Tagged: air statement
Here is How to Make Changes to the Wisconsin Appraisal Industry
I have an idea of how to change the appraisal industry in out state. We need to commit to communicating in order to set goals and pursue them. I already have a system in place where we can communicate to each other and work together to affect change. I point this out because I do not have any alternatives. I started a discussion group on linked in named the Wisconsin Coalition of Appraisers https://www.linkedin.com/grp/home?gid=6673036&trk=my_groups-tile-grp originally in hopes that the WCA would use it but they did not adopt it. If everyone joined the group you would be notified when some one has something to discuss and it would be a good collaborative effort to keep everyone informed and come up with some solutions on how to make some positive changes in the state. I know everyone is usually busy, but it is insane to keep doing the same thing over and over expecting a different result. We need to at least get some discussions going so we know what we want and what we have to do. Get involved so you don’t have to find another job. Take the time to post a comment.
How many of you have been keeping an eye out for something better to do? Did you know that after 2 years of school a dental hygienist makes a median of $70,000/ year with full benefits including insurance?
The average income for a mail carrier is $65,000. No degree
Insurance claim adjuster median is $60,000. No degree
According to indeed.com based on job listings, the average salary for a residential appraiser is between $46,000 and $58,000. http://www.indeed.com/salary/Real-Estate-Appraiser.html
Here is a snippet on the appraisal business from the Bureau of Labor Statistics. http://www.bls.gov/ooh/business-and-financial/appraisers-and-assessors-of-real-estate.htm
Summary
Appraisers and assessors prepare current data before visiting properties.
| Quick Facts: Appraisers and Assessors of Real Estate | |
| 2012 Median Pay | $49,540 per year $23.82 per hour |
| Entry-Level Education | Bachelor’s degree |
| Work Experience in a Related Occupation | None |
| On-the-job Training | Long-term on-the-job training |
| Number of Jobs, 2012 | 83,700 |
| Job Outlook, 2012-22 | 6% (Slower than average) |
| Employment Change, 2012-22 | 4,700 |
What Appraisers and Assessors of Real Estate Do
Appraisers and assessors of real estate estimate the value of land and the buildings on the land usually before it is sold, mortgaged, taxed, insured, or developed.
Work Environment
Although appraisers and assessors of real estate work in offices, they often spend a large part of their day visiting properties. Most work full time during regular business hours.
How to Become an Appraiser or Assessor of Real Estate
All appraisers and assessors must be licensed or certified, but requirements vary widely. To obtain a license, appraisers of residential real property usually must have at least an associate’s degree, and appraisers of more complex residential or commercial property usually must have at least a bachelor’s degree. For assessors, most states set education and experience requirements that an assessor must meet in order to practice.
Pay
The median annual wage for appraisers and assessors of real estate was $49,540 in May 2012.
Job Outlook
Employment of appraisers and assessors of real estate is projected to grow 6 percent from 2012 to 2022, slower than the average for all occupations. Employment opportunities should be best in areas with active real estate markets. Workers should expect strong competition for jobs.
Similar Occupations
Compare the job duties, education, job growth, and pay of appraisers and assessors of real estate with similar occupations.
More Information, Including Links to O*NET
Learn more about appraisers and assessors of real estate by visiting additional resources, including O*NET, a source on key characteristics of workers and occupations.
I have been doing some research on how to accomplish some of the changes related to the appraisal industry. I tracked down who could do a fee study at the University. I talked to John Stevenson at the UW survey center and he said that they could do it with some direction on who and what to survey. I also contacted Rich Deverdier at the Illinois appraiser coalition to see what they recommend. He recommended having the state order the fee study so no one can say that the study is not valid. He estimated the cost to be between $10,000 and $30,000. If appraisers end up paying for it, it would be between $5 and $15 per appraiser based on the 2,024 appraisers currently licensed in Wisconsin. I am guessing we may see a substantial decrease in that number by December 15th.
