A New ‘Standard’ for ROV Requests
Since beginning using this Standard, I have had ZERO ROV requests.
Appraisers, the latest ‘buzzword’ around appraising is Standard. We’ve got to have a Standard for measuring a subject dwelling, even though the comparable GLA reported figure may have been measured far differently from the new soon-to-be mandated Standard. Appraisers have no way of controlling the apples to oranges dissimilarities.
But I digress…
According to the Dodd-Frank law, and the HVCC before it, clients are allowed to challenge the appraiser’s value opinion by submitting what is termed in the law “appropriate” sales to be further reviewed, with the expectation that it or they are included in a revised report as comparables – if a value change is warranted. A sale is NOT a comparable until an appraiser decides it is, and includes it in a report.
But guess what? Just like there has been no national Standard for measuring mortgaged homes across the US (and won’t be until April 1st… no joke!), there has also been no Standard for what an ‘appropriate’ sale is. There is no definition of that term in the law, or elsewhere. It is left up to the client to determine what is submitted to the appraiser as a ROV request after the initial report submittal. And most clients don’t validate the appropriateness of any other property, which normally is supplied to them by someone else with a financial interest in the transaction.
I venture to say that most residential appraisers have been hit with this lopsided process more than once in their career. Most of these ROV properties are entirely bogus due to a multiplicity of inappropriate characteristics, including basing the ROV property entirely on its Sale Price. The general attitude is ‘who cares!’ Just “please, pretty please, raise your opinion of value anyway.”
Well, it’s time appraisers incorporate an easily understood Appraisers’ ROV Standard in their reports to either ward off or tighten ROV requests. This is especially important when 1) the contract price is excessive based on market evidence and your value opinion is lower; and 2) multiple people with differing viewpoints are involved with the property, such as with an estate or divorce. (If your Opinion of Market Value is at or above the Sale Price, you’re considered God’s answer to appraising and won’t be hassled, so you don’t need to include the Appraisers’ ROV Standard in that report. But use it for private assignments.)
Not long ago I got really irritated with this ROV process when a seller submitted to the client 10 properties for reconsideration, which were passed on to me. As you might imagine, none were truly comparable and I did not alter the report just because the seller wanted to get a higher price.
After wasting my time with all that junk, I wrote the following process the client must follow when the situation is as noted above in order for me to consider a ROV request. I, the appraiser, have set the Standard they must follow. But if you use it, YOU need to enforce it.
Since beginning using this Standard, I have had ZERO ROV requests.
I’m making this new Appraisers’ ROV Standard available to you, which you can use as written if you like, or modify it to your liking. No other similar ROV Standard exists, as far as I know.
By the way, the only way this will become effective across the appraising spectrum is if it is used! Do so!
VALUE DISPUTES / ROV REQUESTS:
If client (or anyone else with a financial interest in this property) disputes the Opinion of Market Value (OMV) as reported, the client may submit to the appraiser within 9 business days of report submission no more than three additional recent property sales with similar characteristics as the subject** for evaluation, along with a written explanation stating why these are better than the comparables included in the report. Additional sales must NOT be based only on ‘sale price.’ These must be within the same geographic neighborhood area or in reasonable proximity (x miles or less) to the subject’s location.
If additional sales are submitted to client by someone with a financial interest in the property, the client must FIRST evaluate those for appropriateness to this assignment, before sending to the appraiser for consideration.
If upon the appraiser’s analysis, any new submitted sales are deemed more appropriate than the original comparables in the report, the appraiser reserves the right to modify the report’s OMV and submit a revised report with a changed value. But there is no guarantee that any value change will be made.
**Similar characteristics: Design/Style, Gross Living Area (GLA), Age, Updates, Lot Size, Outbuildings, Location in area
In the statement above, you define the (x miles or less), based on the subject’s location and neighborhood within the region.
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Thank you for sharing this Dave!
Thanks for the statement. It’s very well written.
Thanks Dave! definitely Including it in my Template
Thank you. I’ve been trying to explain this to the originators for years.
Another quick tactic is have a page that lists the comp sales you didn’t use and a brief note on them in reconciliation. I rarely get ROVs. Funny thing is when I do, it’s a few of the comp sales I wrote about so I just direct them to that paragraph.
Geez, if you get that many ROV’s, you should reconsider who your clients are.
Thanks for the on point reminder.
Well done my good man ???
