Skipping Comp Photos, Suicidal Shortcuts
I refuse to undermine my own profession by pretending that time saving shortcuts are always acceptable just because they are ‘more modern and progressive’. I know how long it takes to produce USPAP compliant, credible appraisal results. I charge accordingly for my time. I make no effort to compete on fees with half assed hybrids, evaluations, or single approach partially performed field work. Respectfully, neither should anyone else. Please stop undermining our own profession….
Recently The Appraiser Coach posted an article and links to a podcast suggesting its no longer necessary to photograph our comparable sales.
I wrote a counter argument to the blog site (which does not appear to be posted). Additionally, a couple other (minority) appraisers pointed out valid reasons why the concept of substituting online data for proper field work is a bad idea.
I like & respect Dustin personally. I have been a guest on is podcast and would repeat the experience if I ever thought I could contribute to the body of knowledge. I also believe he is an ethical appraiser.
Having said that, respectfully he is way off the mark on this subject. Dustin advocates numerous legitimate methods of increasing appraiser efficiency. I have respected peers that follow all or some. Though none have adopted this ‘skip the comp’ photos alternative.
Apparently, we need a refresher going all the way back to fundamentals of appraisal. Most are aware that real estate appraising is an imperfect blend of art and scientifically applied principles. That does not mean it is sufficiently science based to be able to be replaced by automation and algorithms. It does not mean that the body of life experience gained as consumers and later as trained appraisers cannot be artfully applied to problem resolution.
It means that when each of the traditional three approaches to value are properly applied in accordance with established principles & practices meeting the MINIMUM standards of USPAP, that the result will be credible (worthy of belief).
An appraiser’s adherence to the fundamental steps of real estate appraisal are often (usually?) indicative of his overall depth of analysis. Property observation (inspection) of both the subject and all comparable sales is a fundamental element of a properly completed R.E. appraisal.
The profession of real estate appraisal developed largely after the Great Depression, which was truly the first ‘too big to fail’ event… albeit one without a backstop. We should avoid rushing backward to accept the same standards today as existed then. Just because data comes out of a computer does not mean it hasn’t been manipulated.
R.E. Appraisal has three basic approaches to value. The premise is that each should be mutually supportive of a defined value conclusion when properly performed. Not equally supportive, but mutually supporting. There should optimally be a reconcilable conclusion able to be derived from their results.
If the direct sales comparison data is less clearly definitive or indicative than desired, it’s not the end of the world because the other two approaches should also provide a supporting result. They also reduce the likelihood that human nature or natural bias could cause circular logic or reasoning in the analysis. If one of those approaches is not used, then the conclusion may become less credible. If neither of the other approaches is used, then sole reliance is left on the less than ideal sales comparison postulated.
Some years ago (circa 1986-1990?) many lenders stopped requiring an income approach on owner occupied single family residential property as long as verbiage similar to the following was included: “The subject is located in an area in which SFRs are not normally sold for their income producing ability. As a result, there is an absence of reliable data to develop and support a credible gross income ratio to sale price motivation / conclusion. Due to this insufficiency of data, the income approach was excluded.”
Some version of that appears in most GSE related SFR appraisals today. In fact it is so commonly used that abbreviated boilerplate is now used that loses much of the original justification for its being used in the first place. I’ve heard appraisers tell me that the fact that a property is an sfr means the income approach doesn’t need to be used. (A very few remember that it MUST at least be considered). Nowhere is its exclusion supposed to be automatic.
This is one area where elimination of the Departure Provision in favor of the Scope of Work Rule has seriously hurt the profession – but that’s another issue.
Some time in the post 2008 TBTF /TARP period, a philosophical discussion began among professional peer groups about whether the cost approach was reliable anymore due to the ‘difficulty in accurately estimating accrued depreciation from all causes’. The argument was never definitively resolved.
However, certain GSEs decided that inclusion of a cost approach was no longer required. Some appraisers were able to cobble together a semi credible paraphrased written justification for excluding it after consideration. Others said why bother – just write that the client does not require it. So common has this exclusion become, that many older appraisers and a lot of new ones no longer remember how it used to interrelate to the other approaches. Elements within the C/A are supposed to reflect (generally) other aspects of the appraisal reports descriptive opinions.
I can’t tell you how many ‘bad’ appraisals I’ve read over the years that could have been ‘saved’ simply by having a properly developed site value and depreciated replacement cost estimate & then reconciling those ‘values’ to their own adjustments… or at least recognizing there was a disparity and understanding that required some further research & explanation.
In any case, we were left with ONE approach being performed in this scenario. Some appraisers noted how much time this saved them. They could do much more work for the same fees because they weren’t ‘wasting all that time on irrelevant approaches.’
Others noted that if they used mls photos it was also slightly faster & easier than downloading camera or memory card photos and then having to ‘find’ them in the software.
More than a few others realized that they could save much more time if they didn’t bother to drive the comparables at all. They just used mls pictures. Even after photo shopping them to eliminate mls logos or for sale signs they saved both time and gas money in not having to drive all those comparables; analyzing comparable neighborhoods or subdivisions, or specific site location influences and writing field notes. Food for thought- if this practice was so benign, or even better so practical and ‘forward thinking’, why did they bother photo shopping them in the first place?