I also talked to the WRA advocate for appraisers, Debbie Conrad, who is an attorney. I know she has attended all of the legislative hearings involving the appraisal industry. She said that she puts out a newsletter with what she does available to appraisal section members at the WRA, which costs an additional $50. You may have gotten a recent email about joining. You also get a free class on homes from Steve Tadevich. Talking to her, it sounds like the legislature has frozen any appraisal related regulation until the government feels like doing something. That begs the question of how do we motivate our government to address the issue of how to fix the industry that we rely on for our livelihood in a timely manner. It would be good to get support from the WRA and the Appraisal Institute since appraisers in Wisconsin are only .03% of the population. Does anyone know any legislators that they could talk into championing the cause of appraisers? How so we get their attention?
The Dodd Frank act broke our industry, which it was not intended to do with its provision for customary and reasonable fees. Without the customary and reasonable fees it does not work. Even with the C & R fee study, how is it enforced? What are the penalties? They gave the industry over to AMC’s prompted by the corruption of an AMC in New York. More Lunacy. Where will the appraisal industry be in 10 years considering that according to the Appraisal Institutes 2014 analysis 62% of appraisers are over the age of 51. Another 24% are age 36 to 50. In 20 years we will have lost 62% of appraisers. That should make the fees go up. http://www.appraisalinstitute.org/assets/1/7/us-appraiser-demographics_(1).pdf From 2010 to 2014 the number of appraisers decreased on average at a rate of 2.6% per year. I would not be surprised to see that double. We will see at the end of the year how far we drop from 2,024 appraisers. I know of several who are switching to other jobs and possibly doing appraisals occasionally. Rick Modaff, an appraiser from Evansville died, last month at age 59. Have any other appraisers retired or died in the last 2 years?
The turn out for the Appraiser Lunch on Tuesday was sparse. 2 of the people that came had 70 years combined experience in the appraisal profession. Jim Coutts, from Beloit, who was one of my teachers when I started over 16 years ago and Richard Larkin from Milwaukee both have years of experience. They are both members of the Appraisal Institute and expressed a desire that AI get more involved in the residential side of appraisals. Rich had actually had an article published in a recent newsletter from the institute expressing the need for more communication between residential appraisers and it sounds like he has started a work group for residential appraisers.
Dean Smith
Phone: (608) 712-6086
Email: realestateeinstein@gmail.com
Final Rule Released on Minimum AMC Requirements. They do not include a rule on C & R fees
April 22, 2015
Final Rule Released on Minimum AMC Requirements
The Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Consumer Financial Protection Bureau the Federal Reserve and the Office of the Comptroller of the Currency released on April 21 its final rule on minimum requirements for state registration and supervision of appraisal management companies, as required by the Dodd-Frank Act.
There was one reference made to customary and reasonable fees made. This was it:
These commenter’s requested that the final rule clarify the extent to which States are expected to investigate and enforce TILA section 129E and its implementing regulations, which includes the requirements to pay appraisers customary and reasonable fees. These commenter’s also expressed concern that States might interpret these rules differently, potentially in ways that may conflict with Federal interpretations.
Lets just ignore the problem. The following are some excerpts from the rule that I thought were interesting. It is worth reading. I threw in a few quotes from the Appraisal Institute.
States will have 3 years from the release of the rule to set up AMC registration and supervision systems. Some commenter’s actually complained that 3 years is not enough time.
Highlights of the rule include:
Under the final rule, these Federally regulated AMCs do not need to register with a State, but are subject to the same minimum requirements as State-regulated AMCs.
What if we do not have state regulation
Only some of the worst AMC’s would be allowed to operate, those that are big bank owned. You know they are going to cut fees even more.
Section 1124 does not compel a State to establish an AMC registration and supervision program, nor is a penalty imposed on a State that does not establish a regulatory structure for AMCs within 36 months of issuance of this final rule.15 However, in a State that has not adopted the AMC minimum requirements established by this rule, AMCs are barred by section 1124 from providing appraisal management services for Federally related transactions, unless they are owned and controlled by a Federally regulated depository institution.16 Thus, appraisal management services may still be provided for Federally related transactions in non-participating States by individual appraisers, by AMCs that are below the minimum statutory panel size threshold, and as noted previously, by Federally regulated AMCs.
