CU: Nightmare or Income Opportunity?

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CU: Nightmare or Income Opportunity? - Statement That Could Serve You Well

Place this statement into your canned comments as it can serve you well.

I received a copy of Ken Harney’s recent CU article today via email. The article was sent from an old appraiser contact that remembered me from the fight that I was leading to boycott AMCs from 2009 to 2010. Ken Harney is undoubtedly the best friend an appraiser could ever have in the national media as he was the only syndicated columnist willing to cover the injustice of HVCC. He and I exchanged several emails during those days. I found no ground breaking news within his article. However, I was grateful for the fact that he continues to play the part of the old guard in his attempts to warn both consumers and real estate professionals about the latest government screw up that will rattle their world. The golden nugget that caught my eye with regard to CU was in fact located within the reader comment section below the article. The comment from Jared Michel best describes the coming CU fiasco and how it will affect appraisers who have never faced this type of situation. Here are Jared’s comments:

There is really nothing wrong what Fannie is attempting. But it needs to be acknowledged that it represents a shift in the nature of appraising for the secondary market. The traditional Fannie appraisal has been the Appraiser’s opinion of the value of the property supported by facts and evidence. The facts and evidence have typically consisted of an analysis of several recent sales of similar types of property. Anecdotes essentially, that support the appraiser’s opinion.

What Fannie is contemplating is asking the Appraiser to complete a more holistic review of the market. Instead of simply presenting data that supports our opinion, we will be asked to also refute other data that might be construed to indicate a different value. Nothing wrong with that, but it should be obvious that this is a much bigger job as there is rarely any logical end point to the task of “proving a negative”. Expect prices for appraisals to rise.

If I ask you to describe the taste of a glass of wine you could do so with a couple of simple words…”dry, fruity, hints of oak and chocolate”. If I ask you to explain what that same glass of wine does not taste like its a lot harder job…”It doesn’t taste like beef, or pork, or chicken, or nachos… or cake…, or scotch,… definitely not brussell sprouts or kale…. You get the idea. “

Jared’s comments caught my eye because I was faced with a similar situation twice after submitting appraisal assignments. The first case came through our largest client after a homeowner had complained about our value. They then pushed the lender to fax us 20+ comparable sales and listings, asking us to consider each with regard to the property’s value. The fact that this was our largest client played a large part in my decision to comply with their request. After spending nearly two additional days on the analysis the lender responded that they were satisfied with our original value and comp selection. The problem of course was that we did the extra work for free. My second encounter with this type of request came from an AMC named PCV Murcor. They could not locate an appraiser willing to accept a rural assignment and were willing to pay top dollar if we would accept the order. As expected it was an extraordinarily difficult job with few comps available. We spent nearly three days completing the order because we knew PCV all to well. Their reviewers knew nothing about appraising but they were well versed in crucifixions. When their typical requests rolled in asking us to elaborate on items that were well explained within the appraisal we were ready. On day two they sent over a list of 20+ comparable sales and listings that we needed to analyze as well. Rather than comply, as we did in the previous example we replied with the following statement:

“As professional real estate appraisers we were asked to submit OUR opinion of value for the property. We will be happy to analyze any comparable sales and listings that you wish to submit to us as a separate assignment however our fee for such work is $50 per comparable sale if located within our county. The fee may higher however if the comparable sales and listings are located outside of our county”.

Place this statement into your canned comments as it can serve you well. These two lines have the ability to transform CU from a living nightmare into an income generating opportunity. The choice is yours.

I recommend that you read Jared Michel’s statement on CU again appraisers. He is offering your the most accurate insight into CU available to date.

Post Script
After receiving the previously mentioned statement from our office PCV Murcor threatened to withhold payment for our previously submitted appraisal. We in turn turned them into the proper authorities for value coercion. We received our payment via Federal Express the following day.

~ By David Feather aka Retired Appraiser

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12 Responses

  1. Deb G. says:

    My biggest objection with CU isn’t the additional work or layers of reviews. I am proud of my work and would post it on the Brooklyn Bridge if client confidentiality wasn’t required. My issue with CU is that we appraisers don’t get to see Fannie’s list of supposedly comparable properties before I pick my own, nor do I have any confidence at all that I am actually being reviewed by a certified appraiser as required by law. This scope of work creep (not knowing how many computer-generated comps I have to address or how they were chosen) makes it impossible for me to generate an accurate fee quote. I might be spending an extra day or two for each job at no additional compensation. What other profession in the world operates like that? Yeah, none, that’s who. If Fannie wants me to appraise a house, that is one fee. If Fannie wants me to analyse its secret (to us) data that validates or disproves its own computer model, that should be a different and separate fee.

