Valuation Nation

Valuation Cowboy

I have known Andy Arledge for 4 or 5 years now. He is the creative force behind Appraiser Genie. The genie is a tool that he sells to a appraisers that assists with data importation, analysis and report writing. I have spent enough time with Andy to know that he is a man of integrity and one that loves the valuation profession. He lives in Abilene, TX. I hope that you enjoy getting to know Andy Arledge.

VN: How long have you been in the profession?

AA: I started out in 1981 when I got my real estate salesman license, was a broker for 10 years and now an appraiser for 14 years. I’ve owned a brokerage firm, the largest property management company within 150 miles, developed real estate, built new construction and owned many rentals. I have a wide range of real estate experience.

VN: What is your favorite thing about the profession?

AA: I enjoy meeting people, solving the problem of the appraisal. Complex assignments intrigue me.

VN: Who are your mentors and idols within the profession?

AA: That’s hard to say, there are a lot of good appraisers that have joined the ranks of AMC’s. I enjoy listening to the boots on the ground appraiser who’s still in the field tackling the actual problems of the industry. I respect Mark Skapinetz for leading the charge of trying to get appraisers to come together as one voice.

VN: What are some of your passions inside the profession?

AA: My current passion is writing software that perform analytics on large datasets from MLS exports. I like helping the boots on the ground appraiser perform a more analytical approach to appraising by using tools that greatly increase their productivity, rather than just being a form filler guessing at adjustments or just pulling them out of thin air. The appraiser of the future must have support for their adjustments/analysis.

VN: What are some passions of yours outside of the profession?

AA: I love flying small planes and getting back to nature in the mountains, hunting and fishing.

VN: Where do you see the profession in

AA: 3 years?

Having now lived through 2 real estate downturns, I see the current market as overheated and I expect another real estate correction in the next 2 years. If the correction is large enough, the profession might gain credibility again if the appraiser’s stick together and become a cohesive voice. Our industry is so fragmented, we don’t have a good voice to get Congress’ ear when new laws are implemented. The big banks could care less what we think, so it’s our job to band together and get the lawmakers to listen to the appraiser’s experience. I believe the desktop push that is currently being pursued by the GSE’s will run it’s course and prove to not be reliable enough to be a good lending tool.

5 years?

I see more and more automation in the appraisal process due to technology advancements. By automation I mean the more mundane clerical processes will be automated to allow the appraiser more time to do the actual research and analyzing their professional expertise requires to build a credible report. The appraiser that engages technology into his business should prosper.

10 years?

Artificial intelligence is advancing so rapidly, it’s difficult to project this far in the future. What we know as advanced technology today will be antiquated within 10 years. 10 years ago, cell phones weren’t taking photos and didn’t have the power to load mobile inspection apps. I still see the appraiser as an integral part of the loan making process, since the appraiser is the only one bringing common sense to the loan process, provided the appraisers become a unified voice with representation in Congress with the decision makers.

VN: What is one thing about your personal business that you are most proud?

AA: Taking a private appraisal practice and using that experience that experience to develop Appraiser Genie from an idea into a national presence is what I am most proud of. It’s been 4 years of hard work, but with our new version coming out very soon, Genie will be the most advanced software supporting the appraiser in today’s market.

VN: If you could change one thing about your business model what would it be?

AA: I would’ve developed more private work earlier, where I didn’t do as much AMC work.

VN: What are some present goals for you and what you do are doing in the valuation space?

AA: I’m planning on continuing development of Appraiser Genie where it becomes more the norm for appraisers.

VN: If you could change one thing in valuation, what would it be?

AA: I’d say it was time to move back to a more lender/appraiser relationship, recent studies have shown this to be more effective and less costly than the current model.

VN: What advice would you give someone just getting in the profession?

AA: For the past 10 years, I’ve advise anyone who called me NOT to get into this profession. With the recent rise in fees and the advancement in technology, I would advise a trainee to gain as much technology experience as possible. Technology will drive the future of the industry.

VN: This last one is for you to discuss or talk about whatever you would like.

AA: I would strongly encourage every appraiser to join their state coalition or a national association. Appraisers are so independent, it’s like herding cats, none of them will go in the same direction at once. It’s no wonder we are the whipping boys of the industry. Until we band together as one voice, the appraiser profession will continue to be at the bottom of the food chain. With one voice we will be heard, and our profession will continue long into the future.

