Reality vs Positivity

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Reality vs Positivity - The Appraiser's Journey: What Happens when Reality Sets in?

Read any sales training publication and you will learn about positivity and how it helps you succeed. For the most part, this is true. But what happens when reality sets in?

Positivity: Many appraisers have praised the decision by Fannie Mae to eliminate the 1004MC. No question, it is a flawed form, but every software vendor allows us to complete the form with the push of a button. This can be done in most MLS systems as well. The form shows the number of sales in the past 90 days and the number of current active listings. With enough data, it can show a trend.

Reality: Many lenders no longer require the 1004MC. They are now asking for 2 closed sales within 90 days and 2 active or pending listings. Inventory is low, active listings are rare so an explanation of why there are no active or pending listings must be done. You may not have sales within the past 90 days either, so more commentary is need. Both of these things are clearly displayed on the 1004MC without explanation. Now we have stips to expand our search because the of checklist underwriter or reviewer needs to check the boxes, regardless of the commentary you have already made. Let’s not forget about those lenders who want the charts and graphs to prove your market trends. Oh yes, limited data results in less credible trends, so more expansion and more commentary on what you did and why is now needed.

Positivity: An increase in the time and effort needed to produce credible market trends and the scope of work and/or revision requests provides an opportunity to re-evaluate the fees charged by my company.

Reality: Appraisal Management Companies believe when business is slow appraisers should lower their fees. MLS does not lower the cost when the market is slow. Software vendors do not lower their costs when the market is slow. Upload fees to portals are not reduced when the market is slow. Why should an appraiser lower their fees? Doesn’t that further deteriorate the economy? Aren’t lower fees pushing more appraisers out of the industry? Don’t the amcs need appraisers for their own survival?

Positivity: The narrative of how great the economy is and how unemployment is low is being broadcast everywhere.

Reality: Lower level jobs are skewing the numbers and people are actually earning less than they did. Homeowners are refinancing at increasing rates and using the equity in their homes as their personal finance company; much like they did 10-15 years ago before the financial collapse.

Have you noticed an increase in FHA appraisals? How many of those are for people who bought their homes a few years ago with 3% down? How many of those properties need repairs completed to meet the minimum standards? How many homeowners inform you they don’t have the money to fix the issues and that is why they need the refinance. Yes it is happening all over again, just like 10-15 years ago before the financial collapse.

Positivity: Appraisal Waivers and Hybrid Appraisals are saving money and speeding up the appraisal process.

Reality: Appraisal waivers and hybrid appraisals increase the risk to the homeowner and investors. Not only are homeowners rejecting these products, they do not save any time nor do they save any money. Most appraisers can typically turn around an appraisal in 7-10 business days. The delay is the appraisal management company shopping for the lowest fee for a week. How much of the fee paid by the borrower goes to the amc? What is the quality of that report?

Positivity is a great thing and can do wonders for us. Reality is what we have to deal with. When the two work hand in hand, progress is made.

By Advocate, Certified Real Estate Appraiser – author requested to remain anonymous

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41 Responses

  1. Bill Johnson says:

    Good article. On a side note, and if your reading this Dustin Harris, please explain why you have blocked me from your site? Remember, “one can learn more from those whom you disagree with, compared to those who already agree with you” Bill Johnson (2016). To silence the other side, is to be stuck in your own opinion.

    Seek the truth.

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    • chris says:

      Agreed !!!

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    • Bill Johnson says:

      Dustin Harris with the down vote?

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      • Mike says:

        He has invited you on the podcast several times. Why don’t you step up to the plate? We would all enjoy the dialogue 🙂

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        • Bill, if he’s invited you on I hope you will consider it. An honest airing of the differences would be good for all. I was interviewed by him once and found him to be a gracious host.

          I disagree with man of his esposued methods but because I know of one successful appraiser that uses them, that is also honest and highly competent, I cant condemn them across the board. I tend to think my friends is an exception because of his highly developed comfort level with all things “IT’ and his personal organizational skills…but certainly some of Dustin’s ideas have been applied. Right along those of Roy Meyer.

