Tag Archives: Appraisers
by Dustin Harris, The “Appraiser Coach”
Maybe you have grown accustomed to those filing cabinets against the southern wall of your comfy office. Hey, some people really dig olive green and beige. Perhaps you enjoy the constant hum of the printer. It is soothing. It is comfortable. It feels like home, and to not have those paper and ink cartridge bills anymore, well, that just wouldn’t feel right- would it?
Finally, papers and folders spilling all over your desk as well as cluttering your vehicle have become a way of life. An appraiser without a slew of manila folders is no appraiser at all. If this is you, this article may not be for you. On the other hand, if you’re an appraiser who is on the constant lookout for ways to save time and money, then keep reading: making a conversion to a “paperless” or “more paperless” office will be of interest.
First of all, if you do not know what the term “paperless” means, you need not be embarrassed. You are in good company. The term has not been around for very long, and you can be grateful that you will learn it here in the privacy of your own reading. There is nothing worse than sitting at the bar with your buddies when one of them makes a wisecrack about a paperless office, and you have to pretend to know what he is talking about. Going paperless is simply that; paper – less. Using “less paper” is what it is all about.
Saving Money – No More Ink
Let’s face it, paper is not cheap. A ream will run you anywhere from five to nine dollars depending on weight and quality. The real travesty though is ink. To spend $250 or less on an inkjet printer is nothing compared to the thousands you might spend feeding it cartridges over the course of a year. I am pretty sure there is a conspiracy between the makers of printers and the makers of ink cartridges. Oh wait, they are the same companies! Like razors and razorblades- razors are giveaways but razorblades are so costly these days they keep them locked up behind the glass door at Rite Aid. I guess there is no conspiracy after all–just smart business. If you want to be smart about your business, going paperless will help you reduce expenses, and in a day and age when many appraisers are struggling just to pay the bills, a few lower bills is a blessing for sure.
Saving Time: Workfiles Created Automatically
A big misconception about going paperless is that it takes more time and slows you down. This is just not true. Getting rid of the paper and moving to an all-digital workday certainly takes some getting used to, but will actually save you time in the long run. The biggest time-saver you will experience is in your workfile. Appraisers are generally fearful that going paperless will somehow cause them to no longer have a workfile (and as we all know, a workfile is a USPAP necessity). Well, you will still have a workfile (it will just be a digital one), and if you set things up correctly, it will create itself automatically! No more time spent organizing and building the workfile. It just happens effortlessly. Furthermore, it is always there (and searchable) forever whenever you need something from it again.
Learning Curve vs Big Payoff
As you may know, I am a huge advocate for “mobile appraising,” which is using a laser and computer at appraisal inspections. Without question, the biggest hurdle for most people in going mobile is the huge learning curve. It is not easy to switch from a tape measure to a laser device. Going from a clipboard and pencil to an iPad™ is even more daunting. Some who try it, give up before they become converted. Incidentally, nearly all who commit to my Ten House Challenge™ never go back. There is no difference in going paperless. In the beginning, you will find it a bigger pain than you would have hoped. It is a new way of thinking and takes some real adjustments. I began the transition to a paperless office nearly five years ago. Many times in the first few months, I almost quit. Many of the people in my office resisted the changes. How glad I am that I stuck it out. I have now gone paperless in nearly all aspects of my life including church, relationships (yes, I have a paperless marriage- that’s another story), hobbies, and just regular life productivity.
