Appraisal of the Industry

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Appraisal of the Industry - analysis - Imagecredit Flickr - VBC17Of course any one who has bothered to open USPAP, or read the preface of any appraisal related book is very likely familiar with the valuation process.

  • definition of the problem
  • preliminary analysis
  • data collection
  • highest and best use analysis
  • estimate of land value
  • application of the three appraisal approaches: cost, market, income
  • reconciliation of value estimates
  • report of value

Of course the application of this definition and process is where the fun begins.

Definition of the problem…

If I do not complete this report within the allotted 48 hours that has been so graciously allowed by the high pressure client I will likely never see another assignment, my children will be forced to work the street, and my wife will trade me in for someone respectable like a used car salesman or an insurance guy.

Preliminary analysis…

I could just grow “a set” and tell the client that 48 hours is entirely too short of a period but then that would mean that I would not be compliant with this demands and could severely limit my ability to do the small unimportant things, like pay rent or eat.

Data Collection…

Conducting several phone calls to other real estate appraisers, I have determined that the vast majority of residential appraisers who have focused on federally related mortgage transactions have found themselves in the same boat, and not one of us realized that we have all booked passage on the Costa Concordia or the Titanic, for those of you too busy appraising to keep up with recent events.

Highest and Best Use Analysis…

Legally permissible, certainly there is nothing illegal about a lender or client asking the near impossible from an objective licensed professional so that they will be inclined to simply make the deal work not taking the actual time needed to make sure all elements are properly analyzed and reported, but if I continue this line of thinking I will terribly digress… so moving on to the next test.

Physically possible, although it is physically possible to inspect a property (measuring, noting the placement of windows, doors, walking the foundation, noting the roof from each and every angle from the street, taking photographs of the subject from each angle, the mail box so the lender knows I can read the proper address at the time of inspection, the street scene so the lender can see the subject does conform to the neighborhood, photos not too close, or too far away, with the proper exposure, walking through each room, turning on light switches, noting the location and condition of electrical outlets, the window frames, the type and condition of each window, the type and condition of the floor cover, the walls and ceiling, the ceiling fixtures, the door and door frame, the plumbing fixtures, turning on the water and flushing each toilet, noting any and all deferred maintenance, noting any condition that would be considered detrimental to market acceptance, and highlighting any condition that would be considered unsafe, unsound, or lacking security for the current, or future occupants, noting the functional room arrangement and making sure there is a flow to the plan allowing for privacy to the private rooms (bedrooms and baths) and the public rooms like the kitchen, dining and living have proper egress without crossing through a private room) and of course inspecting the crawl space (foundation if appropriate) and the attic space to determine the type and degree of insulation, the condition of the rafters and cross beams, and make sure the mechanical system is in place and functioning. Driving through all minor arterial thoroughfares, and interior residential streets, as well as driving the neighborhood boundaries to determine the neighborhood influences so that a proper description can be provided to the ultimate user of the report. Photographing the competing sales and listings for any and all properties that are to be used in the report, and of course holding on the “best comparables” so that when the underwriter or reviewer calls and says “don’t you have any better comps?” you can say, “Why of course I do, I was hoping for you call!”

Financial feasible, since the fees are now lowered and filtered through a middleman, or should I say are now customary and reasonable the appraiser is forced to work much more efficient, and group inspections so that the bus route covers the majority comparables and the final inspection of the day is close to the Wal-Mart where he or she works a night.

Maximally productive, well obviously the only way to become maximally productive is to just generate 1,000s of reports through the appraisal management company mill, disregarding little things like full disclosure or analysis, after all hitting the number and getting the next assignment is the only way to succeed in this game…

…Ok, I believe the level of my frustration should be painfully obvious by now – the truth of the matter is that fact is actually much stranger than the above fiction. There are many appraisers out there who have started businesses to make money and not to keep up the purist attitude and safeguard the profession and the general public. What? An appraiser that wishes to make money and not pursue a career as a public servant to make sure that J.Q. Public is well protected? This seems unimaginable.

Now before anyone gets their nose out of joint, remember I am a second generation appraiser. I fully know that there are 100s of us who do seek to maintain and promote the integrity of this profession and who sacrifice literally tens of thousands of dollars each year in turning down, pushing away clients, or out right rejecting proposed assignments that would compromise their level of integrity or professionalism.