          I think you may be able to articulate the concerns the profession has better than I could. Hope you will consider going on and talking to him about it. I think you’d find it more like talking to an old friend that you disagree with, more than a hostile debate.

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          • Bill Johnson says:

            I hold nothing against the man nor his merry band of Kool-Aid drinking all stars, but in reality, with having dozens of back and forths with him over the years, I understand his true colors (now blocked) and don’t wish to be the fish in the bowl.

            I maybe seeking the truth, but I’m not seeking the spotlight by uploading a YouTube video showing how only one wall on a square house could be measured with my Disto Laser Measurer to get the overall GLA.

            Sometimes you just have to agree to disagree.

            Seek the truth.

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        • Bill Johnson says:

          If one can’t handle the truth, sells out to corporate sponsors via his podcasts, supports the AMC model, is perhaps part of the problem while trying to make a dollar off the appraiser, and ultimately takes his ball and goes home by blocking me from his site, then my decision to not be the lion in the cage for all to stare at or listen to, was the correct one.

          When you say “We would like the dialogue”, who are you referring to, as I see NO one has provided a single comment over his last 100 podcasts.

          VHS tapes for sale, anyone, anyone.

          Seek the truth.

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  2. Taunya Richards on Facebook Taunya Richards on Facebook says:

    Lenders think that and they push it on the AMC, so they lower the appraiser fee. In a world of fast and cheap and I some areas too many appraisers the supply is higher than the demand which causes fees to drop. Even in the COW states there is pressure from the lenders to lower the appraiser fee.

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    • Baggins Baggins says:

      If there is only 1 available order, should it only cost $1? If there are 10,000 available orders and limited vendors to complete them, should they all cost $10,000 each?

      Hint, consumer charges remain constant.

      Improperly co mingled fees create a financial incentive for amc’s to drive down appraisers fees for variable unearned fee rake and junk fee profit points.

      Distinctly different services require distinctly different and separated billing.

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      • Taunya Richards on Facebook Taunya Richards on Facebook says:

        Baggins – I’m speaking from experience of a cost-plus model…where the appraisal fee is separate from the management fee. The pressure is on lowering the appraiser’s fee, because they don’t understand why it was $450 pre-2016 and now it’s $550 post-2016 and the volume has dropped about 60%. To them the increase was a *RESULT* of the 2016 crisis. We took it as a way to actually get fees up to where they should be and they saw it as a supply/demand. BUT, for the most part, appraisers here are doing a good job at not letting the fees slip.

        Appraisers think fees shouldn’t change, in fact they should increase and the lenders do not see it this way. I understand that in other states this may be different. I am only speaking from my own state.

        And, supply and demand DOES affect other professions. If there are more plumbers than there are people who need plumbers the cost of a plumber will drop.

        The only way this changes is if the borrower is no longer required to pay for the appraisal. Because they will ALWAYS shop for the cheapest price.

        Honestly, we appraisers are the only ones who think we should be paid higher than we are.

        The clients who WILL pay and DO care about our quality, service and compliance are miniscule to the number of lenders. And most of us are not willing to share who they are.

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      • Taunya Richards on Facebook Taunya Richards on Facebook says:

        Comingled appraiser fees I can’t comment on because I don’t work for companies that do that.

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        • Baggins Baggins says:

          Doubtful that is an accurate statement. It is nearly impossible to acquire any mortgage lending work from any avenue what so ever, ‘amc’ or ‘direct’, without being in a scenario where the distribution clerks are in one way or another funded via co mingled fees. Even if you’ve paid a mercury fee or similar, you’ve just paid a digi clerk via offloaded cost which is remarkably similar to co mingled fees, just in a slightly different billing form.

          If you don’t ask consumers exactly how much they are being billed for ‘appraisal services’, you can’t know for sure.