In participating States, the minimum requirements apply to any AMC that provides appraisal management services, as defined in the final rule, and meets the statutory panel size threshold, which is that the AMC oversees an appraiser panel of more than 15 State-certified or State-licensed appraisers in a State or 25 or more appraisers in two or more States in a calendar year or 12-month period under State law. States may establish requirements for AMC registration and supervision that are in addition to these minimum requirements..
The implementation of the AMC minimum requirements does not affect the responsibility of banks, Federal savings associations, State savings associations, bank holding companies, and credit unions to ensure that appraisals for their institutions comply with applicable laws and regulations and are consistent with supervisory guidance. If these regulated financial institutions use an AMC to engage appraisers on their behalf, the AMC must be acting as an agent for these institutions.
If after the 36-month period following issuance of the final rule (or any extended period permitted by the ASC), a State has not yet adopted an AMC registration and supervision program, many options exist for creditors to obtain appraisals for Federally related transactions. Creditors that do not wish to hire in-house appraisers can engage third-party appraisers directly.101 Smaller AMCs (those that have fewer than 15 appraisers in the State on their panel or fewer than 25 appraisers in two or more States) as well as Federally regulated AMCs can still perform services in Federally related transactions. AMCs that exceed the statutory size threshold may also continue to service transactions that are not Federally related and, if the State does later participate, can also then provide services in Federally related transactions.
in non-participating States, non-Federally regulated AMCs will be at a competitive disadvantage, because these AMCs will be barred by statute from providing appraisal management services for Federally related transactions.
an AMC shall not be registered by a State or included on the AMC National Registry if the company, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State.103 Section 1124(d) provides further that each person who owns more than 10 percent of an AMC must be of good moral character, as determined by the State appraiser certifying and licensing agency, and must submit to a background investigation carried out by the State appraiser certifying and licensing agency.
Section 1124(c) provides that AMCs that are owned and controlled subsidiaries of an insured depository institution or an insured credit union and regulated by a Federal financial institutions regulatory agency, are not required to register with a State.109 These Federally regulated AMCs are, however, subject to the same minimum requirements as AMCs that are not regulated by a Federal financial institutions regulatory agency.
The OCC believes the final rule will not have a significant economic impact on a substantial number of small entities for several reasons. First, the final rule imposes requirements primarily on States, not on national banks or Federal savings associations. Second, to the extent that the final rule imposes burden on national banks or Federal savings associations that own and control an AMC, there are only two such AMCs, and these are owned by large national banks. For these reasons, the OCC believes that the final rule will not have an impact on a substantial number of OCC-supervised small entities. Therefore, the OCC certifies that the final rule would not have a significant economic impact on a substantial number of small entities.
In the Board’s regulatory flexibility analysis for this Rule, the Board determined that approximately 32 entities would be subject to direct regulation and supervision by Federal financial institutions regulatory agencies. These entities would be subject to direct regulation and supervision under the Rule because the entities are appraisal management companies owned and controlled by insured depository institutions and regulated by a Federal financial institutions regulatory agency (Federally regulated AMC). The number of these 32 entities that actually would be subject to regulation under the AMC Rule is currently unknown because some of the entities may have a network or panel of contract appraisers that is too small to satisfy a threshold requirement of the AMC Rule and therefore would be exempt from regulation and supervision under the AMC Rule.
Data currently available to the Board indicate that approximately five State member banks operate a Federally regulated AMC. Data available to the Board are not sufficient to estimate how many of the approximately five entities subject to Board regulation and supervision would be classified as “small entities.”
