What IS a “ClearVal Appraisal”?
Clear Capital ClearVal… Value Not So ClearCut…
I’ve finally had an opportunity to read a hybrid ‘appraisal’ start to finish. All may read the unedited, non-redacted version in all its glory… or infamy, as the case may be. Please click here (report also embedded below) and read it first. I’ll wait right here.
One thing is clear. It is not an appraisal by any current accepted definition that I am familiar with. Ironically, there is also very little that is clear as far as support for the opined values is concerned. (I’m old fashioned and think it should be a credibly supported opinion of value – otherwise it’s just a guesstimate – clearly some disagree – read 5th edition dictionary).
Let’s start at the beginning.
The appraisal management fee was $225.00. Of that the appraiser was given $25.00. 10:1 ratio-sounds about par. I’m sure its C&R. Heck, compared to what they pay in Bangalore or Mumbai, India its H U G E!
Oddly, now that AMCs MUST show the fee split due to an inconvenient oddity of Georgia AMC/Appraisal law they feel compelled to indicate it also covers “Quality Assurance” (really – they wrote that!); Broker/Agent CMA fee, HomeData Index Fee and a Data Entry fee. Their data entry clerk / typist may get more than the appraiser.
When they list fees that way it doesn’t sound nearly so negative as listing it under the heading ‘theft of service’ would be.
OK, so for a $25 appraisal fee what do the client and intended user(s) or investor receive?
First off they get a really great appraiser! We know she must be great because she holds licenses as a residential certified appraiser in five states including one the property is located in-even if she isn’t.
That’s right, Florida (FL-RD-5268), Georgia (GA-CR-336501), Iowa (IA-CR-03460), Indiana (IN-CR60901154), & Kansas (KS-3044). For assignments in Florida, Georgia, Iowa, and Indiana her address is in Lake, Indiana, but for Kansas assignments, the address is Hamilton, Indiana. Maybe it was an old one that she forgot to update? I wasn’t able to verify if she has one in Bangalore, India.
Anyway, five different states have seen fit to certify as to her qualifications to complete complex residential real estate appraisals. Let’s all make the extraordinary assumption that she’s highly qualified, OK?
OK, back to the appraisal, or whatever it is. The USPAP Report Option cited is APPRAISAL REPORT. Unless that’s just a teaser, I think it is supposed to infer some degree of USPAP compliance exists.
We also know from page one that the effective date of value was 10/25/2017; and that the as-is market value was $48,000 and the Repaired Value was $100,000 [i].
What we aren’t real clear about is what the definition of As Repaired Value means. According to the not-so-ClearVal Appraisal, it seems to mean something like “The As-Repaired Value Conclusion reflects the expected return on investment of the planned renovations.” It reports that the client provided a renovation ‘scope of work’ with a budget of $34,500.
I guess it’s up to us to try to guess what as repaired value means. My best guess is whatever number they concluded at, is equal to cost of purchase, plus cost of repairs, plus desired return on investment = As Repaired Value. Seems straightforward enough.
Had me going for a minute. Silly me, I thought a desktop valuation would only have one defined value vs one defined, and one we still aren’t sure about. No wonder they use a certified appraiser. This is really complex.
OK, what else does the desktop hybrid by an out of state appraiser tell us? It’s a duplex, and it appears to be occupied despite its C5 rating (C5 means nothing to those appraisers that still use their words to describe physical condition of a property; C5 means ‘not so hot’.
FNMA takes two full pages to translate meaningful English and traditional appraisers jargon into meaningless gibberish. ClearVals apparently forgo such useless translations. Investors the world over either know what C5 means or they don’t care. So they are all on the same page with respect to condition.
Now that C5 rating wasn’t the appraiser’s opinion as near as we can tell. It’s based on an interior CMA inspection on some unknown or undisclosed date by the real estate guy that also did the (only) sales comparison grid adjustments, and the appraiser had no part in that. Did the real estate guy have the FNMA UAD Rosetta stone? By the way, does he need an appraiser’s license in Georgia to opine market value opinions when it is NOT to get a listing?
The Exposure time (for both as-is and as repaired) is 60-90 days.
I’m still a little confused as to how it was listed and sold in only 20 days listing date to appraisal date if the norm is 60-90. It’s probably just me. I shouldn’t do complex math in my head. Besides the report says the listing and contract dates were the same day so whether it’s one day, 60 or 90 days, it shouldn’t matter too much should it?
We also know that the appraiser accepts the estimated repair costs supplied by the real estate agent are a total of $34,500. $8,000 of which was for 2x refrigerator and range/oven. A set-in range and freestanding refrigerator are fully equal to 1/6th the purchase price! N I C E. For that price those personal property items better defrost the turkey AND cook it without human intervention.