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There you have it folks. A little insight into another professional in our field. I have to echo Andy’s sentiment on the profession. Get involved.

Moving to a New Market

I have seen several folks on social media asking what it takes to pick up stakes and move to a new market. I am surprised at the advice and lack of GSE and FHA/USDA understanding out there regarding such a thing. While Fannie Mae, Freddie MAC, FHA and USDA do not prohibit an appraiser from moving to a new market, they do prohibit one form doing any work in the new market until the appraiser becomes competent. Each entity requires that competency already be established when talking on a new assignment. In this blog, we are discussing a specialized competency: geographic competency.

Over my career, I have moved four times where I required to become market competent. I was careful in each case to do so by working with offices that could help me become competent. It was not an easy task, but one that I knew was required. Yes, it meant taking less fee for a bit, but I wanted to be bullet proof from a possible complaint. I will add that each experience served as rewarding one. If you move you must retool your processes for each market.

When I moved to Charlottesville (Blue ridge Mountains), I came from a coastal plains area (Hampton Roads). When I lived in Hampton Roads there was almost no such thing as a basement except in rare cases. I had no choice but to learn about this and many other things that were common to a Piedmont location. That meant doing case studies to prove contributory values, etc. Thank goodness I had experience with Excel and other tools like Regression+ to help me do my job well enough.

GSEs and Agencies

Many would argue that USPAP allows one to become competent, which it does. But the issue with the GSEs and agencies is that they require demonstrated competency. So, there is an assignment condition which makes that flexibility found in USPAP not applicable to the assignment. This what they say about it:

Fannie Mae Selling Guide B4-1.1-03

Knowledge and Experience

Lenders must use appraisers that

have the requisite knowledge required to perform a professional quality appraisal for the specific geographic location and particular property type; and
have the requisite knowledge about, and access to, the necessary and appropriate data sources for the area in which the appraisal assignment is located.

Appraisers that are not familiar with specific real estate markets may not have adequate information available to perform a reliable appraisal. Although the Uniform Standards of Professional Appraisal Practice (USPAP) allows an appraiser that does not have the appropriate knowledge and experience to accept an appraisal assignment by providing procedures with which the appraiser can complete the assignment, Fannie Mae does not allow the USPAP flexibility. (emphasis added)

FHA 4000.1 I-B-1-b

(B) Competency Requirement

The Appraiser must be knowledgeable of the Uniform Standards of Professional Appraisal Practice (USPAP) and FHA appraisal requirements. The Appraiser must meet the competency requirements defined in the USPAP prior to accepting an assignment. The Appraiser must be knowledgeable in the market where the assignment is located. (Emphasis added) (this applies to USDA as well since USDA requires adherence to FHA protocol)

FHA 4000.1 I-B-1-d-ii

The Appraiser assigned to provide the appraisal must be able to complete an assignment for the property type, assignment type, and geographic location of the subject Property.

The Appraiser must comply with the USPAP, including the Competency Rule, when conducting appraisals of Properties intended as security for FHA-insured financing.

What do the Experts Say?

I even took the time to interview a USPAP instructor, Maureen Sweeney, SRA, AI-RRS, IFA, CDEI on the topic and she wrote me up this ditty (I use the word ditty on purpose, as anyone that knows Maureen knows that she likes to sing):

