what you need to know about working with AMCs at this blog. Visit WorkingRE. com and under Blogs click AMC Rater (left column).
How’s Business? Survey Results OREP/WorkingRE conducted a How’s Business? survey in early April with over 1,000 responses in the first few days. The results show 51% of appraisers reporting revenues increasing in the first quarter this year over the same period last year; 26% report the same revenue or less; 23% saw a decline in revenue greater than 20% this year over last. Additionally, 52% of appraisers taking the survey report they are more profitable this year than the same period last year, 48% say they are less profitable. Despite many obstacles, 80% of appraisers say they plan to continue appraising, with 20% saying they plan to retire from the profession. To view the entire results, visit WorkingRE.com and click “How’s Business Survey Results” in the center column.
FHA Appraising Easier, More Efficient Excellent material—will help me get to the next level—well worth the money! Thanks, J Joslin FHA work is booming. Here’s an opportunity to make your FHA appraising faster and more efficient. The FHA Appraiser Inspection Checklist and eBook are designed to get you up to speed and more efficient at FHA appraising. The Checklist serves as a field guide for completing your reports. The eBook saves you time and money by summarizing and organizing the material you need to know. Author/appraiser Lore DeAstra says, “We reviewed more than 450 pages of HUD materials and spoke with several HUD officials to compile the FHA Appraiser Inspection Form, course materials, and eBook. It will save you time and money.” The guide is updated with the following: formatting updates for improved ease of use: more concise information in an easy-to-follow eBook searchable by topic; web links to topics for easy access; symbols and pictures included by topic for at-a-glance comprehension to FHA Checklist; FAQ from appraisers and lenders by topic with detailed index by page; over 10 new ways to access information and contact FHA to check competencies and get help fast! For more, go to WorkingRE. com and click FHA Checklist, and eBook (top left column). “Differentiating yourself from others improves your business and marketing efforts,” says author Lore DeAstra. “These revised materials will help you obtain additional avenues of income pertaining to your FHA expertise now and into the future.” OREP insureds enjoy a discount.
New 7-Hour USPAP CE Online: Convenient, Affordable Enjoy an OREP/Working RE discount on Mckissock’s new 7-Hour USPAP online continuing education course, approved in most states. Taking this mandatory continuing education coursework is now affordable and convenient with this new online course. Visit WorkingRE.com and click New 7-Hour USPAP CE (left column) to learn more.
Filing C&R Fee Complaints This from the Appraisal Subcommittee (ASC. gov): The appropriate agency to receive your concern about a creditor’s compliance with the Truth in Lending Act (TILA), including the creditor or the creditor’s agent paying an appraiser a customary and responsible fee, is the agency that enforces TILA for the creditor. If the agent or appraisal management company (AMC) is affiliated with a federally regulated creditor, the appropriate agency to receive complaints against the AMC is the affiliated creditor’s federal regulator. If the agent (or AMC) is not affiliated with a federally regulated creditor, the appropriate agency to receive the complaint is the Federal Trade Commission. There are two websites that you can use to find the federal regulator for a creditor: Federal Reserve System—National Information Center website: http://www.ffiec.gov/ nicpubweb/nicweb/nichome.aspx; and FDIC website at the “Bank Find” webpage: http://www2.fdic. gov/idasp/main_bankfind.asp. Questions regarding the appropriate interpretation of the Truth in Lending Act, including those on customary and reasonable fees, should be directed to the Federal Reserve Board at http://www.federalreserve.gov/ feedback.cfm. WRE
More at WorkingRE.com
Summer 2012 Working RE 37
Professional Marketplace Continuing Education at Cost firstname.lastname@example.org (888) 347-5273 David Brauner/David Brauner Insurance Services
Individual Appraiser E&O Rates Per Claim/Annual Aggregate
$1,000,000 / $2,000,000
$500,000 / $1,000,000
$300,000 / $600,000
Please Note: Rates vary by state. Commercial rates are slightly higher. Please call or visit www.orep.org for more (888-347-5273). Zero deductible available in certain states. A standard deductible of $500 per claim/$1,000 aggregate is included with each policy. Prior acts coverage is provided free for qualified applicants (call for details). Beginning appraisers/trainees qualify. If you would like an application for this program or a quote for a multiple-appraiser firm or for sales/brokering, please call or visit OREP: (888) 347-5273 www.orep.org. Subscription to Working RE magazine included. Financing available.