The answer is not rocket science. They knew it was wrong. They knew it violated the special requirements of their client. They knew it violated the signed certification they included in their work product. They rationalized it.
“Oh, I can’t see the house. Oh, it was gated. Oh, there were gangbangers hanging out in front, Oh there was no place to park and traffic was too busy to take a rolling picture.” All plausible explanations for possibly skipping ONE comparable photo and using an MLS substitute (WITH disclosure – not photo shopping).
But, instead of being limited to isolated instances, use of MLS alternatives became a purportedly time saving mantra. One that self-serving software designers also adopted. Next even FNMA adopted the language. “Why should appraisers waste time driving comps rather than doing what they do best like analyzing data from the comfort of their desks?”
The truth is that FNMA knew that many appraisers were not doing everything they are certifying to have done. It’s no great stretch of imagination to understand why they may feel third party inspections by incompetents, and online data source used instead of direct analyses is acceptable. In their minds, that is what they have been getting all along!
There are two major errors to this wasted time premise. The first is that I am wasting any of my time. The second is the mistaken belief that what I do best and what is most important is my desk analysis. Having the comfort of my own desk is not now nor has it ever been a criteria for measuring appraisal acceptability. Even with my bad knees and ever-increasing difficulty in walking, I would never think that failing to walk a property or property perimeter is an acceptable level of inspection. Comfort is not a metric of USPAP compliance.
If all we did was measure a house and note repair needs or ‘drive by comparable sales’ without stopping long enough to analyze them, then the substandard work promoters may have a valid point.
Rarely discussed is the fact that neither I nor any other appraiser appraise the physical property itself. What we appraise are the rights of ownership associated with the property in a specific physical condition. It’s a subtle but critical nuance. Too many appraisers have lost sight of this. Perhaps because we do it automatically. While ownership rights are (or may be) affected by all physical characteristics, they are not limited to the overall condition of a house itself.
We start off by determining what ownership interest exists. In its most basic form is it a fee interest or some other lesser interest? It takes more than a review of a deed to determine this. We look for obvious signs of occupancy that may confirm or refute a fee interest. We look for easements, or encroachments that may indicate a less than fee interest exists. We look for access issues for the same reasons. We identify physical characteristics that may suggest permit issues, or bonds (such as new sewers and curbs on one block but none noted a block away). We look for development trends. We look for site specific factors that could affect the rights of ownership. At a minimum we are looking to confirm if it is a fee (or other) in average condition versus a fee in other than average condition. A right that benefits by good property condition, or a right that will immediately require infusion of money to be suited for the intended purpose.
We are also supposed to be looking for the same kind of things on each and every comparable sale, to the extent feasible. Online data is not going to show us land slippage; or identify a hog rendering plant nearby. It wont show that an HOA entry gate has been abandoned or that previously private streets were dedicated and accepted by the local government for maintenance. It wont show low areas of roads that flood out in every rainfall. It also does not show traffic – merely relative road sizes that may or may not cause more traffic. It won’t even show the no trespassing signs with or without bullet holes… which may be indicative of other ‘neighborhood specific conditions.’
Online data can be a great help in augmenting physical inspection. There is no rule or prohibition against including extra photos or satellite imagery.
In those relatively rare cases where taking photos presents a hazard to personal safety, then simply explain what that hazard is and include the available online pictures instead. While being sure to analyze all the location and site related comparable sale characteristics that are evident.
I have appraised in gang areas where some streets had tables set up in the middle of the road to collect ‘tolls’; and where any photography could potentially get one shot. I have appraised crack house apartments where ‘customers’ ran a steady pattern of pedestrian traffic down the alley to the rear of apartments. Buildings where visibly taking a picture would simply not be wise.
My camera has a zoom lens. I don’t always have to stand directly behind my subject to get a representative picture. Then I can drive by slowly or normally as is safe and make mental notes of property characteristics.
Oddly, I have pretty much the same ability to take pictures as Google-Streets, and most MLS services that send third party photographers out.
I refuse to undermine my own profession by pretending that time saving shortcuts are always acceptable just because they are ‘more modern and progressive’.
I know how long it takes to produce USPAP compliant, credible appraisal results. I charge accordingly for my time. I make no effort to compete on fees with half assed hybrids, evaluations, or single approach partially performed field work.
Respectfully, neither should anyone else. Please stop undermining our own profession.
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I am currently working on a report in which one comparable is located across the street from an apartment complex. A second comparable backs up to a strip mall. When I took the photos of the comparables (yes I drive the sales) I also took photos of the apartment and the mall. I will include these photos in the report with a comment. The MLS photos did not show these conditions nor did the listing brokers make any reference to them (they never do). Now, I need to figure out the location adjustment.
Skippy does not need to deal with this because Skippy does not drive the comparables and will only use the MLS photos. Have fun Skippy when the state reviews your report. No photos, no comment, no adjustment, you are going down. It might take sometime but they will get you, sooner or later. If you do your job on the front end, you will not need to worry on the back end when the loans go into default and the reviews start.