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  2. Jack Connor says:

    I think the best way to handle the CU is to narrow your range of research parameters as tight as possible, disclose those parameters and print out all the sales and submit them in the report. That way the reviewer can see all you considered.

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    • Tom says:

      Just because of the CU I’m not changing my search parameters! I know my market areas better than some computer or a lender 3,000 miles away. Also, the only problem is you provide them with all the comps you didn’t use. They are still going to turn around and ask you to provide an explanation for each why you did not use those comparables. Just my opinion that’s all I’m saying.

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    • Mike Ford Mike Ford says:

      Hi David! Glad to see who ‘Retired Appraiser” actually is at last! Great article though with a couple exceptions (in my experience).

      PCV Murcor is an appraiser (MAI) minority-owned national appraisal company that also has the government contracts with FDIC to review seized banks appraisals. I dealt with them on the commercial side and found them to be very competent, and highly professional on pushing out high speed commercial assignments, albeit CHEAP and too quick on turn time requirements. They bypass CoStars user license restrictions by pulling the comps for you and then sending them out to the appraiser if desired. They use that access as partial justification for paying lower fees than the work normally dictates.

      After I stopped receiving commercial orders (id taken too long on another commercial order and told them it required even more time than the 10 days allocated), Id still get inquiries from the residential side on complex issues.

      Not once were they willing to pay anything remotely close to the fee that the work called for.

      Based on their lack of understanding of appraisal complexity dictating specific fees, it would not surprise me IF the residential side reviewers didn’t know their rear ends from a hole in the wall. Certainly the order processing folks did not (again, I exclude the commercial side from this criticism-they were outstanding in these areas).

      I can not ever envision a scenario where I would reconsider 20 new comps or any new comps that appeared to be a shot gun approach to challenging value.

      Give me one to five “better comps” AND state why EACH one is deemed a better comp and I will always analyze it to see if it makes a difference. If it does I want to know and correct a potential mistake on my part. If no claim of better comps exists, then there would have to be some other very specific reason for contending my value is low.

      If the best of the five (or three or two) does not make a difference, then I am not wasting time of the remaining ones-unless they are willing to pay $100 for each extra comp they want analyzed.

      I bet your getting the supplemental comps payment had more to do with them wanting to keep their federal (FDIC) contracts than anything else.

      All this has nothing to do with CU though. CU is already giving birth to abuses. Most commonly the AVM “review” where a conclusion of inadequacy is transmitted to the appraiser based on AVM “Wonder Wizards” or “Value Wizards” and THEN the reasons are developed to support the wizards result (Flagstar).

      Anyway David keep up the good fight despite retirement!

      I’ll be forwarding your article to my Appraiser Guild so they can try to contact Mr. Harney.

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      • Retired Appraiser Retired Appraiser says:

        Mike

        I appreciate your input and thoughts on the topic. PCV Murcor was not willing to pay us $50 for each additional comparable analyzed, not did I expect them to. I used it as a way to shut them down in their tracks because they were asking trying to give us a new assignment for no additional fee. I doubt that lenders will be willing to pay an additional $50 per comp analyzed for CU reasons either until enough appraisers begin to force the issue. I would simply use it as a means to get out of the the extra work. In the beginning many appraisers will be black listed for making such a statement but after a few encounters with doing this work for free most appraisers will begin to see the light and come back with such responses.

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        • Mike Ford Mike Ford says:

          Hi RA;

          Agree. ALMOST none will ever pay it which is the whole reason for asking for extra amounts. (For those crazy enough to do so, God Bless them AND the extra income!)

          My old mentors (old time SRPA B of A District Appraiser and HIS old boss) used to charge $100 for just about anything extra. New comps $100. Special non-typical photos after the fact $100. Rent survey $100. And so forth

          More experienced appraisers are willing to start standing up, but we still have many too afraid of losing their one bid client. As they learn to diversify hopefully it will get better.