Appraiser E&O Options • Combine Appraising, RE Sales and Brokering: One low premium covers both appraising/sales & brokering. • Appraisal Firm Coverage: If you are experiencing an increase in rates, a decrease in coverage or new exclusions that seem unreasonable, it pays to shop OREP when your firm’s E&O policy is expiring. Many firms are switching to OREP. Many appraisal firms are surprised to learn how much they can save by shopping OREP. • AMCs: Many appraisal management companies are forming in the wake of HVCC. If you need this coverage, OREP can help. • Retiring: If you are retiring from appraising, ask your insurance agent about purchasing Extended Reporting Period or “tail” coverage. Without it, you are exposed for any liability that may arise from past appraisals. Premiums range from one to one-and-one-half times (100%–160%) your last year’s premium and can provide coverage forever into the future for past appraisals. Each program is unique. Call your agent for details if you are planning to retire.
New 7-Hour USPAP CE Online: Convenient, Affordable Enjoy an OREP/Working RE discount on Mckissock’s new 7-Hour USPAP online continuing education course, approved in most states. Taking this mandatory continuing education coursework is affordable and convenient with this new online course. Learn and earn (CE) on your schedule! Visit WorkingRE.com and click New 7-Hour USPAP CE (left column) to learn more.
“The class was great and the price was even better. Please let me know if you have any other discounted classes.” Thanks, Eric (OREP Member) Appraisers and Agents: The online McKissock course, Essential Elements of Disclosures and Disclaimers ($79/5 hrs. approved continuing education in most states), is available to OREP Members/ Affiliates for administrative costs ($15.64). The purpose of the course is to provide appraisers with the tools to meet their disclosure obligations, while at the same time protecting them from unintended liability through the use of appropriate disclaimers. How and where must an appraiser disclose prior services provided on the subject property within the prior three years? How should repair items be disclosed in an FHA appraisal report? How should significant real property appraisal assistance be disclosed? How can an appraiser protect himself or herself when there appears to be mold in the basement? This course provides the essential elements of disclosures and disclaimers in appraisal reports. Every appraiser will benefit from this course. (Visit OREP.org, click Benefits and OREP Education Network.) Inspectors: Online Mckissock course Home Inspection Safety ($45/3 hrs. ASHI, NAHI, NACHI approved and also by 15 states), is available at administrative costs to OREP Members and Affiliates (ASHI, NAHI, NACHI: $5.74; varies by state). The objectives of the course are to: identify protective clothing that should be worn, recognize safety equipment used, understand limitations and exclusions, discuss general safety issues, recognize lead paint, asbestos, etc., discuss electrical safety, understand, heating and air conditioning precautions, recognize un-permitted additions and more. (Visit OREP.org, click Benefits and OREP Education Network.)
2012 AMC Resource Guide Updated Guide authored by an appraiser for appraisers and marketed through Working RE/OREP.org. Over 300 Verified AMCs; the first 40 listed send 90 percent of the author’s work; national management companies; verified companies that send orders. The author personally verifies and signs up to each company listed and calls to verify immediate need for appraisers. Vendor specific errors to avoid are listed so you make fewer mistakes from the beginning and get more repeat orders. Author emails customers with new companies when added. Top techniques to generate more revenue included. Appraiser Marketing Guide included: Guide lays out all the details on how to get signed up with the appraisal management companies and information on creating top ranking websites. For more and to order, see WorkingRE.com, top left column (click: AMC Resource Guide) or email email@example.com with AMC guide info in the body or subject. OREP Members/Working RE subscribers receive a discount.