I appreciate you sharing the ROV template, and it is well-written. I have previously included such language in my reports before and have still been told by the AMC to review additional sales, without any explanation from the AMC as to why the sales they gave me are more appropriate (they usually aren’t). The “chief appraiser” at the AMC basically said that the lender reserves the right to request an ROV and does not have to provide me with any reason why their comps are better. He also said that when I signed up to work for his AMC, I agreed to this stipulation. I quoted the FNMA selling guide concerning this matter and was told that it was not valid.
Basically, what I am getting at is that you can add all the verbiage to your report that you want, but if a client truly wants you to review their sales there is really nothing you can do about it. You can point to your addendum, but you really have no standing- unless your client agreed, in writing, to your ROV rules before they sent you the order. In other words, the client holds all of the power when it comes to these type of assignment conditions because they have engaged you- not the other way around.
Ethan Yukna agree. OUR professional rules need to change to protect the appraiser. we also need to work with better clients. Get rid of the crappy ones.
Ethan Yukna But, then again, I will judge what is a reasonable request and what is not. For the very infrequent times I do receive a request for a ROV, I first tell the client that there are 3 possible outcomes: no change, an increase, and, finally, a decrease. Next, yes, I will set a limit…three it is…of the number that I will further consider; more than that and I know that they really don’t have anything and are merely hoping that something might stick.
Lee Lansford I rarely get ROVs, but when I do, even if I know the sales they send me are crap, there is nothing I can do about it.
(I will draw the line at examining 3 sales, though.)
My point is that when we an accept an order we don’t have any standing to impose these types of conditions upon the lender or AMC. I’m glad this has worked out for the author. But the way the article was written and the way the introduction on this page was phrased, it made it seem like as long as you have this language in your report than you have protected yourself against having to examine any alternative sales that you know are junk.
The author states that the lender MUST follow his ROV rules, the lender must give reasons behind these new sales, and that these sales must be submitted no more than 9 business days after the report is submitted.
I agree with his rules 100% and have been fighting junk ROVs with crap sales for over 20 years, but the lender never agreed to these ROV conditions.
So, unless you have some sort of contract with the lender that they will abide by your ROV rules, you have no standing. I could state in my general text addendum that I am to be awarded $100 every time an underwriter asks me to include an item in my report that is already there. That does mean I have any ability to enforce that stipulation because the lender never agreed to it beforehand.
Ethan Yukna I agree; however, if you can “draw the line at examining 3 sales”, you should be able to ‘draw the line’ elsewhere as well, no?
Scott Mangum In my experience, most lenders will only send 3 these days. ROVs don’t happen to me often, though, thankfully. If I did get 10 sales I would bargain with them and say “send me your 3 best.”
As far as them having to give reasons why the 3 they do send are better, good luck.
Yup, and there is where the problem lies. Great language, but being that they never really read the report, nor care; we are powerless. It’s truly sad. FNMA also has language stating we can charge them a minimum fee if the sales don’t change anything, but try sending an invoice for that. It won’t get paid.
Donna Halfpenny Your final sentence in your post is a pearl of wisdom.
Lee Lansford why thank you!!!
Ethan you must also remember that as the appraiser you set a large part of the Scope of Work. So as a result if you choose to review the sales or not it is part of your defined Scope of Work.
One should approach every appraisal with defense in mind, thus meaning look at low and high hanging fruit that may be used against you, and plan accordingly in the report at the time of filing.
In the event you get some fruit thrown back at you, keep in mind that although individual properties do contribute in assisting to establish overall market trends, singular properties by themselves will be compared to the greater collection of data for the subjects given market area. Singular properties should be weighted accordingly, and should thus often times have limited to no impact in moving the subjects final market value.
Seek the truth.
I like it. And I would add that the request should identify the party that is actually making the request. I say this because the Client (at the request of the loan applicant) is the only party that can make this request. Recently I had a buyer call me and ask when I would have the appraisal report completed. She had called the lender and the lender said they are still waiting on the appraisal. I told the buyer that the appraisal was completed nearly 10 days ago and just yesterday I had received a RCV. She said “what is that?” Within 2 hours the RCV was canceled. I assume the client and the real estate agent were the ones wanting the RCV and were doing so without the knowledge of the buyer. The buyer ended up purchasing the property for the appraised value.
ROV: Yes much-like the Instructions provided by Fannie & there is a Form for ROV- Value Challenge, Value Dispute, Filled Out and presented to the appraiser through that specific lender. > Longer than w/n 9 days.