Yes, the State will in fact uncover Skippy’s short cuts some day.
My favorite photo of a comp is with the moving van blocking the house. It may cause confusion but the situation is explainable.
We get paid to do a job, and agreed to take original photos. Do what you agreed to if you are a person of integrity
The unfortunate results of limited education requirements for appraisers.
Education has zero to do with integrity Thomas. I recently reviewed multiple reports and a deposition of work performed by a Harvard Grad, MAI. Without a doubt, his formal’documented’ education far exceeds my own.
Fortunately for my clients, I am not intimidated by the trappings of formal education. I look to the substance & credibility of the appraisals instead. This guy had an unsupported low desired target value to support for his client (about 1/4th to 1/3rd of actual MV) and he pulled out all the stops on his “Baffle them with Bullshit” discounting technique to achieve it. Mischaraterization of ownership interests, the applicability of specific techniques and out right lies peppered his report.
His paired sales aren’t remotely indicative of the pairing claimed; his discounts use inappropriate entity ownership interest discounting practices that are not acceptable for the tenant in common interests (TICs); and he used 10 to 20+-year-old half-billion-dollar REIT transactions to ‘support’ his discounts for lack of marketability; lack of control. Ignoring the fact that marketability discounts necessarily changed (extreme reductions) when the SEC allowed non registered stocks mandatory holding period to be reduced from two years to six months between his REIT transaction dates and the effective date of value.
In short, this guy will be hearing from both The Institute’s ethics committee and the California State BREA shortly.
Don’t get me wrong, I’m 100% pro APPRAISAL education. But all the education in the world is useless if it does not also include an understanding of why honesty is so critical. A core understanding; hopefully, learned from Mom and Dad decades earlier.
…
Mike I accidentally measured the WRONG house, The listing agenting came by as I was finishing and taking the photos, he remarked Wow your really busy, your appraising that one also.
He saved me from advertising my GOOF by his remark.
Some back knowledge: I picked up the keys from the agent driving their I picked the wrong side of the street, knocked and the in-laws of the buyer let me inspect, I didn’t need the keys! I SNUKED across the street measured the correct one and returned the keys.
I didn’t tell, was the agent just polite or was he as innocent as I was stupid.
Education is always important however we don’t always use it!
If your like me and or the typical big city suburban/urban appraiser where a good percentage of your work is condo related, how the hell can you observe the comp unless your out of your car walking the project grounds? Are appraisers really spending minutes (5, 10, 20, 30) per comp (driving, finding parking, looking for on-site map, walking to the comp, etc.), or are they just taking general random building pictures and claiming the property was observed. Are appraisers determining in advance by way of plat maps which direction (N,S,W,E) that 25th story located comp is facing, and taking the picture accordingly? Does it mater that locally West facing comps may have panoramic ocean/bay views, versus East facing comps that overlook the freeway out to general hills? When knowing in advance that properties are located in a gated development, are reasonable attempts made to acquire gate codes (reading of confidential MLS remarks, interviewing of agents both recent sold & active, calling the HOA)? Give me 10 traditional comps (view from street) within 60 miles anytime over the need to research (access purposes), walk the grounds of 10 outside developments, etc.
Not to creative a divide or change the subject, but when done by the book (Bill’s book), I think the perception of suburban appraisers (all cookie cutters) should be looked at differently.
Either way, the pictures need to be taken.
Seek the truth
Completing quality reports has spoken for itself by the quality of my clients.
I see Skippy is on the forum with the down votes. So let me ask Skippy a simple question. Would you put this photo in your report? Silly me, Skippy does not think that original photos are important. Skippy does not want to dive the comps, so why would Skippy use original photos. It might be time for Skippy to work as a teller at Walmart.
I see Skippy is on the forum with the down votes. So let me ask Skippy a simple question. Would you put this photo in your report? Silly me, Skippy does not think that original photos are important. Skippy does not want to dive the comps, so why would Skippy use original photos. It might be time for Skippy to work as a teller at Walmart.
Don’t shame other lines of work.
I love your can do/do not quit attitude Mike but Nothing and I repeat NOTHING positive has happened within the appraisal profession over the past 11 years. In fact, every change that has been been implemented over this time period has had serious negative consequences on the appraiser.
Collect at door (sorry…it’s gone)
C & R Fees (if you consider working for 1990 fees fair)
More work load (do 1004MC, UAD, CU ring a bell?)
Cheaper Software, E&O, & MLS Fees (not hardly)
The only thing that seems to be going the appraisers way lately are the gas prices. LOL
A residential appraiser is more likely to reap a greater return for their effort in launching another business venture rather than spitting into a 200 knot headwind (trying to rebuild your appraisal business).
J.O.A.T.- You’re being overly cynical and ignoring all the positive things that have happened by denying their existence. Many small victories have resulted in institutional changes. Bigger ones like C&R fees are on hold til the spurious FTC ends.