New Webinar Series: Information You Can Use from Industry Leaders OREP/Working RE magazine introduces a new webinar series on important industry topics, presented in webinar format by industry leaders. OREP members/Working RE-paying subscribers always enjoy reduced fees. Many appraisers are busy these days, so prerecorded webinars also are available on demand for your convenience. For the current schedule, including dates, rates and times, please visit WorkingRE.com and click Webinar Series (left column) or scan the code at right with any QR Code Reader application. “I really enjoyed the webinar. I have been in the appraisal business for a long time and it was refreshing to have a review. Thank you again for bringing the appraisal community an informative webinar.” —P. Dellomo Top 5 Questions Asked of an Appraiser and How to Answer Presenter: Richard Hagar, SRA Mobile Appraising: Saving Both Time and Money Presenter: Dustin Harris, “The Appraiser Coach” Maximizing AMC Orders and Income Presenter: Bryan Knowlton, Author of the 2012 AMC Guide
38 Working RE Summer 2012
Professional Marketplace: Insurance, Education, Information and More. OREP Announces New Home Inspector Insurance Program Cadillac Coverage: E&O + Premises Coverage (BIPD) $1,250 /$300k Limit Home Inspectors no longer have to pay more for the complete coverage they need. A new program from OREP includes most coverages in the minimum premium ($1,250), including Bodily Injury Property Damage (BIPD/Premises coverage). The new insurance program allows inspectors to have complete coverage and save money! David Brauner Insurance Services/OREP has been servicing the insurance needs of home inspectors for 11 years. Program Highlights • Includes Errors and Omissions (E&O) and Bodily Injury/Property Damage (BIPD)/Premises coverage, as well as most incidental coverages, such as termite, radon, and commercial coverage. • “A” Rated Carrier, Prior Acts, Additional Insured for Agents and other Referring Parties. • Convenient: Fast, Self-Rating Application gets you quoted and back to work in minutes. • No policy fee, no taxes. Home inspectors who are paying extra for ‘add on’ coverages, or worse, going without the full coverage they need just to save money, don’t need to any longer. Broad coverage is included in the minimum premium, including E&O and premises coverage,” said David Brauner, Senior Broker at OREP. OREP’s new program also includes most incidental coverages, such as termite, radon and commercial coverage. The minimum insurance premium is $1,250, which provides a coverage limit of $300,000 Aggregate/$100,000 each Occurrence for E&O/BIPD. Choice of coverage limits and deductibles are available. Find details pg. 31. Visit OREP.org for more or call toll free (888) 347-5273. Info@orep.org. David Brauner Calif. Insurance License: #0C89873
Mortgage Field/Property Preservation Many appraisers and home inspectors are now providing mortgage field and property preservation services for bank-owned properties. OREP has provided E&O and GL insurance to this industry for over 8 years and is a leader in the field. If you’d like a quote, please call or visit OREP.org, (888) 347-5273.
New OREP/Working RE Education Discounts Calypso Continuing Education for Appraisers (See Inisde Back Cover) Online seminars integrate dynamic video presentations, high-resolution graphics, audio narration, and downloadable resource manuals creating a new standard for online appraisal seminars. Titles Include: Environmental Hazards and Impact on Value; FHA Site Inspection; UAD: What’s It Mean to You and Me?; Short Walk through America’s Architectural Styles; Construction Details: Concept to Completion. Coursework approved in approximately 30 states ($89/7 Hrs.). For states, approved education hours and OREP/Working RE discount, visit WorkingRE.com (click Calypso Education) or OREP.org (click Benefits).
Home Inspectors Diversify with Additional Training Complete home study courses on New Construction/Code, Commercial Inspection and Manufactured Home Inspection created by a leading, nationwide education provider are now available through OREP. Save hundreds of dollars on training that will increase your learning and your earning. OREP insureds enjoy even greater discounts on these education packages. The packages are extensive and complete, coming with over a dozen DVDs that take you step by step through the processes and procedures and prepare you for certification. For more information, visit WorkingRE.com and click Home Inspector Discounts (left column).
Group Health Care—No Application/Limitations for Pre-Existing Conditions California residents qualify for programs offered through Kaiser Permanente, Allied National and United Healthcare. These plans are available to real estate professionals on a guaranteed issue basis. Eligibility is accomplished by being a member/affiliate member of a real estate association/board. Kaiser Permanente offers eleven plans including the new Tax Advantaged Health Savings Account Plans. United Healthcare offers three HMO and four PPO plans, including a Tax Advantaged Health Savings Account. Allied National offers four Limited Benefit PPO Plans that offer highly affordable first dollar coverage including doctor office and emergency room visits and prescription drugs. These plans are available to California residents only through OREP (OREP membership not required). Please visit OREP.org, click Benefits or email firstname.lastname@example.org with medical benefits in the subject. WRE
Thank You! Great Service...Easy, fast, affordable! —Patti Tai, Certified Residential Appraiser
Low E&O Rates, New Policy Servicing Department…and Yes, We Still Answer the Phone! Appraisers E&O Min. Prem. $501 (varies by state) Inspectors E&O Min. Prem. $1,250 Real Estate Agents/Brokers Min. Prem. $429 (varies by state) OREP has a new policy servicing department to streamline insurance requests from our clients, including renewals. Simply email your policy-servicing request to email@example.com to get the assistance you need, usually same day. Whether you’re an existing client or someone calling for the first time, you can reach us by phone anytime during business hours (8–5 M–F Pacific Time).