“Competency is competency, and it is not to be sliced up like a pie of different categories. You either have it, or you don’t, and it is not sliced into demonstrated or normal or abnormal; it just is. Credible assignment results are based on the appraiser’s total ethics and total competency. The assignment results either has it, or it doesn’t. USPAP is very specific in what Competency requires, how it is acquired, and what to do if you lack it. USPAP required the appraiser to be competent when they sign the report. Fannie Mae goes one step further. They want you to be competent when you accept the appraisal assignment. Per the Fannie Mae Selling Guide, dated June 24, 2014, page 549 under “Knowledge and Experience”: “Although the Uniform Standards of Professional Appraisal Practice (USPAP) allows an appraiser that does not have the appropriate knowledge and experience to accept an appraisal assignment by providing procedures with which the appraiser can complete the assignment, Fannie Mae does not allow the USPAP flexibility.” Fannie Mae wants their appraisers competent when they accept the assignment. The Selling Guide states, “Lenders must use appraisers that 1) have the requisite knowledge required to perform a professional quality appraisal for the specific geographic location and particular property type; and 2) have the requisite knowledge about, and access to, the necessary and appropriate date sources for the area in which the appraisal assignment is located.” https://www.fanniemae.com/content/guide/sel062414.pdf For those who think FHA is going to give them a pass, too bad. Per SF Handbook, I.B.1.b.i.(B) Competency requirement, “The appraiser must be knowledgeable of the Uniform Standards of Professional Appraisal Practice (USPAP) and FHA appraisal requirements. The appraiser must meet the competency requirements defined in the USPAP prior to accepting an assignment. The appraiser must be knowledgeable in the market where the assignment is located. Fannie Mae and FHA are making suggestions that appraisers should maybe be competent. The say we MUST be competent PRIOR to accepting the assignment.” https://www.hud.gov/sites/documents/APPR_ESSENTIAL_09-14-16.PDF There is no wiggle room around this requirement. If an appraiser doing work for Fannie Mae and Freddie Mac is not competent at the accepting of the appraisal assignment, and they hope to gain competency prior to signing the report, and this is your current practice, please stop.”

I also interviewed another USPAP instructor, Jim Atwood, SRA. He takes it even a bit further, and states that if the FNMA 1004 is used at all, then because of certification-11, the appraiser must have demonstrated competency. I agree with his summation.

“Certification -11, pre-printed into the Fannie Mae 1004 appraisal form, states: “I have knowledge and experience in appraising this type of property in this market area.” When using this form for Fannie Mae, Freddie Mac, VA, or FHA purposes, the appraiser is indicating, by signing the certification, his or her pre-existing knowledge and experience (competency) regarding a particular property type or geographical area. Although USPAP, assuming the client’s agreement, allows an appraiser, who is unfamiliar with a certain property type or geographical area, to perform the appraisal as long as he/she becomes competent prior to completing the assignment, this certification implies that the appraiser is to have sufficient prior knowledge and experience so as to perform the appraisal competently. Certification #11 seems then to preclude accepting assignments for which the appraiser is not already competent.”

In Conclusion

I hope this was a meaningful post. I am not writing this to sound pious, but to help my colleagues make pragmatic decisions. This is an easy enough thing to overlook and I have seen several appraisers do it. As the sergeant used to say on Hill Street Blues:

hill street blues — “Let’s be safe out there.”

The Queen of Green

July 6, 2018

sandy picture — Courtesy of Sandra Adomatis

Sandra K. Adomatis, SRA, LEED Green Associate, NAR GREEN Designee has been a meaningful member of the valuation profession for many years. I first met Sandy when I was taking the last class and demonstration alternative for my SRA designation. Sandy was the facilitator for that week. I was immediately impressed with her knowledge, astuteness and love for valuation. There was no doubt that she loves the profession and believes in doing it the right way. She is a great instructor, one of the best there is in my opinion.

Sandy has been a thought leader in the profession, most notable in sustainable residential technology. She is the foremost authority in valuing residential solar PV systems and has been crucial in assisting the Appraisal Institute in developing the Residential Green and Energy Efficient Addendum. She has also authored a book, Residential Green Valuation Tools, which is a must have for any valuer’s library. She is also a developer and course writer for several classes including the green series. I have had the pleasure to work with her on a team that she led that focused on extracting a premium for PEARL home certifications which was published in a report here.

On a personal note, there are few valuation professionals that I hold in a higher esteem. I am thankful to her for being a mentor to me, and for helping me along in my career. Just to share one quick story about what a good person that she is:

My wife and I have a son that has some special needs. Sandy met my two youngest children (twins, a boy and a girl) and my wife when she came to Charlottesville to teach the green classes a few years ago. My twins have since nicknamed her “Sandy Starfish”. Our son has been in a facility moist of this year to help with some of his issues and when Sandy found out she started sending him correspondence by mail. That meant the world to him, and to my wife and me.