Well… Maybe not 100% Paperless
Potential converts often ask me if going 100 percent paperless is really possible. The answer to that question is a bit complicated. The answer is “Yes!” (Okay, maybe that was not all that complicated, but here comes the complex part.) It may be possible to go 100 percent paperless, but you probably don’t want to. In other words, creating a digital version of everything you currently use paper for may be possible, but certain things just need to stay status quo. Let me give you one example; when I get a phone call and need to write something down, it is just easier to pull out a sticky note than it is to pull out my iPad. Now, if the note is something I want to keep, it will be converted to the digital version quickly but I still keep some paper on hand. Also, though you might choose a paperless lifestyle, you cannot force others to do the same. There are many times that a borrower will hand me a spec sheet or an attorney will mail me case documents. Though those types of papers will soon be converted to digital files, I cannot profess to be 100 percent paperless. Though I like to claim we are 98 percent paperless, the truth is probably closer to 92-93 percent, when all aspects are considered. Still, it is a far cry from where I was just a few years ago.
So how does one go from the traditional to a digital office without being overwhelmed by the transition? The answer may be found in the old parable of how to eat an elephant… one bite at a time. Begin with something small. For example, set up digital backups for your files on multiple levels. Remember that “two is one and one is none.” I personally have five backups of everything I do. Once that is done, move to the next step. Start scanning your documents into a digital file when you are done. In other words, keep doing things the way you are now, but just add the step of digitizing your files and throwing the paper files away. You do not have to jump into the pool with all of your clothes on right off the bat. Dip your toe and then start wading. You will find that the more you move from paper to paperless, the more you will want to take additional steps.
It Gets Easier
You could say that I was paperless before paperless was cool. My affection for technology and all things efficient spurred me to go digital long before most appraisers even knew what that meant. In those days, it was not very easy and it looked much different than it does now. A slew of new technology has made going paperless very doable (note, I said “doable,” not “easy”). Though it still takes some getting used to, scanners, dual monitors, smartphones, tablets, software and apps have made the transition so much simpler.
In summary, paperless is key to the future for appraisers and other professionals who want to flourish in the years ahead.
If you want to save time, become more efficient at what you do and save a boatload of money at the same time, consider making this year the year to begin weaning yourself off file cabinets, manila folders, and hum of the printer for good and move into the digital age.
Now, go create some value!
About the Author
Dustin Harris is 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 also owns and operates The Appraiser Coach where he personally advises and mentors other appraisers, helping them to also run successful appraisal companies and increase their net worth. He and his wife reside in Idaho with their four children.
Editor’s Note: This Q&A comes from the Working RE / OREP webinar: Top 5 Questions Asked of Appraisers and How to Answer, presented by Richard Hagar, SRA. Find the recorded webinar at WorkingRE.com/Webinars.
Top 5 QUestions Asked of Appraisers and How to Answer
By Richard Hagar, SRA
Question: Where can we find information on the “correct” appraisal rebuttal process by banks, if the borrower does not agree with value?
Answer: As part of my answer, let me pose a question back to you: Would you need a rebuttal process if the appraised value was higher than what they thought? Likely not.
Now the better question: Why should there be any rebuttal process just because the value isn’t what the borrower thinks it should be? There is no reason to establish a rebuttal process since it appears that the borrower is attempting to influence the appraised value, which is illegal.
Exception to the above – If the borrower can identify incorrect information within the appraisal, the borrower should prepare a written document pointing out the errors and submit the document to the lender. The lender should review to determine if there is incorrect information. If there is, then the document should be forwarded to the appraiser who can determine if the errors are significant. If the appraiser determines that the errors are minor, then no further action is required. If in the appraiser’s opinion the errors are significant, then the appraiser should supply an addendum addressing the errors and impact on value.
The process is simple, every lender must review every appraisal for compliance with USPAP. If the appraisal passes the review, then make the loan. If the appraisal fails the review, order a new appraisal. The borrower’s opinion of value has no bearing on the appraisal process or value conclusion.
Question: What would you recommend we do about real estate agents applying pressure?
Answer: Complain loud and often to numerous entities. Start with notifying your client (AMC and lender) of the problem. Next, complain to the real estate agent’s managing broker. Keep it polite, business-like and include a copy of the Dodd/Frank law that explains the illegality of their actions.
