Appraiser’s Response to LRES Order Blast

LRES Standard Interior Appraisal Request?

Your special requirements and micromanagement of the appraisal process dictate that I charge a fee commensurate with the additional, but typically unnecessary work needed to produce credible results.

You are the potential client (agent), so that that is your prerogative and it would be my pleasure to accommodate you as long as appropriate compensation is provided.

Respectfully, there is little about your appraisal request that is “standard”. Please explain briefly what you consider to be a ‘standard interior appraisal’. That definition does not appear in The Appraisal Institute’s Dictionary of Real Estate Appraisal.

To be clear, you are requiring that TWO written reports be provided to you. One in an ENV format and the other in XML format.

I find a fee of not less than $1,500 to be required for all of your extra requirements, and multiple report formats. A turn time of 10 to 15 days is needed. Ten working days excluding weekends, or fifteen calendar days, assuming there are no unusual problems.

Additionally, you as the lender’s agent need to provide a preliminary policy of title insurance or a copy of any existing policies so that I can verify any underlying issues that could or would affect the fee interest. You have indicated that the appraisal is intended to be used for mortgage financing purposes but you have not indicated whether this is a refinance or purchase transaction. Your own guidelines as well as USPAP require that an analysis of any contract be performed.

Lastly, I note that your order form addresses multiple property types. I assume it is boilerplate. Please advise which sections of your order apply and which sections do NOT apply so as to avoid any possible confusion.

For orders with fees in excess of a $1,000 I require remittance of 50% in advance prior to starting the assignment. You may make the deposit via ACH or by mail. No appointment will be scheduled until payment is received and cleared. Cancellation less than 24 hours prior to the appointment will result in forfeiture of the retainer. Cancellation prior to that time will be entitled to a full refund less any costs incurred by the appraiser which include research time billed at $75.00 per hour.

Please confirm if these arrangements are acceptable to you. I look forward to working with you on your request. Thank you.

Best,
Mike Ford

From: LRES employee name redacted per LRES request *** [mailto:…@lrescorp.com]
Sent: Thursday, July 21, 2016 12:46 PM
Subject: Standard Interior Appraisal Request- Redacted property address
Importance: High

Redacted property address

Hello,

We have an appraisal request for the property above that we need completed. If this is something you are interested in, please provide us with your fee and fasted turnaround time.

REQUIREMENTS: (Please read before proceeding)

UAD COMPLIANCE REQUIRED
REPORT IS TO BE SUBMITTED IN BOTH ENV AND XML FORMATS

• Purpose – Mortgage Transaction
• Intended Use – The intended use is to evaluate the property that is the subject of this appraisal for a mortgage finance transaction, subject to the stated scope of work, purpose of the appraisal, reporting requirements of this appraisal report form, and definition of market value.
• Intended Users: Lender/Client (Conventional) and PennyMac Consumer Direct

ATTENTION COLORADO APPRAISERS:
The following (4) Colorado counties have been designated by FEMA as eligible disaster areas:

• Adams
• Boulder
• Clear Creek
• El Paso
• Jefferson
• Larimer
• Weld

Due to this new designation, you are required to:

• indicate whether the property has been adversely affected by the disaster; and,
• include information on the impact of the disaster in the subject’s immediate neighborhood; and,
• note if the effects of the disaster is having a negative impact on marketing times and/or values within the subject’s market area

Requirements:

• **Appraiser to include Tax Card in report and verify correct reporting of APN Number**
• Update LRES on the access appointment or any problems within 24 hours of accepting the assignment.
• If any appraiser will be completing the appraisal other than the appraiser shown, please notify LRES ASAP before proceeding. Failure to do so can result in non-payment for this order.
• Report should be completed on the appropriate forms on or before the due date.
• Fannie Mae 1004 form UAD 9/2011 – for one unit property or PUD
• Fannie Mae 1004C form March 2005 – for manufactured home
• Fannie Mae 1073 form UAD 9/2011 – individual condominium unit
• Fannie Mae 1025 form March 2005 – small residence income – 2 to 4 unit
  • Must include form 216, Operating Income Statement
• If the subject property is occupied by tenants, must include both Fannie Mae forms 1007 and 216.
  • ***On any Single Family Comparable Rent Schedule, FNMA Form 1007, completed for this client***
    • Please note that only “rented” or “closed” status Rental comps will be accepted by this client. Do not use Active rental listings as Rental Comparables 1-2-3. Active rental listings can be used as additional support for a rental survey. This is a client requirement.