          Things ran so much smoother when the mortgage originators paid for all those services themselves or the act of distribution was integrated into their operational workload. In 10 years I’ve only found one small local credit union whom uses their own dedicated employees whom also do other tasks, to assign orders. Everyone else ‘hires’ someone to ‘manage’ panels, they are funded via skimming from the consumers appraisal services fee charge.

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    • Consider the possibility it is collusion to fix or manipulate prices arising from lenders various national conventions.

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    • Fees paid by lenders to AMCs have increased far more significantly than fees paid t appraisers over the past two years. 2014/2015 common AMC fee was $450-$495. Most are now $650. Thats why when someone posted a servicelinks appraisal fee offer of $350 on a $650 overall fee yesterday drove me nuts.

      The only reason anyone wants us to lower our fees (further than they have been forced down already) is that they too want a spot at the feeding trough.

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  3. If the client did not stipulate two closed sales in 90 days PLUS two listings, they are not getting the two closed listings. Period. IF there are no sales that also happen to be the most relevant sales in past 90 days, then they aren’t getting those either. I charge extra for client stupidity. IF I think I need more comps to support my value I include them free of charge, but that is MY decision. Not some AMCs one size fits all BS. As for push button market trends…I don’t think so. It is MY job to both define and analyze a market-not some distant software designers algorithms. Maybe phrases about how how all an appraiser has to do is push a button to get their data is WHY lenders and AMCs think fees should be lower. I dont use Data Master or any automated form filling software because the probability of missing default information errors is simply too high for my comfort. I verify all data line by line. Doesn’t take me much longer to type it myself. An extra half hour for increased quality and reliability?

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    • Taunya Richards on Facebook Taunya Richards on Facebook says:

      I agree with you on form filling data software. I’ve tried two so far and I found wrong data enough that I’d just rather do it myself. And I still have to look up reach record because we use allocation method for land value. So I might as well verify it myself and save myself money.

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      • Koma says:

        Thought I was the only one on the form filling software. Junk in Junk out. In my areas the MLS does not have most of the tax assessor (and assessor by law does not have to give it out to the public, i.e., data mining companies) info only what the agents put in and I trust that as far as I can throw…aaa you get the drift. A fellow appraiser of mine uses it and one time I said if you sit in front of the board is data software company going to show up with you? He stated he’ll worry about that when/if the time ever comes. YIKES!

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        • chris says:

          That is why we are in times like this. I use to see the worse written appraisal when I did reviews. Make the deal, falsify the data, make the deal, make the deal make the deals. Now the lenders threaten the AMC, and that’s who they will blame in the future !!! And of course us again !

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  4. chris says:

    2 sales in 90 days is the problem for more support for the appraised value from Underwriters.I had a big wig reviewer tell me he couldn’t understand why the appraisals were coming in with LOUSY comps when better ones were available that had the value spot on. I told him, you haven’t read the engagement letter have you ? He was shocked when he read the sales have to be from within 90 days.

    Think of the time and money cost, lousy appraisal with no support only to make that “appraisal” LAST longer in the lenders file so the comps don’t get near a year old when the lender has to delay settlement for months cause they dint do 1st things first in the first place.

    And it takes the appraiser longer to you lousy comps just to suffice the 90 day rule….And we all know listing don’t mean anything at all.

    VA allows use of sales over 12 months……for a Great reason !!!

    Dumb, dumb, dumb !!!!

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    • IF better comps were available then they should have been used. Has nothing to do with the value. It is ONLY the appraiser that determines if better comps existed or not.

      If the better comps DID support the value then a violation of USPAP has occurred in allowing client to set assignment  conditions that were so limiting that the credibility of the conclusion was affected. FOR THE RECORD-NO secondary guideline rule makers; GSEs or Government agencies (FNMA, Freddy, HUD, VA etc.) dictate the use of misleading market data. What they DO require is an explanation when guidelines cannot reliably be complied with.