Geographic Competency and independence
Establish and comply with processes and controls reasonably designed to ensure that the AMC, in engaging an appraiser, selects an appraiser who is independent of the transaction and who has the requisite education, expertise, and experience necessary to competently complete the appraisal assignment for the particular market and property type”; and
Independent Contractor Definition: The rule revises the standard used to determine if an appraiser is an independent contractor based on whether or not the appraiser is treated as an independent contractor by the AMC for federal income tax purposes.
AMC/Appraisal Firm Distinction:The rule distinguishes between AMCs and appraisal firms based on their respective use of fee appraisers and employees. Each employee appraiser must pay a registration fee to the state or states where they practice. An AMC will only be subject to a registration fee once state registration and supervision regulations become effective pursuant to Dodd-Frank. The rule also provides coverage for “hybrid” firms, meaning entities that both hire appraisers as employees to perform appraisals and engage independent contractors to perform appraisals.
AMC Panel Threshold Size:The rule clarifies that when the number of appraisers is counted for the purpose of determining the size of an AMC’s panel threshold, that the count be based on the number of appraisers listed on the roster who potentially are available to perform appraisals and not on the number of appraisers actually engaged to perform appraisals.
Trainee Appraisers Not Barred:The rule clarifies that AMCs may engage appraisers who use trainee appraisers to assist on assignments.
DATES:
Effective date. This final rule will become effective on [INSERT 60 DAYS FROM DATE OF PUBLICATION IN THE FEDERAL REGISTER].
Compliance date: Federally regulated AMCs must comply with the minimum requirements for providing appraisal management services under 12 CFR 34.215(a) no later than 12 months from the effective date of this final rule. The participating State or States in which a State-regulated AMC operates will establish the compliance deadline for State-regulated AMCs.
To estimate the impact of the final rule on small AMCs, the Bureau conducted a survey. The Bureau called nine AMCs, selected randomly from a list of approximately 500 AMCs provided by industry trade associations. The AMCs were asked for certain basic data including the number of States in which they operate, their revenue (including the revenue from any non-appraisal business), and the number of appraisals that they performed in 2012.130 The Bureau estimated the revenue to be the number of appraisals performed in 2012 multiplied by $350 – the average appraisal cost assumed in the Agencies’ analysis under section 1022 of the Dodd-Frank Act in the 2013 Interagency Appraisals Rule. This revenue estimate is likely to be underestimated, given that several AMCs out of nine reported additional revenue that was not due to the residential appraisal business. Out of the nine AMCs, six had revenues of less than $7,500,000 in 2012, and thus would be within the scope of the RFA analysis based upon SBA guidelines.131 The Bureau computed the cost of registration and renewal fees in States that do not already have them, allocated these costs to individual AMCs based upon the number of States in which the AMC operated,132 and computed the ratio of these allocated costs to the AMCs’ revenues.
The Bureau acknowledges that requiring AMCs to send letters to the appraisers that the AMC decides to remove from its panel might add burden in States that do not already have registration requirements (which typically include notice provisions). The Bureau does not possess any evidence on the number of appraisers to whom an AMC would have to send these letters. According to the Bureau of Labor and Statistics’ August 2014 preliminary numbers, 1.9 percent of the labor force in the real estate and rental and leasing industry was either laid off or discharged in the most recent month. Thus, the Bureau estimates that an AMC will dismiss approximately a quarter of appraisers from its panel in any given year. The Bureau assumes that each AMC will have several standardized letters explaining the reason for dismissal: for example, changing economic conditions or the appraiser’s violation of USPAP or work performance issues. Each AMC might incur a minimal one-time cost to draft these letters, with some industry associations potentially providing templates. After this minimal one-time cost is incurred, the ongoing cost would include a minimal adjustment of the letter based on the appraiser’s particular circumstances and the actual printing and mailing cost. These letters also could be sent in batches, periodically, such as on an annual basis. Thus, for the purposes of this analysis, the Bureau implicitly accounts for these costs in the sensitivity analyses below (which use a State fee of $5,150 and include a $300 administrative expense).