So that is the setup for a Valuer’s Dozen that I am most proud to publish. Ladies and gentlemen, the Queen of Green, Sand Adomatis:

VN: How long have you been in the profession?

SA: I started appraising in 1981 after two years working for a builder, 1 year for a retrofit contractor, and 1 year managing an appraisal business.

VN: What is your favorite thing about the profession?

SA: Appraising is a puzzle that offers a new picture and challenge with each assignment. As a certified general appraiser working many years with my MAI husband, I had the privilege of inspecting a wide variety of properties from nudist camp, farms, adult toy store, railroad right-of-way, 16,000 sq ft houses on the Gulf to 800 square foot cookie cutters. How many people can say their job is that diverse? Not only have I learned much about appraising methodology but have also met many interesting people and learned lots about businesses.

VN: Who are your mentors and idols within the profession?

SA: My biggest mentor is my husband, Richard Adomatis, MAI. He has been retired for more than 25 years but has a great mind and has not forgotten the business. I can still discuss an appraisal problem today and get direction or suggestions that lead me in the right direction.

I don’t have any idols in the profession, but I have several people I truly respect and admire. They are all Appraisal Institute members and to name a few – Maggie Hambleton, SRA; Tim Runde, MAI; Kathy Coon, SRA; Scott Robinson, MAI, SRA; Donald Boucher, SRA; and even you Woody.

VN: What are some of your passions inside the profession?

SA:My passion for the profession is to see more young people come into the profession with a desire to be the best they can be. That means learning as much as you can and looking to be more than a mortgage lending appraiser. There is so much work out there that pays well outside the mortgage lending world.

Appraisers that specialize in mortgage lending work have a challenge going forward with low fees, increasing regulations and guidelines, and automated valuation models that will take away the easy assignments.

My passion is to see more appraisers learn about the green features that are beginning to become code in many markets on the residential and commercial side. I’ve been on this track of learning all I can about the buildings science and dedicating much of my time in sharing what I’ve learned. Our professional is so slow to move in a direction that is not the norm and sometimes don’t see the train until it is upon them. I’ve recently been engaged in working with appraisers in three states that are very green and learned that we still have lots of education needs to bring our profession up to speed.

VN: What are some passions of yours outside of the profession?

SA: My passion outside of the industry include photography and spending time with family. Photography is a hobby and I enjoy doing photo shoots for high school graduates that do not have the funds to buy the expensive photographs from the school. I’ve done prom pictures for some of these students as well. Little kids are really a pleasure to photograph. My children and grandchildren are getting older now, but they gave me lots of joy in photographing them as they played. I did the formal event photographs for the Charlotte Harbor Yacht Club for about 10 years. (My photography is all volunteer because I love it.)

VN: Where do you see the profession in 3 years? 5 years? 10 years?

SA: In 3 years I do not expect major changes in the profession. In 5 year, we will begin to see more AVMs taking the simple assignments for the mortgage lending work. We’ll begin to see more appraisers leaving the business due to age and loss of mortgage work if they have not prepared for other client types.

In 10 years, the databases will be incredibly different, larger, and yet still lacking important data needed to truly understand the more complicated property types. This means appraisers with skills in complex assignments will always have a space in the real estate transaction.

VN: What is one thing about your personal business that you are most proud?

SA: My personal business has flourished over the last 25 years. I’ve seen some appraisers in my market move to other areas or take government jobs because they could not survive during the lean years. Fortunately, my mentor taught me to diversify and have a variety of clients. He also taught me to find a niche that no one else is filling and be the champion. That is how I gained the title “Green Queen.”

VN: If you could change one thing about your business model what would it be?

SA: If I could change my business model it would be to have brought a couple trainees along 10 years ago. I’ve worked with assistants that were very good and made a difference in the work I could handle. As I move toward the winding down years of my career (last 10 years) I could see another 10 beyond that if I had a couple trained appraisers that were younger and dedicated.

VN: What are some present goals for you and what you do are doing in the valuation space?

SA: I have a goal of writing another book in 2019. I’ve got a start on it and hope to have one finished by end of next year.

My current work locally is appraising for estate, divorce, listing, or consulting clients. I do some governmental work for right of way projects as well. My consulting falls into the space of builders and real estate agents that need help in marketing, preparing for an appraisal or challenging an appraisal of a high performance (green) property.