First off, our predecessors killed HVCC. It took a long time and we joined in the fight late, but their actions started back in 2009 or 2010 killed it off.
We (all appraisers collectively) killed off the mandatory 1004MC.
1. VaCAP lead the charge to set legally required C&R fees in Virginia;
2. AGA reinvented itself 100% circa 2014/2015 to become primarily oriented to directly helping appraisers defend themselves over an original 15-year-old style union model. We have had numerous federal level regulatory successes (singly and in conjunction with VaCAP, ASA, AI and National Coalitions.
3. Appraisers are learning how to fight back agaisnt appraiser abuses
4. Regulatory corruption and incompetence has been exposed,
5. Appraisers routinely talk to each other now sharing problems and solutions (in AB and dozens of other online chat groups or blogs)
6. AMCs have been effectively put on notice that abuses will be challenged. One, that routinely worked in states without a license and that claimed to have pioneered the ‘one size fits all’ national fixed appraiser fee was put out of business. Partly due to ongoing disclosures and pressure but largely because of the actions of a single courageous appraiser named Mark Skapinetz out of Georgia that put everything on the line to fight back.
7. Many of us fought to force state and federal registration of AMCs and to reduce the disproportionate influence of REVAA. Now ALL AMCs must be registered with ASC which means they also now have to be covered by various state regulations as well.
Jack, I can list dozens of small victories. The impact of which is not fully felt yet. We allowed lender and AMC abuses to exist for nearly 10+ years after TBTF and TARP. It’s not going to get fixed overnight. Frankly, it is a forever battle. As we win in some areas, the liars cheat, and thieves in the financing side of real estate in America (& to a lesser extent the marketing side) develop new twists on old cons daily.
I sincerely thank you for the kind words, but neither I nor any other national leaders fighting these battles swill live forever. We are trying to develop ongoing frameworks for our replacements to pick up the sword. Don’t be discouraged just because the fight is going to be ongoing. It’s simply a new requirement of doing business. Join it actively.
I refuse to complete hybrid appraisals and I do not complete desktop appraisals ever. I however thank that having to have photos in season of your comps is a waste when you have inspected and taken a photo of your comps once already. You shouldn’t have to drive comps more than once during the duration of using that particular comp. And whoever CJK is talking about whoever Skippy is exactly how this post is devisive and counterproductive. All this post states is the assumption that appraisers are not driving comps. That’s a broad statement and I don’t think there are any facts to back that up.
“During the duration of using that comp?” So if you use it over and over again (either for convenience or absence of better comps) you don’t need to look at it from one assignment to the next?
IF you used it last month or even three months ago in low sales volume markets and there were no changes since it sold, I might agree with you. If you used it in winter (under snow) and now you are doing an assignment in spring or fall, you better go see it again. BTW you should also be saying “Comparable sale 3 is from the appraiser’s database and was viewed after it sold, about two months ago (or whenever). Extensive notes are maintained by the appraiser and the comparison with the subject today is accurately and appropriately supported.” I have zero problems if that is done.
Jeff, instances of appraisers not seeing comparables where all mls pics are used rather than original photos likely include more rather than less that don’t bother to go see the property. FNMA ran numbers on it, and anyone in the business that has spoken candidly with appraisers that do this also knows they do it. That is precisely what caused requirements to ‘prove’ we went to see comparables.
Its like this you wake up one day and realize you can actually have a realtor complete your inspections for you quote (under USPAP) TAF is telling us so. Guess who will let a realtor inspect the property and send you the information but wont let your licensed apprentice go out and complete the inspection. USPAP doesn’t say a current photo of every comp is required in every report its guess who. SOW. And yet with all that is happening this is the best post we can come up with. No wonder this industry is in trouble
Conflating separate issues doesn’t make your point. TAF should be shut down. Period. They outlived their purpose and long ago ceased protecting the public interests. USPAP doesn’t require inspection at all. It DOES require honesty. SOW in FNMA work AND SIGNED CERTIFICATION require that the appraiser inspect each and every comparable AS CLAIMED. The profession is in trouble because individual appraisers keep making up their own rules and rationalizations for not doing what they claim to have done in appraisals. The rest of us have to either compete with them while obeying the rules or waste time defending fundamental concepts of honesty. If a person claims they viewed the comps then they must go see the comps. Period.
That is the sole reason we now have to ‘prove’ we observed a comparable. Because some of our competitors are outright liars. You cited legitimate cases where no comp visit is required. Such cases are the exceptions rather than the rule.
Skippy is any “appraiser” who takes short cuts from client requirements just to make a fast buck. If the clients requires the appraiser to drive the comparables and prove it via a CURRENT photo that is not to hard to comprehend. I have reviewed plenty of reports in 36 years and know for a fact that some “appraisers” did not drive the comps. When I do the review I can tell that they just used the photos from the MLS. When I call and ask if they drove the comparables they usually say NO!!!!!!!! Or, I saw it 2 years ago. When I was in my last FHA class FHA was getting all over some of the “appraisers” for not looking at the comparables and including CURRENT photos. How do you prove that you looked at the comparable, by taking a CURRENT photo of it, not my using a photo from 2 years ago. Good appraisers comply with the clients requirements, if the client wants CURRENT photos, take the photos, that is what they pay us for. USPAP is the base, the client can have an overlay. In the long run it might not matter as FNMA will make is easy for some “appraisers” who don’t like to drive and take photos. The $125 desk reports will make some very happy (or will it, can’t have it both ways) have fun with that. Last post I am done with hard heads, good day.