Question: Big Box AMC/lender always “suggests” additional comps once a report is completed and asks us to tell them why we did or did not use them. How should I deal with this?
Answer: Expect that you will always be providing additional service to this particular client. Increase your fees to compensate for the anticipated additional work. The appraiser’s job is to provide services to clients, and clients should pay for the appraiser’s time. My most common response to lenders like this is: We did consider these properties and found that they were not superior to the comparables used in the report. We use this response so often we made it a macro in our word processing program. Two clicks of a key and we are done and on to the next appraisal. Oh, did I also suggest- increase your fees?
Question: I did an appraisal a few months ago. The bank did not get their underwriting done in time for selling the loan. I also did a follow up inspection three months later for some repairs. The bank has now asked me to change my appraisal date to the final inspection date. Can I change my appraisal date?
Answer: No! What they really want is a new appraisal without paying for it. Have them order a new appraisal.
Question: When we looked at the current USPAP manual, 2012?2013, under FAQs, page F?62 & Question #135. The response says: “If the client does not require a more current effective date, USPAP would not mandate treating the request as a new assignment. However, if the client does require a more current effective date, the request must be treated as a new assignment.” Richard, why do you interpret this the way you do if the answer in USPAP says this?
Answer: Your question and the request by the client deals with far more than simply changing the date of the appraisal. The question concerned the buyer and seller changing the deal…. the sales price and the contract addendums that would go along with the changes. When the buyer and seller change the agreed upon sales price, they have altered the original agreement and, created a NEW contract. Appraisals must reflect the current agreement including all addenda. Think about the issues, if you have a new contract with a newer date:
- Your original appraisal order was dated before the current agreement. How is that possible? How would you explain the inconsistencies to an auditor?
- You pulled MLS and county data before the most recent contract date. Why would that happen? With inconsistent dates on the appraisal order, the original appraisal, instructions from the lender and, the most recent appraisal, it appears like you were trying to hide something. It looks suspicious, and you don’t need that if a government agency comes and inspects your work files.
- So what inspection date would you place on the appraisal? A date that occurred prior to the current contract date? Have you gone out and re-inspected? On the current appraisal, have you noted that you have performed services on this property within the prior X weeks?
- You have new information including the sales price. You must analyze all listing and sales information. Are you simply going to ignore the prior purchase and sale agreement and say nothing about it? Hopefully not.
- USPAP is designed as a generic guide for appraisers. If your client is a lender, then there are additional requirements that must be met. At a minimum, the requirements in addition to USPAP are: The Inter Agency Appraisal Guidelines and Fannie Mae’s Seller Guidelines. When I provided the answer in the Webinar, I considered these additional requirements as well.
Question: What about the client who, either reviews the appraisal or sends to the lender who reviews the appraisal, then asks the appraiser to provide additional comp(s) or to add a statement after delivery, without the intention to increase value, but simply to meet an underwriting condition, such as, “the well and septic distances meet FHA guidelines.” Is this acceptable and how should it be done, or is it not acceptable and how should the appraiser respond?
Answer: Depends on what you have in your engagement letter between the appraiser and the AMC/Lender. You do have a master engagement letter don’t you? How to handle issues and questions like this should be decided by the appraiser and client prior to accepting the assignment, not after. This way, appraisers can set their fees according to the work effort (Scope of Work). Yes, clients can ask for clarification or more information if the questions are related to a deficiency in the appraisal information. A problem regarding the septic system- how would the appraiser know if the well and septic distances meet FHA guidelines? Does the appraiser know the location of an underground septic tank? Does the appraiser know the location of the drain field? For most of the U.S., appraisers would not have a clue about the drain field location. I’ve talked to county health inspectors who have a copy of the As Built and even they don’t know the location. So, I’d be very careful before you go guaranteeing that you know about the location of that well and septic system. Why? Because if you are wrong, you could get sued and end up buying that house out of your personal savings. Ouch!