          I started fighting via the coalition path; now the union and last week also the NAR -they have appraiser Realtor equivalents without having to be a broker. I have even tried to get my state coalition president to join the union and he is considering it.

          It’s a numbers game. ONE coalition=pretty much nothing. 50 such coalitions = possible results; add in a union with the SAME members as the coalitions, and they get even more political pull. Toss in NAR with many tens of thousands of additional ‘interested parties’ where we share common goals; and I think we finally have a winning formula.

          Then again, I have ALWAYS been willing to tilt with a windmill or two.

          Mike

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    • Mike Ford Mike Ford says:

      Jack I disagree.

      (1.) The possibility of a review of some type does not dictate how I perform my appraisals.
      (2.) What makes you think our initial review is even performed by a human being?
      (3.) AVMs are being used as “reviews” to reject appraised values and based on those different avm results, to conclude lack of credibility on the part of the fee field appraiser!
      (4.) FNMA does not dictate appraisal policy or practices. If THEIR requirements have strayed too far from USPAP and generally accepted sound practices then it is our responsibility to challenge those practice. Not pretend that they are ok.

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  3. Cairenn says:

    Just wondering if you still get work from PCV Murcor?
    I’m sick of getting contract changes and change orders and not getting paid for the extra work.
    Does anyone charge for these contract revisions, change order revisions, etc..? I’m afraid I’ll lose the client if I ask for fair pay for all these changes.

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    • Retired Appraiser Retired Appraiser says:

      PCV Murcor and I parted company after they threatened to withhold payment for the assignment. The appraisal profession and I parted company in 2009 when I refused to kickback a portion of my fees to AMCs. Life is too short to hate your job and I reached the point where I despised both appraising and AMCs.

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  4. Jeremy Hall Appraisals - Colorado Jeremy Hall Appraisals - Colorado says:

    My standard PCV fee is $450-$550, 2 weeks. If you truly follow the scope of work, you’ll roll out a 3 page addenda talking about all those irrelevant points in the engagement letter. I keep on telling PCV, if they stop trying to play appraisers against each other and make them compete with each other on fee, I’ll be happy to work with them again. Question; When does the consumer get the benefits of this so called ‘free market system’, when price savings from reduced costs of appraisal services are never returned to the consumer, and are instead held as variable opportunistic profit as a financial incentive to drive down appraisers fees? Typed that line so often, but I guess that’s how far these middle management businesses have come from understanding actual free market systems and properly implemented checks and balances. / Per the linked article which is the topic of this post; Until such time as listing agents need to comply with UCDP, this thing won’t work as intended. It’s the sales agents that push the envelope first. Where is the control system for them? Let’s be honest; Are the lenders loaning on collaterilzed property value, or the borrowers ability to repay regardless of property worth? If lenders were not backed by tax payer money, they’d probably change their ways over night. Can I place a derivative bet on the successful performance or not of the UCDP system?

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  5. Mike Ford Mike Ford says:

    Drat! Jeremy from Colorado had a good post I wanted to address. Cant find it now. Copy and paste from email notice:

    “Author: Jeremy Hall Appraisals – Colorado
    Comment:
    My standard PCV fee is $450-$550, 2 weeks. If you truly follow the scope of work, you’ll roll out a 3 page addenda talking about all those irrelevant points in the engagement letter. I keep on telling PCV, if they stop trying to play appraisers against each other and make them compete with each other on fee, I’ll be happy to work with them again. Question; When does the consumer get the benefits of this so called ‘free market system’, when price savings from reduced costs of appraisal services are never returned to the consumer, and are instead held as variable opportunistic profit as a financial incentive to drive down appraisers fees? Typed that line so often, but I guess that’s how far these middle management businesses have come from understanding actual free market systems and properly implemented checks and balances. / Per the linked article which is the topic of this post; Until such time as listing agents need to comply with UCDP, this thing won’t work as intended. It’s the sales agents that push the envelope first. Where is the control system for them? Let’s be honest; Are the lenders loaning on collaterilzed property value, or the borrowers ability to repay regardless of property worth? If lenders were not backed by tax payer money, they’d probably change their ways over night. Can I place a derivative bet on the successful performance or not of the UCDP system?”

    Jeremy like most of what I read here but we also need to remember it is listing agents jobs to push the value envelope, otherwise there would never be any appreciation anywhere. They need to do it honestly and ethically, but they still need to do it.

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