I think scope creep and not being allowed to complete assignments under USPAP is a problem which empowers those that shouldn’t be dictating how we complete assignments to do so. Where will it ever stop. From allowing realtors to complete inspections but not an apprentice appraiser, to demanding an appraiser take a current photo of a property every time they use that property neither falls under USPAP but is under SOW most of the time. That’s the problem I see. An engagement letter should state simple facts about what is needed and not dictate every step an appraiser should be taking within the process. Because once we give all the power to those to dictate what we do than we really have lost a profession that is an important (independent) process for everyone involved. I think a lot of times it seems value doesn’t even seem to matter. its all about current photos and if water and sewer are available in rural America neither of which is dictated by USPAP. At some point going down this rabbit hole is deteriorating USPAP to the point that we are seeing these hybrid properties and the E&O companies are barely beginning to take notice from one article I read in Working RE Magazine. And then the ASB allowed a waiver to an entire state and yet here we are talking about current comp photos. Can we please get back on board to how we can complete with technology and how relying on assessor information and CU information and MLS information is dangerous. Can we all get behind that. Lets keep the conversation going towards what is detrimental to our industry and the lending industry as a whole. YIkes I gotta get back to work. Im busy as ive ever been. Lets all get along and work together. The hanging of fellow appraisers all the time has to stop. We have enough people trying to hang or blame us for everything all ready
I get it JW, but just yesterday in reviewing a borrower provided purchase appraisal from a few months earlier where the appraiser said he has completed “20,000 appraisals over the past 10 years”, but misidentified the subjects location (its adverse not neutral / backs 4 lane road), and failed to subtract the 2nd story stairwell/open to below (property 10% smaller than public files/his measurements), there are those among us who profit (short term and or 20,000 appraisals), while others seek and disclose the truth.
Considering all parties liked the purchase appraisal and by default the purchase appraiser, I will be the current problem as no one wants the property to be underwater as it is per my opinion. Skippy gets richer, while perhaps I’m the greasy wheel making noise and its my head on the chopping block.
Seek the truth.
Why would you subtract second story stair well opening from sf and 90% of the time the county does not have the correct sf of properties. 20,000 appraisals in 10 years is crazy i agree with that but i would never rely on county for sf
The area in this case is indicated and valued as GLA for the 1st floor, but being open on the 2nd floor (air) there is NO GLA to walk on or value. Subtract it out, draw around it, but don’t include the air as GLA and thus apply a value. Most importantly, if you do measure differently than public record files, do not ignore it but seek the truth as to why (permitted GLA, non permitted GLA, basements, enclosed patios, guest houses, builder options recorded / not recorded, public records error, etc.).
As an example, locally a 39 story condominium building just finalized a lawsuit relating to the as recorded public GLA, versus what each unit truly measured (221 units / much smaller true GLA). Know the approved techniques (condo, versus typical stick built home / inside wall / outside wall, etc.), and support your measurements versus blindly matching public record files. Good luck to those appraisers (over value ?) who blindly used public record files in this development (some sell for over 2.3 million) versus what they should have measured.
As it relates to measured GLA versus public record files accuracy, pick a percentage where they are equal/close (50, 70, 99%), but either way the 50, 30 or 1% of the time where they don’t match, can only be found after measuring 100% of all properties.
Perhaps its a coincidence, but the others appraisers initials might have been D.H. (20,000 appraisals in past 10 years).
Seek the truth.
Gotcha i do count the stairwell on the second level where there are stairs going up. I don’t count the area where its just one set of risers going up in an open great room
If you’re an ansi measuring sort of guy, depending on how the assessor handles reporting, inclusion of stair set areas often leads to a higher than county indicated gla figure. It’s important to be flexible and have some better understanding of how the assessor is calculating. Matching the assessors figure in some locations is a positive action to equate an equal unit of measurement, and that data is usually accurate. For this tangent line of conversation it’s important to qualify the property type generally before deciding on a varied inspection and analysis approach. For much sf det residential, and even most sf att residential of many types, gla is usually straight forward. When in mid and high rises, changing use and complex zoning allowance areas, often more urban dense areas, the same simple rules and simple approach methods may not be equally applicable.
We rarely get to that point of understanding in the appraisal ordering process, which is where this stress comes from. Because the people whom send us orders are not appraisers. Reasons why they’ll never be able to successfully apply a blanket policy to allow ‘app based home inspections’ by the laymen through all housing areas. Before inspection it’s important to know that individual county assessors approach protocols or learn that. Otherwise inspection data may as Bill stated, be rendered meaningless or inadequate.