Please check the Carbon Monoxide and Smoke Detector Requirements for your State (links provided):

• Appraiser is required to address the requirement for CO and smoke detectors as required by the subject state.
• See links for information on your specific state.
  • http://qginc.com/content/its-law
  • http://www.ncsl.org/research/environment-and-natural-resources/smoke-and-carbon-monoxide-alarms-codes.aspx

Two listings will be required for all market areas noted to feature decreasing values.

Two of three comps must have closed within 90 days. In the case where they are not available, appraiser must provide a detailed explanation as to why. No canned statements.

In an Addendum note the percentage of REO sales in the subject market over the past six Months

In the sales history section identify any comparables that are foreclosure sales.

In the Comparable Sales Grid Report the Days on the Market for each comparable.

In the addendum please address and justify any of the following conditions:

• The 1004MC indicates that the overall market is declining however, there are no time adjustments made to comparables with sale dates older than 3 months
• Use of comparables older than 3 months in the grid where the number of settled sales in the “Current -3 month” column on the 1004MC exceeds seven (7)
• No REO comparables were utilized in areas where REO sales exceed 25% of sales in the subject market in the prior 3 months

If distressed sales were used please include this language: “The Distress sales were used by the appraiser to establish comparable values because they were the only comparables within reasonable proximity of the subject property.”

The Percentage of REO sales within the Subject’s market in the prior 6 months

In the addendum indicate in writing that no other comparables were available where the following conditions exist:

• All of the comparables have sale prices lower OR higher than the market value of the subject
• Any of the Comparable Sales utilized exceeded one (1) mile in urban/suburban areas or five (5) miles in rural areas
• The average Days on Market for all comparable sales exceed the Median Comparable Sales Days on Market from the 1004MC
• More than one comparable sale has a greater than 25% gross adjustment, 15% net adjustment or multiple line item adjustments greater than 10%
• More than one comparable is located opposite a major traffic artery, freeway, expressway or waterway from the subject property

In an Addendum, report and explain any room additions, or garage conversions.

If it appears that there are security bars on the windows. Please confirm if they are on the bedroom windows and if so, if they have quick release latches. If not please make subject to the installation of quick release latches or the removal of the bars.

Penny Mac will purchase loans secured by properties with “unpermitted” structural additions under the following conditions:

• The subject addition complies with all Fannie Mae and Freddie Mac guidelines (for conventional appraisals);
• The quality of the work is described in the appraisal and deemed acceptable (“workmanlike quality”) by the appraiser;
• The addition does not result in a change in the number of units comprising the subject property (e.g. a 1 unit converted into a 2 unit)
• If the appraiser gives the unpermitted addition value, the appraiser must be able to demonstrate market acceptance by the use of comparable sales with similar additions and state the following in the appraisal:
  • Non-Permitted additions are typical for the market area and a typical buyer would consider the “unpermitted” additional square footage to be part of the overall square footage of the property; and,
  • The appraiser has no reason to believe the addition would not pass inspection for a permit.

In addition to the photos required by Fannie Mae/Freddie Mac, the client requires photos for the following value-influencing situations/factors

• External Site Influences – Identify all external influences and explain how they impact the marketability and value (e.g. busy street, interstate, commercial/industrial, schools, parks, etc.)
• Upgrades/Remodeling – Describe the recent Subject upgrades or remodeling and provide supporting comments for any adjustments
• Outbuildings – Describe any outbuildings and provide supporting comments for any adjustments
• Deferred Maintenance or Health and Safety Hazards

If the Subject property is located within 1/4 mile of a high traffic street, an airport, freeway, rail road tracks, or within a block of an industrial area, the Client requires:

• At least one closed sale with the same influence, or
• Appraiser to include specific detailed commentary regarding the lack of such comparable sales and your rationale/support behind any adjustments given

When the appraiser has determined that the subject has a C5 or C6 Condition Rating, the Client requires the report be made ‘ subject to’ based on the hypothetical condition that the required repairs/inspections necessary to bring the Subject up to C4 or better Condition Rating have been made AND that the following be provided:

• A description of the repair/inspection items, specifically noting if any represent Health & Safety issues.
• An itemized cost-to-cure estimate for the repair items
• Comparables sales that reflect the ‘as-is’ condition of the comparable sale property at the time of the reported transfer
• o Photos of the appraiser’s observations which indicate the needed repair(s)/inspection(s).

(NOTE: If during the inspection it becomes evident that the Subject condition deficiencies are such that repair would NOT be financially feasible, completed the inspection and then contact AMC for further directions and/or instructions.)