Did I mention the duplex, multi family residence is occupied? I don’t know by whom or how many of the units are occupied; what the rents are or whether they have leases, or other rights of tenants in possession and whether these are carry over tenants or new tenants – but that’s probably not important for an income property, right? I mean especially if the income approach is going to get skipped anyway. Besides, maybe in Indiana fee simple means ‘same as rented’? Any Indiana appraisers that can confirm this?
I wonder if all the rents are up to date or whether there could be a rent dispute related to unacceptable “C5” conditions? That couldn’t affect value could it?
Thank goodness there are no externalities! My map shows one of the busiest international airports in the country about 1½+ to 2 miles due north but fortunately the appraisal ignores it completely. If the boilerplate says there are no externalities, who are we to second guess? (Thankfully the MARTA light rail line from the airport to downtown Atlanta isn’t shown on my map or I’d have to wonder about that too).
I’m certain most appraisers will concur that a one-line neighborhood comment description to explain a price range of from $13,000 to $515,000 is perfectly adequate (Tight!). “The neighborhood is in average condition with average curb appeal while having some units in need of minor to significant repair at the time of this report.” …and the Nobel prize for best work in fiction by a new author is…?? Is this ClearVal Appraisal boilerplate or the appraiser’s?
REO Saturation is roughly more than DOUBLE the national average. Repeat sales index is rising. Wonder what they mean by that? Flip prices are higher than prior non flip purchases? Is it local jargon in Truckee California for all ‘residential resales?’ Oh well it’s a nice graph and it probably really does mean something about the market value of the subject. Attractive use of color too!
Listing history and prior sales.
No prior sales shown in prior 3 years. I couldn’t find any either – but then I’m not familiar with Georgia transactional reporting. Wonder why they auctioned the property.
Listed, but no analysis provided. Listed and contract entered into first day. Auction reported by Atlanta appraisers familiar with circumstances. Sale price was $48,900 with a new first Mortgage in the amount of $77,790 – private party financing 12/13/2017 (post effective date). Picture is becoming clearer, I think.
The $48,900 also is reported to have been a multi parcel transaction. In my state that means more than one assessed land parcel – not sure what is means in Georgia (All claims to the contrary I don’t truly speak ‘Southern’). “What if-ing” $77,790 needed; 80% LTV minus a couple points means it HAS to be worth $100k “as repaired”, right? Probably just a coincidence. Suggested value isn’t in the order and no one would ever have thought to make a phone call, would they? Especially since the as repaired value is so ClearCut.
Now, here is where we may run into a sticky situation. Appraisers in Atlanta that have read this report and performed perfunctory data checks didn’t find the 20 comparable sales the Indiana appraiser referenced. Being from the heart of America (Indiana), maybe they have better “comparable” sales data there than Georgians do.
Damned locals are probably talking about other comparable single duplexes or triplexes rather than bulk sale bundled property comps like the appraiser reportedly used. Picky, picky, picky! How come 3 or 5 duplexes sold as a single deal can’t be used? How about if we only take pictures of the front of ONE duplex each and make believe they are all ‘duplex’ just like the subject?
It would be unfair of me to be critical of using five duplex comps or three duplex comps without being the one preparing the appraisal so let’s skip over that and move on. It’s not a problem if we don’t point it out, right?
We know that (from the report) that the four very best and closest comparable sales were used. Um Oops, I mean the three very best sales and a listing were used. Some were similar to inferior in age, some superior to similar in GLA (as long as all those pesky alleged extra units aren’t counted). That’s not counting the strange & peculiar things the agent showed in his CMA.
The reported sale at 5570 Windwood represents the “as-is” value (all by itself); and a sale at 5607 Windwood and listing at 5631 Windwood tell us what the “as Repaired” value is; and presumably the sale at 4377 Springwood Terrace is there to keep the others company? But not real close company.
S3 is the highest of all sales and is from well out of the neighborhood about 3 ½ miles away. That’s ok if no better comps are around, but I’m not sure I’d reconcile to an out of area sale when the best IN-area comp is saying $83,000.
I’m trying hard to replicate the steps: $83,000 + $111,000 = $194,000/2 = $97k mean; hit it with a big hammer and kick it in the rear end and conclude at $100,000? Um, yeah, sure.
OK, don’t be snarky Mike! Maybe out of area S3 was weighted slightly more for unexplained reasons. Sales 3 ½ miles away that ARE directly under the airport flight path probably have a premium? I know I’d enjoy sitting on the patio waiting to see if I can catch bits and pieces of passing aircraft in my old Stan Musial autographed baseball mitt. What I DO know is that an $83K unadjusted same-street sale does NOT support $100,000-at least not as shown.