JW, insurers are reactive. So far the loan re re re modification program has plugged the leak for the past decade. That time may soon come to an end. Enforcement in this industry happens retroactively and rolls down like a speeding freight train when it finally gets on track. I still have old 2008 era folders with pages after page of suspension and revocation news, including penalties, fines, suspensions, etc. 2k, 5k, 10k, 15k, 50k, 100k, penalties based on volume and occurrence type.These big money appraisers feel invincible, for the moment. That won’t always be the case.
https://www.marketwatch.com/story/this-widening-crack-in-the-mortgage-market-could-sink-us-home-prices-2019-10-03?
https://appraisersforum.com/forums/threads/suspensions-and-revocations.88400/page-165#
I’m not here to dictate nor should I be reporting as to the conclusion determined by another reporter of a property such as the Assessor. I do however provide my analysis based off of ANSI. with the exception of basement area in some particular markets where acceptance is that lower levels are or can be partially below grade. I can see where cookie cutter neighborhoods may have more consistent data than the third world country I appraise in but again bleeding in the reporting of why the counties sf differs from mine is reporting on the unknown or assumption of another person’s findings
If the assessor counts stairs or not is a matter of fact, not opinion. If you use ansi all the time, in a county where the assessor does extract stairs, you’re constantly overstating the unit of measurement compared to its peer comp. That’s all I’m saying, is that mechanical approaches are not necessarily the best approaches. I have no standard measurement method, except to identify if the assessors figures are generally accurate, then adjust and report accordingly. The goal is not one specific method or another. The goal of valuation analysis is equalized fair units of measurement.
Surprisingly enough JW the so called cookie cutter properties are amazingly most often the culprit relating to public record file errors/differences. Think of it this way, a builder offers 3 different plans where buyers have options for lofts instead of open to below areas, 2 car garages instead of default standard 3 car tandem garages, with the 2 garage you get the extra downstairs bedroom and the full bath instead of the standard 1/2 bath, etc. We depend on the builder to record the chosen options, and to pass it onto local governments for public record purposes (good luck). Often times, the GLA is off, the garage count is off, the bedroom count is off, the bathroom count is off, etc.
During the housing crisis, based in part on this common occurrence (recorded errors), and with little to no agent over site/inspection prior to listing for sale as an REO, I screamed then but no one listened regarding the errors I saw.
During those crazy few years, I saw over 50 examples where the home was listed with public record file data only, but instead the home had the extra GLA (bedroom), the extra full bathroom option, and to a lesser degree had the deleted 3rd car garage.
My points are many, with the extra characteristics not being reflected publicly, was the property foreclosed on unnecessarily as its proper value was typically off by +/- $25,00 to $50,000 (drive by only / no interior inspection)? Was no one alarmed when the appraised value came in $25,000 to $50,000 above contract price (due to superior features not in public records)? How big was the problem locally, and or nationally if as a single appraiser I witnessed the undervaluing of property to the tune of 1.2 to 2 million dollars?
I’ve said it before and I will say it again, to find the 1, 5, or 20% of errors (fill in the blank), 100% of the properties need to be inspected.
Seek the truth.
I get it Baggins, but while others may think they can walk on air in this profession, until such time I see it (open space/stairs) with my own 4 eyes (eyes in the back of my head), NO SOUP FOR YOU!
If I can find it, I will pull a link regarding the 39 story condo building I was talking about (Recorded GLA versus actual GLA). Interesting enough, as the condo was built in 2005, I’ve been in that building 14 times over the years and had they used my measured data, they could have addressed the issue a decade earlier. Good luck to those appraisers who steered their sketch GLA to resemble public record files data, versus using what they measured.
Seek the truth.
This is why I have a ‘no airborne’ policy. I’m too old to get off of the ground level. I don’t do subterranean and I don’t do mid or high rise. Ha! You’re talking about a critical issue with assessment reporting. A government department mixing up units of fair measurement. That’s something that should be corrected from the top down. Not surprising in the big city though. Only with the advent of big data, are agencies like assessors offices taking a closer look at uniform reporting approaches. Sounds like the assessor needs to have a firm approach to reporting size and apply that uniformly to all those big buildings. You’ll need a clever slogan; The commons hallway is NOT your private property. Something like that. Ha! You can catch me bbqing in the hallway complete with a toll gate. It’s on the official record, this is counted as my private property and nobody passes without paying the toll! I’d merely be doing the same thing the government does on public roadways. If it’s legal for them, should be legal for citizens too. Rather than see a problem here, I see opportunity.
It’s worse than I remember as the lawsuit and resulting settlement covered 9 high rise condo buildings. Short, but interesting reading ($78 per sf settlement), GLA off my 6 to 26%, etc.
Seek the truth.
Building upon what I was saying earlier relating to condominiums (photos, etc.), and the often appraiser laziness to walk the complex to take an actual true front picture, is the miracle of these same appraisers who always seem to find their comps in phase 1. It doesn’t matter if the project has 15 or 20 phases as there’s a 90% chance they will all be indicated as being in phase 1.