View a copy of the final rule for Minimum Requirements for Appraisal Management Companies.
View a copy of the Appraisal Institute’s comment letterto the federal agencies on their proposed rule addressing “Minimum Requirements for Appraisal Management Companies.” (log-in required).
The CU Monster is Coming January 26th
The Monster is Coming Soon! (January 26) Do You Know What Your Adjustments Are?
Once upon a time in the land of Homeownership a great rumor spread throughout the land, “The CU is coming! The CU is coming to devour appraisers!” No one knew if it was true. The people pondered. Will it kill deals? Is it coming to eliminate all of the appraisers so the AVM can become king? Some say it is coming to eliminate non conformists so everything will be the same and promote a master race of appraisers, able to justify their every adjustment.
There seems to be a lot of wondering what this will do in the end. It all sounds like more work with no pay with tons of coercion in the end to conform to what a computer says. Can we battle a computer program when we cannot even see what data it is using? Do you really want to try to explain why you did not use the comps that the computer picked, Why you used a $35 adjustment when all of the other appraisers used a $25 adjustment in that same neighborhood? Here are some of the things others are saying.
Here is what Phil Crawford from the “Voice of Appraisal” has to say about it.
Thomas Jefferson said in 1802:
“I believe that banking institutions are more dangerous to our liberties than standing armies.
If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property – until their children wake-up homeless on the continent their fathers conquered.”
Check Out This Video. You will Enjoy it. It is a couple of realtors and their take on the CU. They think that loans will be delayed, only low appraisals will get approved, and that appraisers will have to do a lot more work for free.
http://thenationalrealestatepost.com/appraisal-time-bomb-coming-in-january-2015/
Info from Fannie
• Adjustments to Comparable Sales Policy Update
Fannie Mae has eliminated the 15% net and 25% gross adjustment guidelines and provided clarification with respect to expectations for the appraiser to analyze the market for competitive properties and provide appropriate market-based adjustments without regard to limits on the size of the adjustments.
• Introducing the CU CheckPoint
To help prepare lenders for using Collateral Underwriter (CU), the CU CheckPoint was created to provide implementation tips and milestone targets. CU is an appraisal risk assessment tool that will provide real-time feedback on appraisal submissions starting Jan. 26, 2015.
Here are some realtor quotes taken from Realtors on linked in.
“Appraials will take longer, cost more, and will be more of a desk top type appraisal. They could cost up to $1,000. Purchase prices will probably be kept low, thus not allowing the market to grow.”
“We have a new challenge to keep our focus on real estate results, as others busily undermine our hard work, destroy the peace of mind of the Buyer & Seller, and add to the complexity of purchasing real estate. It is sad to see this occur when our real estate world is already too complex, continually dictated by the Government, and now deliberately made more complex than it should be. The American Dream becomes even more distant.”
“I have so much questions on this but, I guess I will just have to wait to see how things will truly affect a transaction after January. To use up to 20 comps for a price comparison on a purchase is basically using an average price per sq.ft. within a designated radius in a selected area (it’s almost liked using the Tax Assessed Value). If this is true, cheaper houses will win over those with higher price per sq.ft. and appraisers would need to pay a special attention to any upgrade(s) and specifically note every one of them to justify their value (I will suggest to all Sellers to provide a list of upgrades for the appraiser to review).
All in all, knowing Fannie Mae’s appraisal algorithm for property selection and procedures in an appraisal challenge in this new method is the key. At this time, I will advise to all Realtors to prepare yourself with a mortgage company with a strong appraisal review board. It will definitely be more attractive to a Seller than those without! Does anyone know if the NAR is interested taking on this issue at a higher level?”
Appraiser Quotes on linked in
“As an Appraiser, let me suggest that you seek lenders that hold their own loans and do not depend on fanny. This proprietary information is not known to me therefore I am not responsible for compliance with this information. This information has not been vetted and is therefore not usable.
This appraiser has no knowledge or access to the data source used by underwriting and is not responsible for data gathered by sources that are not available to the appraiser.
