AppraiserX

I am AppraiserX. From humble beginnings I came. Thankful to be working in a profession that I only imagined in my youth. I have heard that the journey is what life is all about. Perhaps, there is some truth to that. Now, after many years in the business, I find that to be more and more true. You see I am what they call a buyers representitive. I appraise homes for buyers and lenders. What I mean by that is that I am not a deal maker. Banks and mortgage brokers are typically looking for someone that will work the numbers up as high as possible so that they can lend more money. Unfortunately, I have a problem with that because if I do that I have let the buyer and the lender down by not providing the most accurate information. The banks and mortgage companies many times sell a bulk of their loans to lenders who invest in the mortgage industry. The problem here is that after the banks and mortgage brokers work to get the highest possible value there is little or no equity in the property and the lenders money is not properly secured. This might also result in the buyer having purchased a property that is over valued. Later on when they decide to sell they find there home is only worth a portion of what they actually paid.

The typical consumer may find this all hard to believe after all of the lending mishaps that have occurred in the past. Unfortunately, these past mistakes have not been corrected. There is too much money involved. Banking is big business. where do you think all the money is? It’s in the bank, right? These big companies have lobbyists that go to Washington and have great influence when it comes to drafting or defeating new lending laws.

They have figured out how to control appraisers and in my opinion actually regulate a large portion of the appraisal industry. They have also figured out how to keep a portion of the appraisal fee and not disclose it to the consumer. That’s right, not only are they raking in huge closing fees but their greed has inspired them to take part of the appraisal fee as well. This is done by simply opening an appraisal management company and sending the appraisal request to this “separate entity” and searching for appraisers that will complete the appraisal for the very lowest fee possible. They get to keep the difference between what they can get the consumer to pay and what the appraiser will accept. I could go on but I think I will save that for another time.

The attorneys don’t want to use my services because they are in many cases looking for an appraiser to meet their value as well. If they represent a property owner in a divorce case, or any other case for that matter, they are looking to get the best possible value for their client. Weather it be a low value or high value, it differs from one instance to another.

By representing a true value appraisers like myself basically eliminate the majority of the appraisal market. When honesty and integrity is supposed to make you more prosperous in the appraisal industry it might just put you out of business. I love the real estate business. Don’t get me wrong. I just don’t like the direction the business is headed. Instead of giving the banks and mortgage brokers less control over the appraisal industry it appears the they will be given even more control. What needs to happen is the law makers need to back up and take another look at the problem. Instead of placing more control in the hands of the people that are causing the problem they need to take more power away. For instance the lawmaker revised the lending laws to make it a crime for banks to apply pressure for appraisers to inflate value. Then to nutrelize that law the lawmakers have provided a loophole that allows the lender to pass the job of applying pressure to the appraisal management companies or AMCs. These companies are unregulated and have absolutely no reason to restrict themselves from applying pressure. There is no system set up to hold them accountable for this kind of unethical behavior.

To counter the pressure to inflate value the law makers should call for federal or state reviewers that look at a large number of the appraisal reports. Give them access to the same sales information so that they can make factual judgments regarding value. Give these reviewers power to suspend appraisers pending a review by the state licensing board. Off set some of the workload by turning the criminal cases over to the courts where they belong. Abolish the appraisal management companies. It should be a crime for any indivedual or company to manage or make police regarding an appraisal report and not be licensed and qualified to complete that same report by a state or federal regulating authority.

In my opinion the best place to start a push for something like this is on the state level. If the state lawmakers would consider amending the appraisal laws to require companies or individuals that manage, place appraisals, or make appraisal policy to be licensed to complete that same appraisal, this would eliminate the unregulated companies and their uneducated employees from having any part in this business. These types of changes are critical if we are going to do anything substantial to combat the problems caused by the unchecked powers that control the now failed lending industry. Then and only then can the appraisal industry exist without pressure or prejudice. I am am AppraiserX, and I am pleased to be able to provide this information for the public. 

AppraiserX a Paupers Tale - by: AppraiserX

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Facing a declining housing market, the U.S. Department of Veterans Affairs (VA) distributed a document (Thursday, December 06, 2007) reaffirming that the agency requires appraisals at fair market value for properties used as security for a VA loan.  Download Circular 26-07-4 -Valuing Properties During Periods of Declining Market.pdf

In a document signed by Judith Caden, Director of the VA's Loan Guaranty Service, the VA provides the following guidance to appraisers (Chapter 11, Section 8, Lender's Handbook):

A summary of market trend indicators to consider when performing an appraisal is provided below.