You say the comps phase number doesn’t matter. But if each appraiser is pulling up the projects plat map (locally 90% of time phases indicated), and overlaying a satellite map to check for initial location concerns, while there why is the actual phase number not pulled and noted? Why in knowing you will need to walk that 500 unit development and the 20 acres its on to take comp pictures, would you not either paper print, or digital print a map to ease with knowing where each comp is located?
The answer of course is that many don’t think the phase number is important, the comps specific location is important (always neutral), and of course the MLS picture at the time of sale best represents the subjects condition.
Although not full proof, those who do reviews (condos), should take a page from Bill’s book and 1st check for proper phase identification, as more times than not, if correct other good data seems to follow.
Seek the truth.
Inspecting the comp is part of verifying data. MLS photos don’t tell the whole truth…
TYVM, outstanding photos, good appraisers should know this, Skippy (bad “appraisers”) will not care. Driving the comps is so much of a hardship for them. I wounder if that broker was reported to the Real Estate Commission (very good photo shop).
The cost approach is complicated. Newer housing is simply not as durable, but it certainly costs more. I like the home on a scale argument. That old 50’s home weighs as much as a modern home 3x it’s size. It’s fair to its specific market, or it’s not. MV is enough for regular mortgage lending.
Difficult to keep up with is runaway inflation and concealed builder profitability amounts. As time passes the assessor simply scoots all that to increased land value to maintain expected land to value ratios, but is that accurate? We’re living inside the bubble so it’s hard to have perspective. The prices go up but labor and product supply costs don’t exactly follow that on a straight line. Wag the dog.
For comp photos, it’s not that difficult or time consuming. One can hardly mention the shortcuts appraisers routinely take without also mentioning the integrated profit taken from improperly co mingled appraisal and distributor of appraisals costs. The root cause of these widely accepted shortcuts is due to the downward fee pressure distributors place on appraisers, while pocketing the difference, returning exactly zero cost savings back to the consumer. Cost plus distribution has more benefits than just more cash to the appraiser. Lending assurity is directly tied to the model of appraisal order distribution. Would distributors of orders still prefer the lessor work product over the more detailed ones, if they were not incentivized by fee raking and stringent performance metrics to shop for the lowest bidder? Lenders continue to walk the razors edge while offloading risk to investors and taxpayers. Not that anyone cares, if the loan goes south they just modify it, again, and again, and again, and again. See my above news article link of remodified home loan statistics. Those ultra low 4% defaulted mortgage claims the gse’s have made, turns out to be all hot air. Repurchase pressure never stopped building.
Great comments especially about the rise in costs in building and the taxing of properties
I think we need to separate the action of taking photos of comparables, from the action of driving the comparables.
Current technology provides numerous photos of most properties on the MLS, far more photographic documentation than the appraiser can get from a drive-by picture (often from a moving vehicle). My practice focuses almost exclusively on litigation and other non-lender work, and many assignments involve retrospective valuations. A current photograph on a comparable property that might have sold years ago provides little useful information about property at time of sale.
So while I’m not an advocate of mandatory comp photos, that DOES NOT mean that I eschew the idea of DRIVING the comparables. Physically inspecting comparable properties provides valuable information about the neighborhood, the property and the relationship of the comp to its surroundings. Even in cases where I’m using numerous comparables for statistical modeling, I still drive the neighborhood to get a sense of locational and other factors that might play into my analysis.
So that’s my two cents . . . photos should be optional, but driving the comparables (depending on how many there are) is a no-brainer. For the record, I’ve posted the same response to Dustin Harris’ commentary as well.
Optional tougher to enforce. Maybe a separate and distinct yes/no question to “Did the appraiser personally drive by each comparable sale?” Another issue is MLS copyrights. Perhaps they would collectively authorize re-use of their photos in reports by Board member appraisers?
I always figured incidental use would be ok (not sure why – public domain; limited use?) whereas complete substitution of mls pics versus appraiser pics could be problematic.
The real problem though is still the appraiser that will simply lie about having inspected the comparable to the extent that could be seen from the right of way.
Absolutely correct! However, if the appraiser would lie about that, then why should you believe any thing else about their report
This is the same kind of BS that was going around when I worked as a staff appraiser for two weeks. Supervision was willing to create rules contradictory to USPAP requirements just to please their lender clients. I had a supervisor tell me that USPAP was a bunch of BS!
Lol! When I was at IRS I asked my manager why AICPA accountants didn’t simply follow USPAP in real property valuation. Her response? “Because some of us don’t believe it it!” That was even after Treasury Dept had officially adopted USPAP.
Let’s face it, USPAP is ‘inconvenient’ for government agencies. California could not begin to comply with it or conform to it in BREA investigations, which is why they now claim they don’t do ANY appraisal reviews or appraisals.
I am most concerned with Dusten not posting your response. Same has happened to me, Everyone should be aware of the one-sided bias that Dusten practices
MRK, I suspect, it was inadvertent rather than deliberate. While Dustin and I disagree on several issues, I’ve never known or found him to be disingenuous or deceptive. It may be nothing more than he was finished with the topic and missed my ‘later in the game’ post.