Business by the Golden Rule Our mission at OREP is pretty simple: “Business by the Golden Rule.” It means we treat you the way we want to be treated: with honesty, courtesy and efficiency. This is David Brauner, Senior Broker and Principal of David Brauner Insurance Services/OREP.org. Call us to see what you’re missing if you’re missing great rates, great service and business by the Golden Rule. Yes, with OREP you can have all three. Call toll free today: (888) 347-5273 or visit OREP. org. Policy servicing: firstname.lastname@example.org. OREP publishes Working RE magazine. WRE
OREP now in our 10th year! back: (L-R) Kevin, Ashley, David, Clark, Michael front: Lori, Maria, Mary, Carolynn, Cary, Chantel
“WOW! Thank you very much. You are the fastest and most efficient insurance agent I have ever done business with !!!” —Aloha, James
David Brauner Insurance Services: Calif. Lic. #0C89873
Summer 2012 Working RE 39
Effective Marketing: Going Local By Rick Bunzel, Pacific Crest Inspections
Editor’s Note: It is not your father’s real estate business any longer.
The real estate business is evolving and starting to become
Internet-centric. Ten years ago most clients didn’t touch the Internet before buying, today over 80 percent do. Today’s real estate professionals not only have to have a website, they need a website that ranks well on the search engines. If you’re still spending money on a Yellow Pages ad or the weekly newspaper, you need to update your marketing strategy. Google is part of our daily vocabulary and there is strong competition to be on page 1 of the search results. Google is now becoming location specific and a search term that includes a town and state will yield results that are local. Below are some techniques that anyone can use to get local listings, even if you don’t have a website. If you’re not familiar with search engine optimization you may want to “Google” it and find some tutorials. A little work on your part can make the difference between your site being on page 1 or page 5. Internet search websites are also getting more refined and are able to provide local information based on your search request. Companies such as Google and Yahoo allow businesses to provide information to enhance local searches. Google allows you to build a profile (including a coupon if desired) at no charge. Here is an example: if you type in “your town,” “your state” and “home inspector” in the Google search bar you will get the following results: Arrow 1 (figure 1) shows you the organic search result which is Pacific Crest Inspections (my company). Arrow 2 is the local result and Pacific Crest Inspection also shows up because we signed up and filled out Google profile. If you click on the “Directions” and “More” tab you get this result: In figure 2 you can see that Google (and other local search sites) are giving your business another web page just for signing up. These results could just as well be for “Real Estate by Rick.” As long as there is a valid mailing address, Google, Bing or Yahoo will take your listing. Some local search sites purchase the data from third party database providers that source the information for the printed Yellow Pages directories. There are three primary database providers of local listing information: InfoUSA, Localeze/Amacai, and Local.com, all of which provide the various search engines, directories, and vertical sites with local listing data. Each has its own process for validating business listings. You may have a listing based on your phone number (and your phone company providing the information), but it’s good to see if the listing is accurate and in the correct area. The great thing is that it is 40 Working RE Summer 2012
easy to get local web presence by investing a few hours in front of your computer. Here is a list, including web addresses, of local listing providers. By visiting these links directly, it can help simplify the process. Just click and go! The big dog is Google, as most people prefer it as a search site. But you don’t want to stop at Google, as having listings on a number of sites boosts your overall search ranking and enhances your web presence. • Google Local (http://www.google.com/local/add/lookup? hl=en-US&gl=US) • Bing Local (https://ssl.bing.com/listings/ListingCenter.aspx) • Yahoo Local (http://listings.local.yahoo.com/) • Localeze (http://webapp.localeze.com/bizreg/Index.aspx) • Appraisers and inspectors can also get a free listing in the online phone books so it worth spending a few minutes signing up. Yellowpages.com (http://listings.yellowpages.com/) YellowBook.com (http://corporate.yellowbook.com/contact-us/) There are companies that will assist you with developing local listings for a fee. Most of the time, they will do things that you can do yourself and I don’t recommend them. WRE
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ACI and its products are trademarks or registered trademarks of ACI. | Copyright © 2012 ACI | Other brand and product names are trademarks or registered trademarks of their respective owners.