1. Determine whether sales or financing concessions are being offered in the subject property's market area. If so, determine the effect on the sales price of comparable properties.
2. Consider the supply and demand for available housing in the subject market and compare the average listing price to the sales price ratio in the subject market area.
3. Consider the marketing time trend (increasing or decreasing) in the subject marketing area.
4. Analyze sales listings, contract offers, and unsettled sales to determine if market conditions changed between the date each comparable sold and the date of the subject property appraisal. Provide an addendum if a significant market transition is indicated due to changes in employment opportunity, housing supply/demand, average marketing time, seller concessions, etc. However, appraisers should certify in the appraisal report,

"I have considered relevant competitive listings/contract offerings in performing this appraisal, and any trend indicated by that data is supported by the listings/offering information included in this report."

General Guidance: Certain areas around the country are experiencing what is frequently referred to as a "declining market." We recognize that some lenders may object to receiving appraisal reports that contain comments or analyses of negative market conditions and, consequently, may request that such items be removed. VA expects appraisal reports to contain negative comments when they accurately reflect market conditions.

Be assured that VA has no objection to guaranteeing a VA loan in a declining market area as long as the appraiser has properly documented the facts of the case. Furthermore, secondary market sources have indicated that they will purchase VA loans in declining markets as long as the appraisal analysis is proper and complete.

Download Circular 26-07-4 -Valuing Properties During Periods of Declining Market.pdf

Author: Brian J. Davis, ARA - Brian Davis & Associates - Brian has over 23 years of appraisal experience in Central, IL and hosts the Appraisal Scoop blog and the Win TOTAL Users Group an email forum for appraisers

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Matt Johnson of www.lasermeters.com and ww.appraiserdepot.com has announced the introduction of yet another product to the Leica line of laser measuring devices. 

The new DISTO™ D3 is a multi-functional "pocketable" measuring device with an integrated tilt sensor and a lighting detector that automatically switches on the display and keypad illumination.  THAT should help when working in those dark REO properties!

Matt Johnson says: Once the price is finalized for the US, I’m guessing it will be around 9.00 and will probably start shipping in November. I got the chance to play with the D3 a few weeks ago.  The keypad reminds me of the Nokia cell phones from a few years ago. 

Measuring made easy – your versatile partner with a modern look!

• Tilt measurement The instrument’s inbuilt tilt sensor quickly and simply determines tilts up to ± 45°. The tilt sensor can also provide you with true horizontal distances. Reliable measurements are therefore guaranteed.
• Multifunctional end piece Aim the instrument straight at the target point, whether measuring out of corners, slots or from edges: with this end piece you are prepared for all measuring situations. The instrument detects the end piece automatically, which helps you avoid expensive measuring errors.
• Automatic keypad and display illumination A built-in sensor detects if the environment is dark and switches on the illumination of the keypad and display. You can also measure in the dark without any problem.
• Multiple functions The Leica DISTO™ D3 can also calculate areas, volumes, room dimensions and various types of Pythagorean functions. A time delay release and enough memory for up to 20 measurements finish off the instruments wide range of functions – a concept designed to make
  your work easier.

Included items - practical and clever:

• Holster: Stows everything away neatly
• Target plate: Allows accurate measurement on a non-reflective surface.
• Wrist strap: Secures the instrument at all heights

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Would you like to FEEL the Irrational Exuberance of Robert Shiller’s A History of Home Values 2nd Edition housing values (from 1890 to present) plotted to a realistic roller coaster?!

Come on!  Take a BREAK!  Climb aboard the Home Value Roller coaster . . . .

If you’d like to take a peek at what the data REALLY looks like, here it is in the traditional graph:

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WASHINGTON — The Antitrust Division of the Department of Justice launched a new Web site today to educate consumers and policymakers about the potential benefits that competition can bring to consumers of real estate brokerage services and the barriers that inhibit that competition.

Among its features, the Web site includes:

• maps identifying states with real estate laws that can inhibit competition,
• a calculator to help consumers tally their potential savings when brokers pursuing new business models compete for their business, and
• links to additional government resources.

The address is: http://www.usdoj.gov/atr/public/real_estate/index.htm 

"Buying or selling a home is the largest financial transaction most Americans will ever undertake," said Thomas O. Barnett, Assistant Attorney General in charge of the Department's Antitrust Division. "This Web site will help consumers and policymakers understand the benefits of increased competition among real estate agents."

The estimated median commission paid by home sellers in 2006 was ,672, according to the Antitrust Division. New real estate brokerage models have the potential to reduce that amount by thousands of dollars. For example, in states that allow open competition, some buyer's brokers rebate up to two-thirds of their commission to the customer, and some seller's brokers offer limited-service packages that let sellers list their homes on the local multiple listing service (MLS) for as little as a few hundred dollars.

