After taking writing courses in college and a couple of AI courses on report writing, I utilize the following guidelines:
I avoid third person references to myself. I try not to use the passive voice. I avoid "insider" lingo. I took the words "deemed" and "appears" out of my lexicon long ago. My goal is to communicate, not to obfuscate. I have never gotten
a request asking for more clarity on any of my reports.
File under pet peeves: Confusion between CO and CO2.
Carbon Monoxide is a harmful gas identified by the chemical formula CO and is the gas that is being detected by an CO detector/alarm.
CO2 is part of the gas that we expel when we breath. There is no requirement for a CO2 detector in homes. Yet.
Maybe after the zombie apocalypse to warn the zombies when a breathing human is nearby.
The agent was concerned because he felt that appraisers should value a property at the highest price that a buyer would pay.
This was my answer to him-
I appreciate your comments on current problems with appraisals. I too have noticed that some appraisers tend to undervalue properties, which is just as wrong as overvaluing a home, but I disagree with your definition of market value.
The highest price that a buyer is willing to pay is not market value, it is the price for that specific transaction.
Market Value is the estimated amount for which a property should sell on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing with both parties acting knowledgeably, prudently,
and without compulsion. In other words, market value is the most probable price that a property should sell for to a typical buyer. That is the value that appraisers are obligated to discover.
It is important to distinguish between Market Value and
Price. A price obtained for a specific property during a specific transaction may or may not represent that property's market value. Certain considerations may have been present, such as a special relationship between the buyer and the seller.
Another possibility is that a specific buyer may have been willing to pay a premium over and above the market value, if his subjective valuation of the property was higher than the Market Value. I am sure you have had a buyer that "just had to have" that particular
house, even though it may have been priced higher than Market Value.
Comments on the Interim Final Regulations: Docket No. R- 1394 and RIN No. AD-7100-56
I am an appraiser in Northern California and I am responding today to the request for comments on the Interim Final Regulations.
Appraiser independence should apply to all residential consumer credit transactions, whether that involves a primary residence or second home. Broker price opinions (BPOs) and other non-appraiser valuations should be covered by the interim
final rules in order to protect consumers in transactions for which appraisals are not required. Specifically, BPOs should not be the sole basis of making a lending decision on a primary or second residence.
I have been extremely concerned since the inception of the HVCC that, in the case of AMCs which are affiliated with or in contract with creditors, the appraisal function is not truly independent and never can be. The temptation for collusion is always present
in these circumstances and thus defeats the purpose of the Dodd-Frank Act. Wasn’t it eAppraiseIT and WAMU collusion that initiated the New York AG’s investigation that resulted in the HVCC?
There was a mistaken belief among creditors that HVCC required the use of AMCs to order and manage appraisals so the use of AMC'S has increased substantially since the HVCC took effect. This has happened in part due to a concern whether
creditors could successfully implement the internal firewalls separating loan staff and the appraiser.
I believe that the increased use of AMCs has had a negative effect on the quality of appraisals. AMC's often seem to select appraisers based solely on price and turnaround time, without regard to the appraisers' knowledge of the local market
in which the property is located or the level of competence and expertise needed for the assignment. This should be addressed in the final interpretation of the regulations.
I have great concern regarding the requirement to report appraisers to the state appraiser licensing agency for "unethical or unprofessional" conduct. The rule is too vague and broad. The interim final rule should require reporting only of material misconduct
to prevent every consumer, lender or realtor that is unhappy with an opinion of value from overwhelming state appraiser agencies with unsubstantiated complaints. To further prevent frivolous reporting, the final regulations should require a person reporting
misconduct to articulate reasonable, fact-based grounds for alleging that misconduct has occurred. It is unfortunate that along with a mechanism for reporting appraiser misconduct there will not also be created a mechanism for appraisers to report misconduct
(including pressure and coercion, which still exist) by the other participants in a loan transaction.
AMCs in general are exempt from accountability in the interim final regulations. AMCs need to be examined for their roles in alleged appraiser misconduct and their own misconduct including pressure for turn times, pressure for values and harassment of appraisers
by onerous assignment conditions and excessive reviews.
Customary and Reasonable Fees is an issue that has to be carefully examined and can’t be separated from the definition of a normal, non-complex assignment. Specifically, it is up to the appraiser to determine what the assignment
entails and what steps are necessary to produce a credible result. Factors that go into producing a reasonable scope of work for each assignment include, among other things, location of the property, type of market, availability of data (comparable sales,
income data, building materials and labor costs), the complexity of the improvements and size of the property. An appraiser must also have enough time to complete the assignment depending upon it’s complexity as well as time for proper verification of data.
In other words, assignments can be relatively easy- involving standard research, relatively short driving distances and a shorter time to develop the results. An assignment can be complex or more difficult- requiring longer driving distances,
more involved research. The time needed to fully develop the report may take days instead of hours. Because appraisal assignments differ so greatly, the fees that should be charged for each kind of assignment can not be reduced to a simplistic fee schedule
approach. Each assignment should command a fee that is reasonable for that type of assignment and for the level of risk associated with the product.