Maybe this isn’t actually an appraisal at all! MAYBE it’s only supposed to be one of them “Reconciliation” thingies the title companies used to love to hustle. Take two meaningless sets of numbers and merge them somehow to get ‘something different’? Call it an appraisal-hybrid as opposed to what President Truman would have called it.
The appraiser refers to her ’grid’ though I suspect she means her unadjusted one-line comparables’ list. To me a ‘grid’ is short for sales comparison grid and I assume adjustments appear there. Her one sale that ostensibly reconciles to $48,000 sold for $36,250 (we think). As I already noted, I’m not so good at doing math in my head but I would think a sale at $36,250 would support something in a range of say $35K to $37K -maybe $38K+/- range without making adjustments. Did I miss something?
OK, interim summation before everyone loses interest:
Appraised market value of what we think may be a leased fee interest being considered as fee simple was $48,000.
Appraised “As-Repaired-Some-kind-of-Unspecified-Expected-Return-(ROI)-Value” $100,000.
I hesitate to comment or inquire about the CMA ‘comps’ undefined “fair market value” since the appraiser does not indicate reconciliation to any of those results. Presumably they are in the report for some purpose. None of them support the concluded value (as repaired) though all are higher than the ‘as-is’ market value concluded for the subject.
The listings include one on the subject street which might have been interesting to do an actual analysis on. Owned by the same owner developer by any chance? How long on the market?
None of the sales show any sales data or verification sources. In the spirit of camaraderie shall we assume everything is hunky dory as reported by either the appraiser or the real estate guy with no other verifications needed? (Hey! I just figured out a way to speed up ALL appraisals!) No more time-consuming verifications, OK?)
Pssst! Highest and Best Use as if vacant and as improved is ok to just assume, right?
Same with adjustments. Phone the guys over in India and ask them how much to adjust size, location, age, quality and condition for; or lay hands on the keyboard; or use divining rods and conjurin’ to find adjustments and market values!
We also cannot tell when the real estate agent inspected the property. The pictures (pictometry) are dated February 13, 2017 which lets us know what the overhead aerial views were around 8 months before the effective date. Not much else known.
Some appear to be current (see interiors) and one appears to be before the ‘as repaired’ state (windows boarded up and or broken).
OK as with all reports, maybe there are some plausible explanations for all these things.
Scope (or claim) was to satisfy “interagency appraisal and evaluation guidelines.” I especially like Limiting Conditions #2 (LC2). Assumed to be current and accurate unless specifically found to be otherwise – presumably by their quality assurance people? LC3 is kind of cool too! LC6 is another good one worth reading. LC7 disclosure is governed by USPAP and the bylaws of professional appraisal organizations with which the appraiser IS affiliated? LC9 is another one – infers repair estimate is “based on the appraiser’s desktop analysis”- it appears on reading the report that the analysis was limited to reading the agent’s CMA and concluding after much consideration and intuited-impression to “Yeah, what he said.”
Certifications – may be more problematic – Statements of fact are true? Like comparable sales data? There have been several credible reports that MLS details for the comparable sales that were used tell a different story than is shown in the hybrid.
Cert 8 is one that I will let my peers opine about as to adequacy. The report does claim to be USPAP compliant.
I ran a public records closed sale check around the subject. My greatest concerns if I were doing an appraisal of the subject is (1) why are almost all immediate area sales (under 1/3 mile distant) seemingly LLC purchases in this area with double national average REO saturation so long after the recession? (2) Was that ONE $15,000,000+ sale the raw land subdivision due north between the subject area and the airport – east of Crystal Lake? Why would it pop up as a similarly sized comparable property sale? Outlier – or significant factor in current neighborhood market activity?
Readers must decide for themselves – credibly supported opinion of the (two) values claimed? So, what say the peer appraisers?
Is it wonderful work and a credit to our profession, or fodder for state regulators and possibly CFPB? For $25 bucks are lenders and their investors getting what they think they paid for?
Information developed post appraisal is that the owner was not able to obtain an appraisal at the hybrid value ($100,000) in order to pay off the existing loan & investors. Was he mislead by an inflated potential value?
I wonder why an income analysis wasn’t deemed necessary in order to develop either of the values concluded. Is a one-comp-sales-comparison adequate for “as-is” values now? No income approaches. No cost approach needed?
I think if I were an investor at ‘Ground Floor’ I’d be wondering if this is covered by anyone’s E&O insurance. Heck if I were the buyer I‘d be wondering the same thing.
Electronic signature-plausible deniability? Nah – NO WAY you can hide the kind of paper trail fees of $25.00 creates.
Click here for the second hybrid report.
Footnote: [i] “When repairs are noted and the appraiser has concluded a Repaired Value conclusion that differs from the As-is Value Conclusion presented in [this] report, the Repaired Value Conclusion is predicated on the hypothetical condition that the stated repairs have been completed as of the effective date of value.”