In a number of states, however, laws have been passed making it illegal for brokers to offer rebates, or requiring them to offer a full package of traditional services regardless whether all consumers want them. The Antitrust Division Web site contains data showing that if these sorts of barriers to competition were eliminated, consumers could save thousands of dollars in real estate commissions when selling one home and buying another.

• What are the laws in your state?
• Buying? State laws on rebates increase prices
• Selling? State laws on brokerage services increase prices

The Web site also explains how consumers are harmed when states forbid competition between lawyers and non-lawyers to conduct real estate closings, and when brokers tailor the rules governing local multiple listing services to exclude lower-cost rivals.

Consumers are encouraged to contact the Antitrust Division of the Department of Justice if they have information concerning anticompetitive conduct in the real estate brokerage industry.

Brian J. Davis, RAA - Brian Davis & Associates - Brian has over 23 years of appraisal experience in Central, IL and hosts the Appraisal Scoopblog and the WinTOTAL Users Group an email forum for appraisers.

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Brian J. Davis, RAA - Brian Davis & Associates - Brian has over 23 years of appraisal experience in Central, IL and hosts the Appraisal Scoopblog and the WinTOTAL Users Group an email forum for appraisers.

Filed under: Real Estate Appraisal | No Comments »

The September 2007 USPAP Q&A has been issued by the Appraisal Foundation and covers the following questions:  Download September 2007 USPAP Q&A pdf (29.8K)

• Can I authorize someone else to sign an appraisal report for me?
• Is an appraiser required to use software that allows the user to authenticate the appraiser's signature?
• Does giving someone my signature password give up "sole personal control"?
• If a software company creates signature file for use with their software, does that give up "sole personal control" of my signature?
• If a signature is stolen, am I in violation of USPAP for failing to have "sole personal control of my signature?

As I read each of the responses, I was thinking . . .Yeah, "technically" that's probabaly true, but what are the real world consequences if I accept and act on that advice?

I'm just not sure that I agree with most of the rationale of these responses, but it's the last Q&A that really baffles me?!  (see below)

Appraiser identity theft, and related mortgage fraud, are at serious levels. I would have thought that the Appraisal Foundation would have addressed those topics, in this latest Q&A, on a practical level.  At least acknowledge the risks involved with giving somone else your signature password or knowingly transmitting reports to clients that are redacting signatures and altering reports that others are relying on.

Question:  When I transmit my residential form report electronically I have heard that some of my clients are opening the appraisal file and removing my signature file, reformatting the data, and in other ways altering my appraisal report for the client's use. What are my responsibilities under USPAP if I know or believe such actions are occurring after my report is delivered to the client?

Response:  USPAP does not specifically address who "owns" an appraisal report, the research necessary to produce that report or the report's supporting documentation. Once an appraisal report is delivered to a client, a client may do a variety of things, including redacting or removing the appraiser's signature, or converting data from the report into a format more functional to the client, etc. Once the appraisal report has been transmitted to the client, USPAP does not place further responsibility on the appraiser for the client's use of that report.

Click here to Download September 2007 USPAP Q&A pdf (29.8K) and see if YOU agree with the latest Q&A!

Brian J. Davis, RAA - Brian Davis & Associates - Brian has over 23 years of appraisal experience in Central, IL and hosts the Appraisal Scoopblog and the WinTOTAL Users Group an email forum for appraisers.

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Earlier this year the ASC, (Appraisal Sub Committee), ordered all states to comply with their Policy Statement 10: The Scope of State Agency Enforcement Programs.  This statement requires every state to perform a work product review on every licensee issued a Certified Residential or Certified General license since January 1, 2005.  Download ASC Policy Statement Paragraph 10G.pdf (39.3K)

T.J. McCarthy of the Illinois Coalition of Appraisal Professionals (ICAP) said: "Needless to say, this is a huge task for the IL Appraisal Division of the Department of Professional Regulation."

In an effort to facilitate the process for people upgrading before the January 1, 2008 AQB licensing criteria change, the state of IL will only be auditing work product on new applications for certified licenses from now until December 31, 2007.

Illinois will begin the process of reviewing the work product for all licensees issued a Certified Residential or Certified General license from January 2005 through August 2007 after the first of the year.

Illinois began sending out audit letters on new applications in early August.  The audit letter directs the applicant to send in copies of three appraisals selected by the state of IL from their experience log.

T.J. McCarthy (ICAP) offers these tips:

• Send in a complete copy of the report including all addenda.
• The reports need to have a signed certification page.
• DO NOT attempt to make changes to the reports in an effort to clean them up. It has to be a true copy.
• Respond to the state within the requested two week time frame.
• DO NOT send in your workfile.
• The appraisals have to meet USPAP reporting requirements and be compliant with Illinois Appraisal Law and the Administrative Rules.