In the future, anticipate that this client will do this again. Increase your rates to cover the anticipated added work effort. Take my webinar, or live class, on Appraiser Independence and the Mandatory Reporting of USPAP Violations. In this live class/webinar we take time to go over the difference between deficiencies and influence.
Question: Many banks require that their name be listed as the Lender/Client even though the order has been placed by an AMC. What is the best practice in this case?
Answer: Best answer according to USPAP: The client is the entity that orders the appraisal. As such, the AMC is your client and should be listed as such on the appraisal. Then make the lender as the additional intended user. Acceptable practice (not the best answer): indicate both the AMC and the lender as the Client. Common practice according to FNMA: place the lender’s name on the front page of the report, then list the AMC and the lender on the signature page.
Question: What can we do if we notice that volume falls off after we did not hit contract price for a client?
Answer: Ask the lender why but don’t expect a reliable answer. There’s not much you can do if a client does not hire you, that’s their business decision. Time to find another client.
Words from Fannie Mae regarding removal of an appraiser for cause: How does Section I.B.(8) [of the selling guide] impact how lenders may remove appraisers from a list of qualified appraisers?
Answer: Section I.B. (8) addresses the removal of an appraiser from a list of qualified appraisers in connection with influencing or attempting to influence the outcome of an appraisal. However, Section I.B. (8) does not preclude the management of appraiser lists for bona fide administrative reasons based on written, management?approved policies. Also, Section VIII provides for lenders to have written policies and procedures implementing Appraiser Independence Requirements (AIR), including rules on appraiser independence, and to have mechanisms in place to report and discipline anyone who violates these policies and procedures.
Question: It is legal for an AMC to remove an appraiser’s name from their list if the appraiser does not accept their fees?
Answer: First of all, I’m not providing legal advice. What is legal or illegal is up to the government regulators and the court system. You can read numerous laws and you’ll have a good idea of what is illegal. Can one business not hire an appraiser because they charge more than others? Yes, welcome to America and free enterprise. Is it right for the AMC to pay ridiculously low fees? No! The solution is simple, improve the quality of your appraisals so you can find clients who pay more and stop working for clients that will not pay a reasonable fee.
Please understand, the people calling from the AMCs are usually lying to you about the fees and what others are charging. Weekly, we get AMCs that offer $200 for a residential appraisal. We say no. Often they come back and offer more. They are negotiating with you, except appraisers are unaware of the negotiation. We set our minimum fee at $600 and DO NOT work for less. And for $600, that house better be within close proximity of our office. Often we obtain $800 – $1,200 fees from AMCs (Seattle area). We’ve also been paid $5,000+ for complex waterfront properties.
In this order: A) Increase your skills, B) produce better quality appraisals and, C) increase your fees!!!
I strongly suggest taking the webinar on Appraiser Independence and the Mandatory Reporting of USPAP Violations at WorkingRE.com. Search the Hagar Institute website for classes, or ask us to hold a class in your area. The information you will receive will blow your mind and make your life easier. Finally, and I’m not sure but did I say… good appraisers should increase their fees!?
Notice: Mr. Hagar is not an attorney and CAN NOT PROVIDE LEGAL ADVICE OR COUNSEL. Nothing in this story shall be construed or interpreted as legal advice. Please seek the advice of your legal counsel. The contents of this document are for informational purposes only.
About the Author
Richard Hagar, SRA, is an appraiser, author and nationally-renowned instructor and consultant for banks, state and federal regulators and appraisers on federal and state compliance issues. Hagar has helped author numerous laws, regulations and guidelines at both state and federal level and is a nationally-recognized expert on appraisal/lender regulatory issues.
by Diana Jacobs
It’s a curious time in which the appraiser finds themselves practicing.
There is greater oversight with demands for shorter turnaround time. There are appraisal management companies (AMCs) that shop the appraiser’s turnaround time and price.