Much of my time is spent writing courses, seminars, and teaching or speaking on high performance properties or features. Some local appraisers hire me to do the solar PV valuations because they have not taken the classes and need the assistance.

VN: If you could change one thing in valuation, what would it be?

SA: The image. There are 77,000 licensed appraisers in the US and far too many do not present a professional image to the people they serve. We are in a service business and we must take the time to do our work well and to serve the people we call our clients. If we tell them we’ll have a report in 5 days, do it. Why do appraisers think they only need to take the number of classes needed to get the required CE? What does this say about our dedication to be the best we can be?

VN: What advice would you give someone just getting in the profession?

SA: If you plan on making this profession a career, take quality education and work under an appraiser with a good reputation. Take pride in your work and find a space where you can specialize and learn everything you can about it.

Network with other professionals and organizations that will add to your knowledge base, skills, and potential clients. Attending meetings and educational offerings by right of way organizations, attorney education, and building science classes are just a few of the ways I’ve found were most helpful in gaining a presence in the space I wanted to serve.

VN: This last one is for you to discuss or talk about whatever you would like.

SA: I love my profession and I want to see everyone in this business love it like I do. We need to work together to make it what we want it to be. The low fees we accept can only be changed by appraisers. Charge what you are worth. I am not on sale today and I am not a .org. Keep that in mind when the next client calls.

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I hope that you all enjoyed this one. I am getting lots of great feedback on this series and I consider it a success already. Please keep the suggestions coming.

Real estate Agents and Appraisers

Real Estate Agents and Appraisers

July 5, 2018

Woody Fincham, SRA, AI-RRS, Member of RAC

cville

I live in a wonderful community. I love Charlottesville, VA. We got some bad press last year because of a bunch of outsiders using our community as a match to set off a flame. This area has a very diverse group of people from all over the world. The University of Virginia attracts some of the best and brightest from all over, and the locals are accepting and friendly for the most part. Because of the diversity we have some great ethnic restaurants in addition to the myriad of farm to table and haute cuisine from the region. This diversity also offers lots of great professionals in the real estate profession.

The spark for this blog has come from my interaction with agents and brokers here in Charlottesville. I have worked in four distinct markets in my career. I have found that since I have been here in Charlottesville that the agents that I work with are a bit stand-offish. I do not mean that in a negative manner, as they are very polite and professional but pretty much steer clear of the appraiser. In every other market I have worked in the agents were very interactive with the appraiser, in some cases almost too much so; like anything there is a balance. This is problematic in many ways and I think the reason why I say that will be evident in the following narrative.

Before I dig too deeply into the purpose of this blog, I want to make something clear. I have nothing but respect for professional real estate agents and brokers. They represent an important function in the real estate transaction. I have tried myself to work as an agent and learned quickly that it is hard work and requires a set of skills that must be honed.

Why is the Relationship Between Agents and Appraisers Important?

I teach residential valuation classes for the Appraisal Institute. This means that I facilitate and lecture education for those starting out in the profession, those that are seeking continuing education and those seeking the prestigious SRA and AI-RRS designations. I mention this because every class that I do facilitate, I inevitably talk about the psychology of the real estate transaction. This requires discussing the importance of an open, honest and transparent communication between valuers (appraisers) and agents and (brokers).

Valuers analyze data and legally are required to maintain an unbiased position within the transaction. This means that we are not able to consider emotional reasons or circumstances to influence what we do, or we can face lots of trouble. Why do I mention this? Because, with residential real estate, there is often lots of emotions tie d up in the transaction. This, after all, will be someone’s personal residence; their castle. This can include purchases of vanity homes, homes to raise children in, very simple homes etc.

Appraisers do not normally deal directly with the consumers that are buying and selling real estate directly. Often, we are dealing indirectly with consumers through the lens of the agents that were involved with the sale, both the selling agents and the listing agents. Therefore, the relationship is important. I have a requirement to verify sales information like concessions, buyer and seller motivations, and other things that relate to confirming if the transaction was arm’s-length.