Based on the audit, the state will either;

1. approve your application, defer your application pending additional clarification of the work product submitted,
2. defer your application pending review of additional work product selected from your log by the state, or
3. deny your application for non compliance.

The IL Board is working on policies and parameters for an applicant to reapply to the state if their initial application is denied based on non compliance of the applicants work product. In the meantime, Brian Weaver has posted a Q & A on the ILDPR website to help answer many of the questions appraisers have been asking regarding the audit.

You can read the Illinois Q & A here:  The Illinois Appraisal Experience Audit

Click here for the complete ASC document: Letter to All States Transmitting ASC Policy Statement Amendment re Experience Validation and USPAP Compliance, Comment Summary, and Policy Statement 10 G 08.13.07

Brian J. Davis, RAA - Brian Davis & Associates - Brian has over 23 years of appraisal experience in Central, IL and hosts the Appraisal Scoopblog and the WinTOTAL Users Group an email forum for appraisers.

 

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Rep Paul W. Hodes introduced House Bill H.R.3535 to create the Homebuyer’s Protection Act of 2007 on 9/14/2007:

To amend the Truth in Lending Act to require escrow accounts for the payment of property taxes and insurance for all subprime loans, and to expand the coverage of the appraisal requirements under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, and for other purposes.

The second section of the bill is MOST important to appraisers! It would significantly change the language in FIRREA regarding when appraisals are required .

• The current language only requires appraisals on `federally related transactions’.
• The proposed language requires appraisals on ALL `real estate related financial transactions’.

What could that mean for AVM and BPO products? This bill is in the first step in the legislative process. Introduced bills go first to committees that deliberate, investigate, and revise them before they go to general debate. The majority of bills never make it out of committee.

But if it were to pass . . .Would that mean that ALL real estate transactions would have to be performed by a licensed appraiser? What do you think the chances are that a bill like this will make it out of committee?

Here’s a clip from Rep. Hodes website:

This bill amends the Truth In Lending Act, or TILA, to ensure that all subprime loans have an escrow for the life of the loan, like prime loans. Because subprime loans do not require escrow accounts, borrowers can be hit with huge tax bills at the end of the year, contributing to foreclosures.

The second part of the bill would require a licensed appraiser to appraise all residential homes when a consumer seeks a mortgage. Currently, licensed appraisers are only required when a federally regulated bank originates the loan. However, with the increase in non-bank mortgages (like warehouse lenders) some loans are not “federally related” and therefore do not require a licensed appraiser.

Without an accurate appraisal, a homeowner would not know the true value of their home and could be taxed at a higher rate by the city. Additionally, if the mortgage is later purchased by an investor on the secondary market, that purchaser would not know the true value of the home either. If a foreclosure occurs, the investor who purchased the debt (mortgage) would be unable to recoup their whole loss since the property was appraised at a higher value than it was actually worth.

The bill would change federal law to require a licensed appraiser in all real estate transactions by amending Financial Institutions Reforms, Recovery, and Enforcement Act 1989, also known as FIRREA.

Here’s an excerpt from the bill:

SEC. 3. SCOPE OF APPRAISAL REQUIREMENTS.

• • (A) by striking paragraph (4); and

    (B) in paragraph (5), by striking `any transaction involving’ and inserting `any consumer transaction involving’.

  (1) The heading of section 1120 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3349) is amended by striking `federally related transactions’ and inserting `real estate related financial transactions’.

  (2) Section 1121 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3350) is amended–

(a) In General- Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3331 et seq.) is amended by striking `federally related transaction’ and `federally related transactions’ each place each such term appears and inserting `real estate related financial transaction’ or `real estate related financial transactions’, as the case may be.

(b) Technical and Conforming Amendments-

Download HR3535_Homebuyers_Protection_Act_2007.pdf (42.4K)

Latest Major Action: 9/14/2007 Referred to House committee. Status: Referred to the House Committee on Financial Services.

Thanks to Joan Trice of http://www.AppraisalBuzz.com and washingtonwatch.com for ferreting out this legislation!

Brian J. Davis, RAA - Brian Davis & Associates - Brian has over 23 years of appraisal experience in Central, IL and hosts the Appraisal Scoopblog and the WinTOTAL Users Group an email forum for appraisers.

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Would you like to learn more about Valuation for Financial Reporting and what this important and growing area of appraisal practice might mean for your own business? Produced in conjunction with the Appraisal Institute’s Valuation and Litigation Services Shared Interest Group, this timely podcast explains VFR, the role appraisers play in the process and how employing VFR standards, principles and methodologies may impact liability for valuation professionals.

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