There are software companies that download data the appraiser enters with graphs, market conditions analysis, regression analysis and a wide variety of maps and pictures, which makes it appear as though the appraiser has chartered a plane, shot an aerial view, contacted governmental agencies and obtained tax information, flood information, environmental information, a soils survey, zoning and of course, provided a complete breakdown of the current Multiple Listing Data.
All of this information is at the very finger tips appraisers, who are being encouraged to consider, in the future, having someone else do their inspection while they work with the data from their desktop. The trend among users and providers is to have the appraiser focus on their “critical thinking” time. So just how much time is involved in an appraisal and how many decisions does an appraiser have to make?
Using the form 1004 residential form (most widely used form for a large majority of lending practice) the appraiser has numerous decisions to make in roughly six to eight hours.
It breaks down like this:
Page 1: 206 decisions (134 without the condition and individual blocks of choice)
Page 2: 205 decisions (potential blanks to be completed)
Page 3: 41 decisions (narrative blanks for the possible additional comments)
1004MC: 71 decisions/blanks to complete
Total: 523 possible decisions (451 without condition of materials and blocks of choice)
All of these decisions are without directions on what the appraiser must do when inspecting the neighborhood and the subject and the comparative transactions or the Limiting Conditions or the 25 Ethical Obligations of the Signed Certification Page, which at a minimum, has to have an additional item #26 for the history of service disclosure.
Keep in mind, you have to plan your inspection and never leave a neighborhood the same way you came in. Why? Because you stated you inspected the neighborhood: how did you do that if you didn’t drive all of the streets or charter a plane to fly over to ensure everything is the same or similar in terms of maintenance, condition, and general conditions that create and affect the value?
What’s the running total? 523 Decisions on the form. Twenty-six (26) Ethical Obligations to promise and be held legally accountable for by up to 30 years in prison and a fine of up to $1 million, according to Title 18 U.S. Code Section 1001 or similar state laws.
Whew! Now it’s time, of course, to consider the remaining decisions;
- 3 Directives of USPAP SR 2-1
- 12 Directives of the Written Report in SR 2-2 (a) of the 2014-2015 USPAP Appraisal Report
- 10 Directives of SR 2-3 but we aren’t going to count those 10 as they are part of the 26 on the Supplemented Form.
There are four USPAP Rules and each has very specific decisions and directives which appraisers are required to prove they have taken into consideration and/or performed. The Ethics Rule has three subsections; the Record Keeping Rule includes nine items of musts. The Competency Rule has three directives on being competent; three directives on acquiring competency and three directives on what to do if you discover you’re not competent. The Scope of Work and Jurisdictional Exception rules both have multiple directives of exhortations and prohibitions (do’s and must not do’s).
We’re not through yet. Mortgage lending comes with a host of additional decisions which result in approximately 130 pages of assignment conditions of which about 40 pages relate to the residential appraisal report form and each page adds its own specific directive on the additional requirement of performing and reporting an appraisal in the secondary market. There are easily 100-200 additional considerations that must be made under those assignment conditions.
Oh, lest we forget, 67 of those fields of the 1004 form must be UAD compliant.
784 Decisions to Make, 784 Decisions
My count, and it doesn’t break down the multiple directives of the assignment conditions or specifics of the Statements of USPAP or the Scope of Work Rule, etc., is 784 decisions for the appraiser in every residential assignment.
Don’t get me wrong, I’m all for maintaining quality management and quality control over this most serious issue of performing an appraisal assignment. When an appraiser makes a mistake they should be grateful for the opportunity to correct the error. In the event the error was discovered after the fact, the appraiser needs to accept accountability.
Often the appraiser, in an effort to get the job done in time, will fail to keep the appropriate documentation in their workfile. It’s not always about the intentional act of trying to withhold or mislead. It’s simply a time issue for the appraiser. In the appraiser’s mind if it’s available through Internet research why does it have to be printed out when it can be retrieved if needed? Of course, that has proven to be the Achilles Heel of many state-disciplined appraisers as the workfile is the evidence needed to prove compliance with all of the regulations in those many decisions that have to be made during an assignment.