This appraiser retains the total and complete right to decide which comparables are the closest most similar comparables to be used in any and every appraisal performed. Any attempt by underwriting to dictate which comparables are used in a violation of Dodd Franks Appraiser Independent Requirements (AIRS).
For all of these reasons there will not be any further analysis performed by this appraiser to address the use of comparables that were not used in this appraisal. Any further attempt to control the use of comparables will be reported to an attempt to influence the appraiser and a violation of AIRS requirements.
Yes A battle is coming between underwriting and appraisers. It is in the best interest of NAR to get involved with this issue at all levels. Do you understand that as soon as I state undue influence or and attempt to influence the appraiser, No loan can be written. We will only get beat up so much before we blow the deal by stating that there is an attempt to influence the appraiser by underwriting. And this is an attempt to influence the appraiser. Many people who I have spoken with say that will answer any reasonable requests for clarification. However if they get crazy with this the “Attempt to Influence” complaints will sky-rocket and no loan can be written if the appraiser states he is being influenced in any way. MAKE NO MISTAKE, THIS IS AN ATTEMPT TO INFLUENCE THE APPRAISER AND IS IN VIOLATION OF THE LAW.
Why is this information being kept from appraisers? They are sharing it with underwriters but will not share it with appraisers?”
“I think one thing we can all agree on is that this is yet another tool that will be a yardstick to beat us with. AMC’s and lenders are not going to do a whole lot of work when they see a high rating. They are going to first assume that our appraisal could have been better. We are being pushed into a corner as I see it. NO ONE is going to pay us more so we can take extra time to jump through CU hoops. The argument will be the same as the 1004MC. That the “extra work” is just something we should be doing already. I say bring it on. I feel I complete good appraisals and when they come back at me with some rating info I will deal with it then. I just hope everyone understands that Skynet v1.0 launches soon and will eventually be as good or better than us on about 90% of all appraisals. The other 10% are the ones you wish you could pay the client $100 to take back anyway. We have NO lobby and the banks and FNMA will eventually get what they all really want. That is an inspection done the same day ordered by a runner who takes photos and measurements, then a 90 second AVM that used 63 sales and listings with a 10 year history of the market area to create an awesome report. In many cases they won’t need the measurements because ours are being added to the database with every appraisal. I work alone and have a database of ~14,000 comp photos and several thousand comps spanning a decade. I also have thousands of appraisal files on individual homes….. Imagine what they have already.”
Here is some info from the National Association of Appraisers as far as some of the things they will be looking for:
Click to access Collateral%20Underwriter%20-%2012%2022.pdf
Risk flags inform the lender that there may be
1) policy compliance issues (UAD issues, property eligibility, etc.)
2) over-valuation risk (using statistical modeling – no value will be provided, just risk scores)
3) an appraisal quality risk (mechanics & methodology used – data integrity, comp selection, adjustments, and reconciliation)
The risk scores, risk flags and messages do not affect the UCDP (portal) submission, but are only warnings to inform during the appraisal review process.
Within the Appraisal Quality section, CU will analyze
– Data Integrity – are physical attributes and transaction terms accurate reported?
– Comp Selection – are the selected comps representative of the subject property?
– Adjustments – Are adjustments based on typical market reaction (not rule-of-thumb)?
– Reconciliation – Are most relevant comps given most weight in reconciliation?
CU will provide detailed messaging with each of the components to help lenders identify potential issues that will lead to a high risk score.
Fannie Mae has stated that, through their portal, they have seen over 14 million appraisals to date and have over 20 million comparable transactions. Fannie Mae states that of comparable sales they
have in their database, they see each one on an average of 5 times. So, data needs to be consistent when using a comparable sale more than once. Data is also checked for consistency among peers.