Michael Sanders touched on an important portion of the issue. What did the buyer of the comparable purchase? Most likely, the buyer bought the property represented in the MLS photo, not the totally remodeled comparable 3 months after the sale. We are supposed the reflect what the $’s spent purchased, not a remodeled or newly re-roofed or painted property. Aren’t we suppose to reflect on the quality and condition as well as the differences based on what the comparable sale dollars bought? MLS photos better reflect what was purchased. Having said that, driving the comps is a must since it will tell us about the neighborhood of the sale and any side issues. Routinely, I take current photos and work file them with comments attached. I have a couple of years experience (54 to be more accurate) and have used this technique many times. My reports also reflect which photos are MLS and why they are being used. Not an answer to the issue, just thought provoking.
DF: I inspected a property yesterday. It is a current pending sale. Did the buyer purchase the building reflected in the 6-month-old enhanced MLS (loopnet) pictures (more than 36 of them)? Or, did he purchase the less presentable, property with a homeless shelter (tarps) taking the entire width of the alley directly to the rear of the site, with half of that supported by his rear entry gate?
ALSO, access to users with vehicles is ONLY from the rear alley which is blocked by cars parking illegally. Graffiti sprayed on alley fence to rear of the site. Neighbor complaining that It is the property owner’s obligation to ‘cure’ the homeless problem in the alley because it is a nuisance (substance dealing purportedly).
Sides vocal ‘revival hall’ to south (‘Enthusiastic’ spiritual singing was definitely audible on-site); and a company called “innovative solutions’ on the north side that appears to be special service for developmentally disabled (physical and mental). Neither use is adverse however neither provides any level of neighborhood retail or professional office space synergy.
When THIS sale becomes a comparable (as it will) nothing in the printed data will demonstrate that this property is also being purchased for plattage or parcel assemblage despite agents’ statements to the contrary…because it makes no economic sense otherwise! 75% of sales in the area are for assemblage/future developments. At best, current use is carrier property. The photos make it look like a brilliantly remodeled interior when its actually 50% decently renovated and 50% still needing renovation with dangerous physical hazard conditions leading to the rooftop. 1920’s unreinforced brick masonry construction not indicated in mls data either. Only Class “C”. IN FAIRNESS, reinforcing per code not determinable from interior inspection (or exterior)-that will have to be verified via city.
Looking at online data only and the reader will be led to believe this is just an intended owner-user extremely low cap rate sale instead of spec purchase for a future flip.
Anyway, the fact that you use BOTH mls and your own eyes means (to me) that you’d probably have identified any differences and adjusted accordingly. As a supplement MLS is fantastic. As a substitute, it is inadequate.
Mike Ford makes a good point, however, as I stated, I still drive the comps, would have seen this mess, taken recent pictures and ruled it out as a comp.
I can’t argue with that Dan. Exactly what we are supposed to be doing.
I appraised a burned down duplex, across the street from a brand new 5 story hospital. Property was previously zoned R-2, currently changing to C-? Was the land value enhanced because of the fire destroying the improvements, No need to haul off three truck loads of stuff, questionable requirements for other stuff removal.
The comps illustrated lands for new medical offices exceeded that of ollldduplexes, and demand was excessive and provable.
The only question was the problem of my client, The insurance company and it was not an appraisal problem.
Mike I accidentally measured the WRONG house, The listing agenting came by as I was finishing and taking the photos, he remarked Wow your really busy, your appraising that one also.
He saved me from advertising my GOOF by his remark.
Some back knowledge: I picked up the keys from the agent driving their I picked the wrong side of the street, knocked and the in-laws of the buyer let me inspect, I didn’t need the keys! I SNUKED across the street measured the correct one and returned the keys.
I didn’t tell, was the agent just polite or was he as innocent as I was stupid.
Education is always important however we don’t always use it!
Who would you inform that said appraiser is not personally inspecting comparable sales.
If you know that to be a fact, then report it to the state regulatory board for appraisers. Look up State Real Estate Appraisers Board for the state in question. Some variant of that will usually come back but it will clearly indicate that they license appraisers.
Send complaint (may have to download their own form) along with evidence that you have they are n’t doing own inspections. Like appraiser is a male but a female inspected the house. Or appraiser signed as Jones, but person inspecting identified themself as Smith, etc.
Every one of us certifies that we conducted our own inspection OR we supply an explanation (and description) of professional assistance provided by others, & list thier name.
My practice was from a broad area from the affluent communities to the areas noted for escape to the remote neighborhoods. Agents in the rich areas could sell second homes with different techniques than the locals. The assessor Measured most all the SFR’s from the 1930s forward and from the 1980’s they adopted ANSI. Both second home owners and astute locals found higher prices from the richer buyers. If accomplishing a written report I found space to explain, if accomplishing a 1004 I also explained their was two markets ‘not uncommon’ I also including the information in the drawing the arithmetic and the assessor or the commonly used advertised sizes. The topographical steep lots had access situations which many didn’t notice or explain the easements required, or slippage which may or not be obvious. Walk out basements frequently required clarification. We experts are required to pare like with like.
The biggest problem was quoting enough fee for the job and collecting it.