Because we need to understand the psychology of the transaction, we must have communication with those that were party to the transaction. Often enough this will be the agents. We certainly like to speak to sellers and buyers but that is often not feasible or even possible. We email and call the agents to confirm what we can. But this is not just limited to the comparable sales and listings that we use, it is equally important to discuss with the agents on a property that we are valuing for a pending sale.

Agent and Appraiser Interaction on a Mortgage Transaction

When I am working on a file that is a sale involving a lender, I really like to have the agent(s) available to answer questions. It is imperative that the listing agent make themselves available at least vie phone or email. I love to have the listing agent present at the appraisal observation on site. It allows me to discuss the listing history, price changes, and even market reaction. Feedback from showings can be extremely important as is the motivation from the seller as to why they are selling. This is important because the appraiser must determine if the sale is arm’s length or if it may have some form of duress that affected the price.

I also like to discuss how the property was priced. I find that in the appreciating markets that we are currently under, it is useful to be able to see how the property was priced. Of course, I do my due diligence and locate and utilize sales that I believe to be the best and most representative in comparison to the subject. But I do like to get input form the agent, as it helps me tell the story of the listing history and motivations. If there are multiple offers, escalation clauses, etc. These things can show pent up demand and it is important to let the appraiser know these things.

Some Agents Have a Negative Perspective of the Valuation Process

Having read several blogs lately from agents discussing the problems that they have with appraisers it seems some really dislike having to deal with appraisers. I get it. To many agents the appraisal is just a box to check. In all honesty, that is a common perception for loan originators as well and they are the client of the appraiser writing the report. But appraisals are more than that, they require a full-blown research process followed up by supportable analysis based on market reaction.

Many reports that I write take anywhere from 8-20 hours in total file time. It is not a simple undertaking in many respects. To use familiar terms to an agent, it is like taking a CMA (comparable market analysis or BPO, Broker price opinion) and adding the requirements to measure the property, take lots of pictures, address any needed problems or repairs, be familiar with lending guidelines such as Fannie Mae, Freddie Mac, VA, FHA, USDA, various investor requirements and interagency guidelines. Not to mention the myriad of client additional requirements. There is much more to the appraisal than just what is typically seen at the property observation. In fact, on many files that I do, the data collecting that I do at the property observation is the easiest part of the assignment.

My point here is that appraising for lending institution is not easy. It has lots of moving parts and requires specialized knowledge to do it. And this is in addition to understanding how to value a home. There are many hours of education and many pages of books devoted to this topic. Even simple homes require lots of work to just value it. For the agents and brokers that I work with here in Charlottesville, please ask questions. Please attend the appraisal site visit if you can. Please share notable information. Your involvement and communication to the appraiser is key to our abilities to do our jobs the right way.

Some Appraisers Have a Negative Attitude Towards Agents

The only advice that I can give to valuation professionals on this is to stop. Agents and brokers can and are required to advocate for their clients. This can be frustrating to appraisers but that is their job. I understand frustration, but I see some vitriolic comments and less than professional attitudes out there. And while I sometimes share in the less than positive experiences, I try to live by this mantra: “I may not agree with you, but I will do everything that I can to explain to you why my opinion must be different”. We are not in the appeasement business, we are in the appraisal business. Sometimes we are not going to make folks happy, but it is better to respectfully disagree.

Thanks for Reading

I appreciate that you have read this blog and I hope that it serves as an informative piece. While I want to communicate with agents and brokers how important their availability is to the appraiser, I also want to remind my valuation colleagues that we need to be talking with and engaging with agents and brokers. In these hot markets that we all are dealing with (agents and appraisers) open and professional dialogue is needed.

I have also linked to this blog the National Association of Realtors: Residential Appraisal Process – FAQs for Agents

Tom Horn, a colleague and fellow blogger put this out on his blog Birmingham Appraisal Blog.

Ryan Lundquist who publishes Sacramento Appraisal Blog has a great article on challenging an appraisal.

Please feel free to reach out and let me know if I can help you in any way.