Example: If your report states that Sale 1 has a sale price of $220,000 and other appraiser peers have used the same sale in other appraisals with a sale price of $200,000, this conflicting
information would raise a risk flag. Fannie Mae has said that they will not flag small differences in gross living area or cases where appraisers are split between C3 and C4 condition ratings for the
same property. Fannie Mae is looking for material differences and outliers.
When selecting Comparable Sales, CU can only score those fixed items on Page 2 of the URAR. All UAD-standardized features are considered. Amenities such as pools, outdoor kitchen, accessory
units, fireplaces, fences, out-buildings, etc. are not recorded in standardized format. Thus, these cannot be considered by the CU model. Since Fannie Mae has access to over 20 million sales,
physical similarity, distance, and time (most recently sold) will be scored. There may be cases when a lender will come back to the appraiser asking why certain sales were not used in an appraisal.
Fannie Mae has said that in almost every appraisal report they see, there is a comment that says “The appraiser used the most comparable sales available.” If the risk score is too high, lenders may
question if this is a true statement made by the appraiser.
In the Reconciliation, CU is looking to see that the appraised value is within the adjusted sale price range provided by the comparable sales. Example: Opinion of Value is $250,000. Range of the
Adjusted Sale Prices: $200,000 to $225,000. Fannie Mae is on pace to receive 20,000 appraisal reports where the opinion of value is outside the range. CU will check for those appraisals where
there is a wide range of values with support being from a single comparable. This may be justified, but CU will look in order to validate. CU will look at the lower and upper range of values from the
comparable sales. CU may provide a higher risk score and messaging so that the lender may address the issue. This may mean having a conversation with the appraiser.
What can appraisers do in preparation of CU?
Brush up on appraisal methods and techniques
Have supported/market based adjustments – the days of using standard adjustments that were handed down or you were told to use by your supervisor are gone
Be able to explain how you developed your adjustments
Don’t use the same adjustment for all appraisals (unless you can support it).
Example:
$25 sf GLA adjustment for $75,000 property…as well as a $750,000 property.
Be consistent with your comparable sale data. If you used Q3 previously….stay with that. CU will flag the same comp used by you having different data.
If your data differs from MLS, public record data or any other source, provide explanation why the data differs from your research.
Be aware of your comp selection and adjustments. Include support for your adjustments.
Provide support for why you went “that far” to get a comp. Fannie Mae
There are many that have been appraising longer than I, but in my 23 years, appraisers have been predicting the end of our profession since the day I started. Fannie Mae buys loans. So, they get to make the rules for the loan they purchase. If you want to play their game, you’ll have to learn their rules. If you are an appraiser that provides sound, credible work, this is just another curve-ball being thrown at you. If not, you might need to learn how to hit a curve-ball.
The CU Monster is Coming
Yes Daniel there are monsters in our world. They have been lurking in the shadows for years. Fannie Mae has let them loose on us and will release their own CU monster on January 26th. If you thought you were a good appraiser, you will find that you have no defense against the massive CU monster who will rip your appraisal apart, adjustment by adjustment, comp by comp.
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I watched the Bradford Redstone video also at https://goto.webcasts.com/starthere.jsp?ei=1050667
I have also seen a demonstration of the SAVVI analytics program, which looks similar and is also in the Total store if you use alamode. Here is link to their demo info http://www.savvianalytics.com/#!need-help/c13kd
Both of these look similar to the Fannie CU Monster. I am sure that more programs will come hoping to fight the CU big data monster. This is another great opportunity to make more money off of appraisers. The main issue is the big data problem. In most markets around here you are lucky to have 6 comps and most of these regression based programs need 200 comps or more to be accurate. I think who ever can overcome this issue the most successfully will be the most successful in the creation of the most popular monster. User friendliness will also matter. Either way we will have to pay for big data analytics. Any appraisal software that includes it for free will probably garner the majority of appraisers.