      I offer this respectfully Chris-the time to push back against inappropriate guidelines or ‘rules’ imagined by AMCs is up front-not afterward when improperly complying with  those rules can produce a flawed result.

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      • chris says:

        Agreed !!!

        I only work for the VA. I will NEVER work for an AMC ! A friend has to give them 50 photos in each report, talk about a waste of time, 2 sales in 90 days that are not comparables is a joke !!

        I was very lucky when they added me to their panel ! will never work for an AMC, there are to many lenders out there that have figured out they DON’T need an AMC.

        But they keep asking me to work for them….just to get a lower price….or, after no response from us, try to prove there is an appraiser shortage !!!

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        • Baggins Baggins says:

          Don’t confuse protecting yourself and your insurer from liability with unnecessarily expanded scope of work. I put in 100 photos minimum, and readers of my report actually learn something about the real estate and market at hand.

          In regular expansive suburbia those policies and approaches, 2 in 90, 2 a or uc, 2 other to bracket, etc, those are effective approach methods. It’s give or take so perspective is necessary, the bigger picture.

          Hot shot lawyers will run this show once again when the bubble pops. Don’t be left holding the bag. Pictures are cheap. Words are free. Time may be money but moving too fast is why I watch them come and go like shooting stars. Do not move fast or cut corners or just do the minimum unless you have already paid the retainer for a specialized lawyer.

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  5. Koma says:

    Do not tell me what sales to use! You can offer guidlines and if not met I will explain in detail why your guidlines could not be met and why my comparables are best for the report. Or if possible I will put in two within 90 days as Comps 4,5 etc. with commentary. If market is declining or increasing two listings are include if available whether asked for or not. Just my opinion.

    Also, Agents please do not send over sales and state you are giving me comparabales. State that they are sales because they are not comparables until I decide if they are after reviewing the subject’s market.

    “USPAP Standards Rule 1-4(a): When a sales comparison approach is necessary for credible assignment results, an appraiser must analyze such comparable sales data as are available to indicate a value conclusion”. In my opinion USPAP does not specifically address which sales should/should not be used, how many sales have to be used, how recent or how proximate they must be.

    Thanks for listening!

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    • Baggins Baggins says:

      That’s why I post my complete data research within every report, well most of it. I use a customizable 1 liner data set and may sort that out and parse it further. I routinely put my primary 1 year set, 90 day cut, and also a larger less filtered set or other into reports.

      Nobody can say I was not aware of ‘comps’. And if they try to put something on me that is not in that data set, the easy go to defense is that example is out of range, I applied sensible and lenient search criteria to examine only similar size, type, and age of properties.

      Agents don’t do it that way, they just click the 1 up cma tools and seek comps by price. The order managers are advocates of the lender. Deal with it, get better at effective defense within reports so you don’t get blowback and calls and stips.

      One day I’ll manage a panel myself most likely. And I certainly will question comps use as a routine process. That will be an essential part of my job to assure quality. Appraisers will either be doing it right, in a transparent way, or I’ll wonder if they threw darts. There is no better defense than posted data within the report. It’s so easy, if you have a good detailed workfile and consistent research method with reliable file labeling as you save them, adding workfile data into final reports takes 2 minutes and is as easy as upload pdf tool and then stack the file within the right order in the report. Cheers.

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  6. TruthBeTold says:

    This speaks to my post from the “Bye bye, 1004MC” article. Dropping the 1004MC will create more work for us, because the people reviewing these reports don’t want to read and they are easily confused because they know little about valuation! Our biggest problem as appraisers that we need to recognize and deal with is that we let AMC’s banks and USPAP dictate our “free enterprise”. Independent appraisers are business people first, just like all the other businesses we deal with (except AMC’s – flawed model). If you want to add extra to the report based on your own quirks, that’s ok as long as you’re willing to pay for our time. In my state, this goes on mainly because we have an oversupply of appraisers, and AMC’s and banks want to make sure it remains that way. Because of this oversupply, many appraisers are quoting fees based on what it will take to win the job, that means no-profit prices.