It would be best to wait for independent fee study results before the issue of customary and reasonable fees is decided. The input of experienced appraisers should be part of the equation. AMC fees should be excluded from consideration
since they were developed after the HVCC and are a part of why reasonable and customary fees are being discussed at all. AMCs, through their monopolistic practices, are the reason that appraiser fees and appraisal reliability have been compromised.
Because of the HVCC, AMCs have monopolized lender appraisal business. AMCs have become the main source for inexpensive and quick appraisals.
The consumer has not been the beneficiary of these fast and cheap appraisals. In fact, consumers are charged the same or more than before the HVCC. The appraiser is paid 20-50% less than what they used to receive when their business was direct to lenders.
The quality and reliability of appraisals has been compromised resulting in delays, deals gone sour and multiple appraisals, which the consumer pays for either up front or through increased fees.
Since the appraiser’s role in the real property transaction is to protect the public interest and since the final regulations should also promulgate the protection of the public’s interest, I have proposed some considerations the Board
should be aware of when writing the final regulations. The consumer’s interests need to be protected by the Board and by the appraisal profession, so I hope that these comments will be considered and acted upon accordingly.
Frank Garay and Brian Stevens KILLED IT tonight. Best speakers for motivation and method that we have had for a long time. The delivery was spot on and the crowd loved it. I got more complements and I know they must have picked
up 20-30 new subscribers tonight. Would have been more, but I think they had an audience full of TBWS Daily show viewers already.
I heard "lightbulbs" going on all over the place and the buzz afterwards was very much, "We can do that" or "What if we did this?" And I think everyone appreciated the positive viewpoint presented. It was very energizing. I hope Frank and Brian got something
out of the evening too.
I know that my appraiser friend was already talking about a collaborative effort with me. That made me feel good. Should be fun.
At any rate, it was great for them coming up and sharing with us their amazing mix of truth, insanity and wisdom.
There has been some discussion about whether or not it is necessary to vent the temperature and pressure relief valve on a water heater located in a garage to the outside of the structure according to FHA.
Local code in Sacramento County may not mandate outside venting, although when researching this issue yesterday, I found contradictory statements in local ordinances.
When interviewing my appraisal peers about this issue, all agreed that the temperature and pressure relief valve should be vented to the outside of the structure. When no clear point of authority exists to support an appraiser's reporting of an existing
situation, the actions of one's appraisal peers should determine the correct course of action.
However, that is not the case here.
While no written statement or point of authority exists within FHA documentation that gives the guidance for temperature and pressure relief valve venting, other than it must be vented, a call to the Santa Ana HOC revealed FHA's stance on this issue.
I called the Santa Ana HOC this morning and talked to Ed Flores in the Technical Department about venting the water heater pressure relief valve. He stated in unequivocal terms that the temperature and pressure relief valve on a water heater must be vented
to the outside of the structure regardless of its location within the structure, including, as is the case here, a water heater located in a garage.
He also reminded me that as of February 15, 2010, all repair completion reports are to be reported on the
Fannie Mae Form 1004D, and that the HUD-92051 is to be reserved for new construction compliance inspection reporting.
First of all what we are trying to do first and foremost is to compare apples to apples. That is, the most similar properies are usually the best comparables.
For an appraiser the most important comps are the ones that sold most recently because those tell us what buyers are paying for homes. For a Realtor, I would think that Actives and Pendings might be the most important, because those are your seller's competition
and the pool of homes from which your buyer might consider purchasing. Run a CMA to see what the average list to sales price ratio is and apply that to the listing prices to get an idea of what buyers are actually paying.
The 4 things I look at first are (1) closest in terms of location and sales date. I try to define the neighborhood boundaries and, if possible, only use comps from within the same neighborhood. I also don't usually go back further than 90 days. If I have to
exceed 90 days, in order to find enough sales, then I have to know whether the market declined or increased since then and apply a percentage increase or decrease to the sales price.
Then I look at (2) size and room count, I stay within 10%+- if I can. Model matches are the best, of course. Lot size has some effect, but not much for most tract homes.
(3) Age would probably be next. We try not to use comps that are more than 10 years older or newer. It's hard to adjust much for age due to remodeling, different levels of upkeep and deferred maintenance.
(4) Condition is the hardest thing to quantify, but that would be the other thing that I would try to match. Hard to measure sometimes from the MLS listings. I always have to call or email the listing and buyer's agent to get a true picture.
There is no rule of thumb for adjustments; it is case-by-case and market derived. What I mean is, what is the market reaction to missing appliances or a pool or proximity to the train tracks? Experience in the market, interviews with agents, matched pair analysis
and regression analysis are the ways we isolate each variable and measure how much in terms of dollars or percentage each contributes to the home's value.
Long winded, sorry about that, but as you see it's not so simple. There are other factors, but we can talk about those at another time.