• Client requires that the appraiser provide the MLS Number and related verification document information (- i.e. recorder’s document number, etc.) for all of the comps provided in the appraisal. For comparable sales provided by the builder/developer or their sales office (or any other party with an interest in the subject transaction), the client requires the appraiser to report all of the sources and comment specifically that all necessary information has been verified through a reliable independent third party source that has been identified (by name, contact info, and type) in the appraisal and the appraiser’s work file.
• For all condominiums – the client requires that the appraiser meet the minimum requirements of the investor for the assignment (Conventional – Fannie Mae, Freddie Mac) and a minimum of 3 closed sales;
  • At least one (1) sale from inside the subject’s complex
  • At least one (1) sale from a competing development/project
  • Specific and detailed commentary is required;
    • anytime the appraiser cannot meet these requirements and anytime they are indicating a lack of comparable sales within the subject’s project (if the appraisal indicates a lack of comparable sales in the subject’s complex, the appraiser must provide details on all sales within the subject’s complex in the prior 12 months)
    • anytime the subject is selling for substantially more than the most recent prior sale of a similar unit within the subject’s complex
    • on the marketability of the subject and subject’s project anytime the appraiser is indicating that there are no recent sales from a competing project
• Site condos can be included on either the applicable SFR/PUD form or the applicable condo form at the appraiser’s discretion, but if the SFR/PUD form is used, the appraisal must include information all required condo project (total project and subject phase) information including number of units, number of units, number of units rented, number of units sold, number of units for sale, etc.)
• If the subject is located on the Hawaiian Islands, the client requires the appraiser to provide the Lava Flow Hazard Zone for the subject property
• If the subject has a basement (finished or unfinished) provide a sketch.
• A copy of Appraiser License and E & O.
• California and Colorado Properties: if the property is located in the state of California or Colorado, please note if Carbon Monoxide Detectors are present on premises and meet state law.

Mandatory Appraiser Independence Requirement Comment:
Insert the following Appraiser Independence Requirement comment for appraisals/review appraisals in the addendum of the report:
APPRAISER INDEPENDENCE
No employee, director, officer, or agent of the Seller, or any other third party acting as joint venture partner, independent contractor, appraisal company, appraisal management company, or partner on behalf of the Seller has influenced or attempted to influence the development, reporting, result, or review of this assignment through coercion, extortion, collusion, compensation, instruction, inducement, intimidation, bribery or in any other manner.
I represent and warrant that, as of the date of this Report, I have had no contact with anyone that would in any way be construed as a violation of the Appraiser Independence Requirements; the only individuals with whom I have had any contact regarding my preparation of this Report have been limited to representatives of LRES Corporation and the designated individual required for entry into the subject property for purposes of inspection. No agent or representative of lender/client whose name appears on the first page of this Report has contacted me directly and I am obligated to and would report any such unauthorized contact, whether in person, by phone, or electronically, to LRES Corporation immediately.

Income Reconciliation Section:

• If any portion of the subject is non-owner occupied (tenant occupied, or vacant and intended to be tenant occupied or investment property) please provide the current rent which can be secured by the owner/tenant. If the subject is for a single unit (SFR, PUD, Condo) purchase transaction and the subject will be non-owner occupied (investment property), a comparable rent schedule (FNMA Form 1007) should have been ordered. Please notify the AMC for direction/instructions if this is the situation and the FNMA Form 1007 has not been ordered.

1004D Appraisal Updates:

•  The Scope of Work for a 1004D Appraisal Update requires the appraiser to: “Research, verify and analyze current market data in order to determine if the property has declined in value since the effective date of the original appraisal.” The Appraiser certification requires the appraiser to affirm: “I have summarized my analysis and conclusions in this appraisal update and retained all supporting data in my work file.”
• To support the Update conclusion (and to be consistent with these requirements), the Client requests that the appraiser provide when submitting a 1004D Appraisal Update:
  • The updated status for all active listings and pending sales used in the original report
  • Provide at least two sales that closed after the effective date of the original report
  • Recent listing activities may also be provided to demonstrate additional support.
• Must provide an Opinion of Site Value & Estimated Remaining Economic Life, even if the cost approach is not required to be developed per USPAP guidelines.
  • If site value exceeds 30% of appraised value, comment on whether it is customary for the region.
• If Legal Non-Conforming zoning, must supply commentary on ability to re-build subject 100%, reason for non-conforming zoning and effect on marketability.
• If predominant value varies by 15% from market value, commentary must be added to exhibit the effects of the over/under improvement on the subject’s marketability and support the opinion of value.
• Explain all variances in GLA, room counts, etc. between the local tax records and appraisal report.
• Provide land value in cost approach section.
• Make certain that signature, effective date, telephone number, and e-mail fields contain accurate data.
• Location map with subject and all comparables must be included.
  • Explain the reason for use of any comparables that appear to cross major neighborhood boundaries; and/or roadways.
• Sketch with subject room layout and exterior dimensions must be included.
• Confirm whether the subject’s utilities were on and in working order at the time of inspection.
• Do not submit a completed appraisal without obtaining and analyzing the sales contract.
• IF borrower name, subject property address, or owners of record differ at all from those provided on coversheet or sales contract, commentary is required listing the differences and sources of information.