Now, may I ask you this question? Is the appraiser really getting the respect, support and monetary remuneration for the service they provide? Isn’t it time for the users of the appraisal services to recognize the work that goes into the appraisal product? Shouldn’t the users of appraisal services and the regulators of appraisers recognize the obvious potential for errors when so many decisions have to be made in such a short amount of time? Isn’t that what our forefathers thought when they stated in the development rule of SR 1-1 (c) “Perfection is impossible to attain, and competence does not require perfection”?
About the Author
Diana Jacob currently lives outside Hillsboro, Texas on a small ranch and has been involved in real property appraisal since the latter part of the 1980s. She holds the Certified General Certification from the states of North Carolina, Georgia and Texas and a Residential Certification from the state of Louisiana. She is a certified USPAP instructor and represents the Texas Association of Appraisers at The Appraisal Foundation Advisory Council (TAFAC).
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by David Brauner, Senior Broker, OREP
Editor’s Note: The rise in state board complaints-from consumers, agents and others, is one more headache appraisers face these days. Below are two stories that can help. One correction to our last News Edition: Victory for Customary & Reasonable Fees in Louisiana: the 2055 C&R fee is $325.
New lending guidelines are causing a spike in complaints to appraisal boards nationwide, and with it, more headaches for real estate appraisers. With borrowers now able to obtain a copy of their appraisal upon request, and agents/brokers attempting to intimidate appraisers by blaming low values on “bad appraising,” frivolous complaints to state boards are a new reality for more and more appraisers- even the careful ones.
A dashed off email complaint by a consumer, agent or other disgruntled party who didn’t get their value, can have serious ramifications to an appraiser’s business- innocent or not.
Dealing with a complaint, even one without merit, can be time-consuming and frustrating, and if not handled correctly, can be ruinous to your appraisal business. Most insurance companies, including the one’s OREP works with, provide free legal guidance to their insureds and this is often the best place to start, especially when dealing with legal suits. But untangling state board complaints, that accuse appraisers of specific violations of the Uniform Standards of Professional Practice (USPAP), require a different set of skills. To be on equal (or better) footing with the stable of attorneys your state board has at its disposal and to properly defend your interests, you often need an expert’s understanding of USPAP and an insider’s knowledge of how state boards operate to enjoy the best result.
According to Bob Keith, Former Executive Director and Appraiser Program Compliance Coordinator for the Oregon Appraiser Certification and Licensure Board, what many appraisers don’t realize is that not all state board investigators are trained appraisers and few are experts in USPAP. “Only slightly more than one-half of one percent of all credentialed appraisers are qualified as experts in the minimum Uniform Standards of Professional Appraisal Practice. As a result, those making decisions about your professional license and career may be less of an expert in USPAP than you are,” says Keith. “It pays to have any expert on your side.”
Keith says to have a fair chance in a complicated and often unfair process, appraisers must understand a few basics about protecting their license and their livelihood and how to obtain expert advice when they need it.
Keith is providing consulting services to appraisers facing state board complaints since leaving the Oregon Board. “Having a complaint filed against you is a frightening experience, but it does not automatically mean that you’re going to be disciplined by your state licensing board. Don’t panic but don’t delay either. You can ‘fight city hall,’ but you must be willing to utilize resources that are readily available,” Keith said.
You can learn more about Keith’s consulting practice at OREP.org (click Benefits). OREP Members and Affiliates and subscribers to Working RE Magazine receive the first half hour consultation from Keith free and a significant discount on consulting services if needed. Note: Due to his recent close association with the Oregon Appraiser Board, he is not providing consulting services to appraisers for properties located in Oregon at this time, but Keith can make a referral to a local expert that can be of assistance.
Beware of Consent Decrees