Sounds like Fannie will be throwing out all of the guidelines they have created in the past in favor of big data with 50-90% gross adjustments. The bigger and grosser the monster the better. Unless you are using an AVM to do your appraisals like Fannie, your appraisals will be flagged as a risk filled appraisal. If you thought you already received too many stupid revision requests wait till the 26th. We may have to throw out everything that we have been taught by our peers to make it in this profession unless we all bail on mortgage work, which in the end may be what they really want anyway.
The Redstone video shows a vision of the future of the appraisal industry. A drone flies out and takes a photo of the property, which is recognized by a property data base and satellite imagery geo coding the property, which taps into all of the home depot, lumber yards, building permit hubs, and other stores related to improving a property to analyze what types of improvements have done and the satellite measures the GLA and fills in the subject information. Then the monster analyzes every sale in the county, selects the most similar comparables, puts them in the appraisal, makes the adjustments, throws in all the stats to support the adjustments and why you did and did not use those sales, and spits out the most likely value.
I think Fannie is going to create a plethora of USPAP violation and Appraisal Independence issues. USPAP requires that In developing a real property appraisal, an appraiser must: be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal. So what happens when Fannie says that your adjustments are wrong because they don’t match up with theirs? They will have to say that you are incompetent and do not know how to correctly employ recognized methods and techniques unless you can prove how you came up with those adjustments. That brings up the question as to is the CU monster a recognized technique or method. Does anyone use AVM adjustments in their appraisals? Would a peer review accept a $150/sq. ft. GLA adjustment on a $200,000 house? Is the CU an appraisal review even if they do not give a value? Does it require a geographically competent appraiser? Can a computer program perform an appraisal review? What will it do to the brains of the check box monkeys?
I love it when an AMC requires that you include Fannie’s own AIR statement in an appraisal that states the following and sends back a 2 page revision request for all of the other things that they want you to put in the appraisal that violates the statement. It seems that Fannie is in violation of their own statement.
- Appraiser Independence Safeguards
- An “appraiser” must be, at a minimum, licensed or certified by the State in which the property to be appraised is located.
- No employee, director, officer, or agent of the Seller, or any other third-party acting as joint venture partner, independent contractor, appraisal company, appraisal management company, or partner on behalf of the Seller, shall influence or attempt to influence the development, reporting, result, or review of an appraisal through coercion, extortion, collusion, compensation, inducement, intimidation, bribery, or in any other manner including but not limited to:
(1) Withholding or threatening to withhold timely payment or partial payment for an appraisal report;
(2) Withholding or threatening to withhold future business for an appraiser, or demoting or terminating or threatening to demote or terminate an appraiser;
(3) Expressly or impliedly promising future business, promotions, or increased compensation for an appraiser;
(4) Conditioning the ordering of an appraisal report or the payment of an appraisal fee or salary or bonus on the opinion, conclusion, or valuation to be reached, or on a preliminary value estimate requested from an appraiser;
(5) Requesting that an appraiser provide an estimated, predetermined, or desired valuation in an appraisal report prior to the completion of the appraisal report, or requesting that an appraiser provide estimated values or comparable sales at any time prior to the appraiser’s completion of an appraisal report;
(6) Providing to an appraiser an anticipated, estimated, encouraged, or desired value for a subject property or a proposed or target amount to be loaned to the Borrower, except that a copy of the sales contract for purchase transactions may be provided;
(7) Providing to an appraiser, appraisal company, appraisal management company, or any entity or person related to the appraiser, appraisal company, or appraisal management company, stock or other financial or non-financial benefits;
(8) Removing an appraiser from a list of qualified appraisers, or adding an appraiser to an exclusionary list of disapproved appraisers, in connection with the influencing or attempting to influence an appraisal as described in Paragraph B above (this prohibition does not preclude the management of appraiser lists for bona fide administrative or quality-control reasons based on written policy); and
(9) Any other act or practice that impairs or attempts to impair an appraiser’s independence, objectivity, or impartiality or violates law or regulation, including, but not limited to, the Truth in Lending Act (TILA) and Regulation
We’ll have to get together in February and discuss how the CU has enhanced our profession.
Wisconsin Appraiser 