    Be diligent in taking on trainees! Consider “all” of the factors that will affect your business volume and efficiency over the long term, Hybrids, appraisal waivers, staff appraisers, everything that the banks and sellouts are doing to increase their bottom line while cutting our ability to scale and increase profit, at the expense of the public trust! I plan on continuing to use the 1004MC,(12 months) required or not, if I have sufficient data. If not, I will do what is necessary to exhibit the market trend. I will do this until the “do as your told” appraisers recognize what a healthy profit margin is, or the number of appraisers becomes balanced again.

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    • chris says:

      Agreed !!! I will also continue to use the MC form.it will limit our liability if ever called on, also you are right, they DON’T read, they just glance.

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  7. Leslie Jones on Facebook Leslie Jones on Facebook says:

    What’s the best ways to get the highest appraisal possible?

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    • Leslie Jones on Facebook Leslie Jones on Facebook says:

      I’m refinancing but had surgery so things around my house aren’t perfectly kept.

      I want to make sure my house puts it’s best foot forward, so to speak.

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      • Baggins Baggins says:

        There is no best way, other than investing in the property itself. The appraiser will spend time researching comparable sales of similar properties, and their established sale value will be the indicator of your current as is valuation opinion.

        Nothing substitutes for cold hard cash investment. At a minimum make sure all your utility is in working order, everything visible well cleaned and repaired, nothing left to chance. No broken windows, a good roof, good gutters, all projects in a completed state.

        One can always seek to re engage w/ a lender at a later point in time after more improvements are performed, if the valuation opinion does not accommodate your personal financial goals. However, the lending rates are tracking upward so time is of the essence.

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      • Leslie Jones on Facebook Leslie Jones on Facebook says:

        Thanks everyone!!

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      • Bill Johnson says:

        If your talking short term clutter versus years of deferred maintenance, then there’s nothing to worry about (no effect on value). As value is comparative, perhaps your best foot forward is to time your refinance to known recent like sales/comps that are of a value that will meet your goals.

        Good luck.

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    • chris says:

      Make the front look nice, remove every eye sore as you walk around your house and outside. Paint, clean the carpets, clean the bathrooms, wash the kitchen cabinets, make the house look like you would want to buy it again. upgrade some builders grade lighting. You can’t change the age of anything easily, so you’re stuck with what you have.

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      • Baggins Baggins says:

        Then get a new electric panel, updated furnace, new hot water heater, put gfi’s in every place current code requires, repaint the whole home, new flooring throughout, get a new roof, extra wide gutters with leaf guards, fix any sank concrete issues, improve your kitchen appliances, get a bath remodel, and um…. You either got it or you don’t.

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    • 1. Hire someone to come in and make it spic and span
      2. At minimum clean up front yard (neat and kept appearing).
      3. Hows your exterior paint? Maybe just the ‘brightwork’ (trim) could be freshened up.

      These are a few of the most basic things a person can do. Can’t guarantee ‘more’ but a pretty cost effective way of avoiding ‘less’ than possible. Bottom line is your property relationship to recent sold similar properties.

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  8. Mark Skapinetz on Facebook Mark Skapinetz on Facebook says:

    APPRAISERFEST 2018. The best will be at the Fest.

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  9. David Samnick on Facebook David Samnick on Facebook says:

    Never reduce your fees just because business slows down. That is the worst business decision a professional can make. The smart appraiser will increase his fees every year. KNOW YOUR WORTH. When you reduce your fees you are hurting all appraisers everywhere. Don’t be the weak link in the chain. JOIN THE AGA and go to Appraiserfest in November. Stand with like minded individuals who want change. Imagine if everyone just said NO to hybrid appraisal reports. They are doing more damage then we realize. I don’t know about y’all but I do not want to suffer through another crash and that is exactly what is going to happen.

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  10. Baggins Baggins says:

    As usual, this all boils down to sound money issues..

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Reality vs Positivity

by AppraisersBlogs time to read: 3 min