Still – the residential appraisal industry has been changed to such a degree that the largest clients out there are simply using their AMC of the month or the year, to whip the appraisers into shape. Exerting pressure though an agent by restricting work, is still exerting pressure. Even though it has become customary it is definitely not reasonable.

Ok – rant concluded…

By John Reynolds aka UncleZev, source Appraisers Speak Out

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3 Responses

  1. Jack Schlenk says:

    Review on Monster jobs ad; “Review Appraiser Job ”
    Read the Summary of duties, the Duties, and Job Requirements

    Line from Duties
    1. Assess, evaluate, and analyze, BPO Opinions, Appraisals, AVM and other external and internal data sources, as appropriate, to independently establish an Adjusted Value, with employee’s discretion………

    Nothing about USPAP

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  2. Retired Appraiser Retired Appraiser says:

    Yawn

    Your rant as a common among appraisers as stink on a skunk.
    Might I suggest a new concept that you touched upon and quickly ran from?

    “GROW A SET”
    Meaning?: Saying enough is enough
    : Recognizing it for what it is: EXTORTION
    : Organizing with other appraisers
    : Creating a plan to exterminate the criminals

    WHAT HAVE APPRAISERS ACTUALLY DONE?

    * They’ve griped about their lives in blogs

    * They’ve written several thousand letters to politicians (who were half responsible for the crime to begin with)

    * They’ve signed petitions (that were shredded by the politicians (that were half responsible for the crime to begin with)

    * They’ve complained on internet blogs

    * They’ve accepted defeat by allowing others to control their profession and their livlihoods.

    WHAT HAVE APPRAISERS FAILED TO DO?

    They failed to recognize the fact that homeowners are being screwed over nearly as badly as they are by HVCC / Dodd/Frank

    They failed to realize that attracting the media is the real solution to regaining their profession.

    They failed to realize that IF they can GROW A SET (temporarily…don’t sweat) and ORGANIZE they have an incredibly strong chance of defeating AMCs and regaining full control of their profession

    THE SOLUTION

    ORGANIZE (Appraisers Against Extortion) No Union required

    FIRE UP HOMEOWNERS to create a far larger group

    GOAL: GAIN THE MEDIAS ATTENTION
    (See Molly Katchpole vs Bank Of America and read about the how quickly the media solved the problem for Molly & consumers)

    If you watched the latest Congressional hearings that appraisers attended to complain about their plight you will realize that Congressmen get it; they know banks are being smucks about the entire situation but they have no desire to tangle with banks due to the amount of money they contribute to their election funds.

    ORGANIZING & ALIGNING WITH ANGRY HOMEOWNERS CHANGES THE EQUATION APPRAISERS. Congress will only stroke the purring kitty (the bank lobby) as long as nobody rocks the boat. Nothing gains there attention faster than a few million pissed off homeowners (problem: homeowners don’t even realize this scam exists). < See BankRape.com

    Do a little research guys on the Air Traffic Controller strike of 1981. This should provide you with a great deal of comfort. In order to bust the strike Ronald Regan called in Military Air Controllers to pick up the slack and fired the striking ATCs. Since the military has no appraisers it's a safe bet to assume that you will GAIN MEDIA ATTENTION in a very big way. Their only option is the turn to BPOs & AVMs. (We all know how well that would work out).

    To be more concise: Appraisers have the means to take back control of the profession that the banks hijacked in 2009 and holding the mortgage market at gunpoint until Congress agrees to restore fair fees, turn times, and the appraisers ability to collect their fee at the door.

    I recommend that appraisers watch the Wizard Of Oz this week. This movie contains a message that all of you need to hear: You've had the ability to change your fortunes all along…you just didn't realize it.

    GROW A SET
    ORGANIZE with the media in mind as your prime targer
    HIJACK THE MORTGAGE MARKET
    and WIN BACK YOUR CAREERS

    Hint: The current refi bubble is about the burst. Once it does appraisers will be in a far worse position.

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  3. Jeremy W Hall - CO Jeremy W Hall - CO says:

    The more rants the better, UncleZed, the more the better. / The most meaningful take away from this article is the notion that appraising is to protect the public trust, and is more than just a personal money making endeavor. Appraisers should earn more by protecting the public trust better. Sadly the opposite is true. Superstars should apply at realty sales, not appraising. Great article.

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