Photo Requirements:

• Subject photos must be taken of the front and rear at opposite angles to show ALL SIDES of the dwelling. Additional photos are required for any improvements with contributory value that are not captured in either the front or rear photograph. Street scene photo must include a portion of the subject site. If the subject property is proposed construction and the improvements have not been started, the appraiser should take a photograph that shows the grade of the vacant lot.
• All interior photos of each room in the subject property (including the kitchen, bathrooms, and finished/partially finished basements) and they must be properly labeled.
• No personal photographs or religious items should be included in the report.
• Any “areas” including foyer, laundry, utility, etc.
• Any outbuildings (porch, shed, deck, detached/attached garage, pool, etc). Must be full frontal photo.
• Unfinished areas/renovations must be photographed, included, and commented upon.
• All problem areas of the subject property to include physical, functional, external and health and safety issues (both interior and exterior).
• Front photo of each comparable (this includes land and listing comparables). Original photos required to be taken at the time of this appraisal assignment, MLS photos and stockpile photos are not acceptable.
  • Assignment As per Scope of Work, the appraiser will inspect each of the comparables from at least the street. If property is inaccessible (e.g. private road, gated, pedestrians obstructing view, etc.) take the photo of what you have observed, and also provide an MLS photo of the comparable property in question and submit it on an additional photo page in the report. If a photo of the property is not available on the MLS please provide a comment stating so along with the MLS number.

When submitting the report to LRES:

• File must be uploaded in AI READY (.ENV) format and (.XML) format to our website at www.LRES.com.
• DO NOT attach invoice to the report.
• Please make sure to put the correct LENDER/CLIENT information as mentioned above.
• Appraiser must be available to make corrections/revisions and must supply the revised report within 4 business hours after request. Payment cannot be issued until the order is corrected and deemed complete per the instructions.

Appraiser is not to communicate any information to Occupant or Borrower regarding Appraisal Fees or Values! This is grounds for Cancellation on any Current and Future Assignments.

CONFIRMATION

Time is of the Essence
LRES will compensate appraisers within the time constraints that comply with the applicable State law. However, the appraisal report must comply with USPAP, Federal and State law and Client provided guidelines. The appraisal report’s time of delivery is of the essence; LRES reserves the right to re-assign the appraisal assignment without further liability or penalty in the event that delivery does not occur in accordance with the terms of this agreement.

Further Assurances
Appraisers shall use reasonable efforts to, from time to time at the request of LRES, without any additional consideration, furnish LRES further information or assurances and take reasonable action, as may be necessary, to carry out the provisions of this Appraisal Assignment within the provided due date.

Dispute Resolution
LRES reserves the right to withhold or void payment in cases where there is a breach of this agreement, or performance of service violates USPAP or any published standards of best practices. In the event there is a dispute regarding payment, LRES shall notify the appraiser via any established method that establishes proof of delivery, including electronic mail, return receipt requested, within 30 days after the date the appraiser first transmits the appraisal with the reason why the fee shall not be paid. All disputes shall be managed in accordance with LRES’ established dispute resolution process.

Name redacted per LRES Request ***
Appraisal/BPO Order Specialist
LRES Corp.
Corporate Headquarters
765 The City Drive South, Suite 300
Orange, CA 92868
O 714.872.7811 | F 714.520.5499

Postscript 8/19/2016
*** AppraisersBlogs Team received an email from LRES Compliance Department requesting that we remove the contact information of their employee, the Appraisal/BPO Order Specialist, due to an ongoing domestic violence situation. Name of the employee was redacted from the article on 8/19/2016.

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Michael Ford

Certified General Real Estate Appraiser at Michael F. Ford Appraisal

Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory

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