Woody Fincham, SRA, AI-RRS, Member of RAC

wfincham@valucentric.com

Valuers Dozen, The Professor

I am very pleased to out this Valuers Dozen up. The subject of this one is someone that I look up to in the profession. Stephen Roach, MAI, SRA, AI-GRS is a thought leader in the valuation space. His firm, Jones, Roach & Caringella, Inc is a well respected one. Stephen has served in some very important positions with the Appraisal Institute (AI) going back to 1991. Presently he is the chair of education and member of four other committees with the AI. He is considered by many to be one of the best instructors in the AI. On a personal note, Stephen is someone that I know that loves to find good food. Dear readers, I give you The Professor, Stephen Roach, MAI, SRA, AI-RRS.

roach pic

Courtesy of Stephen Roach

VN: How long have you been in the profession?

SDR: This is my 40^th year appraising. I got a job with a local MAI the day I graduated from college, and I’ve been at it even since.

VN: What is your favorite thing about the profession?

SDR: I love figuring out the question. For the kind of work that I do, it’s not always clear what the actual question is, and sometimes the clients need help figuring it out. I enjoy helping them do that. And then I enjoy solving the problem that I may have helped to define.

VN: Who are your mentors and idols within the profession?

SDR: In terms of mentors, the gentleman who hired me, Andy Smith, saw something in me that I may not have seen in my 23-year-old self at the time. I’m eternally grateful to him for that and for the opportunity and the encouragement. My first business partner, Robert Jones, was also a great partner, friend, and mentor; he shared his experience and helped me grow as an appraiser. My idols early in my career were the appraisers and teachers who I viewed as industry and intellectual giants – guys like Jim Mason, John O’Flaherty, Bill Kinnard, Frank Harrison, Bob Foreman, and Jim Graaskamp (truly sorry if I left anyone out!). More recently, my idols are the people who are moving the profession forward; they’re the thought leaders of the profession, in my opinion. I’d put folks like David Lennhoff, Richard Parli, Jeff Fisher, Jim Amorin, Leslie Sellers, Nelson Bowes (RIP, buddy), Ted Whitmer, and Jim Vernor in that list (even sorrier if I left anyone out). I also have a huge amount of respect for the people who step up to help lead the Appraisal Institute, which I consider to be the most important organization for appraisers in the world (AI publishes more books and develops more courses than anyone else, and I view AI as the keeper of the flame of the body of knowledge). I really look up to all of these people, and it’s a true honor to call them colleagues.

VN: What are some of your passions inside the profession?

SDR: I really enjoy teaching and testifying. Perhaps that’s because I think those two are opposite sides of the same coin, as both require listening carefully, figuring out the question, and watching the listener to make sure that the explanation is making sense to them. I particularly enjoy helping the next generation of appraisers get a good start and find their passions in the profession – some truly great folks did that for me, and I am happy and proud that I can help pass it on.

VN: What are some passions of yours outside of the profession?

SDR: The most important thing in the world to me is my family. I’ve been married over 39 years, and I am so grateful for every one of those days. I’m super proud of my children, both successful in life and their chosen fields. I also love to ride my motorcycle (and my Vespa) – the quiet time is very relaxing, and I love to travel.

VN: Where do you see the profession in 3 years? 5 years? 10 years?

SDR: I’m not sure that I can break down the timeline like that, but my suspicion is that the profession will continue to evolve and fragment. I see three major trends on the horizon. First is the continued emergence of AVMs, so-called hybrid appraisals, and other alternatives to the traditional model of residential appraisals. I don’t mean to sound alarmist, but I see this as an existential threat to a large number of appraisers in the country, and I can’t imagine that demand for these traditional appraisals won’t continue to erode in the future. I suspect that this trend will spread to the commercial world in due course, although likely to a lesser extent due to lower homogeneity of the product. The second trend I suspect will continue is the fragmentation of the work. When I stated in the profession, our four-person appraisal firm did everything – loan work, counseling, litigation support, houses, commercial property – whatever came in the door. Over the past 40 years, I have seen more specialization by property type and even by issue, and I suspect that trend will continue. The third trend I see continuing is the change in company size and structure. When I started in that small firm, we were able to get relationship-based work from just about every major financial institution in the area (from local and regional banks and S&Ls up to the national powerhouse banks). My impression is that much of this work is now going to larger firms, and that the smaller independent firms are having a harder time competing, especially in the more urbanized parts of the country. I see this trend as largely responsible for the “franchise” models (like IRR and Valbridge) and the continued growth of the appraisal offices of larger national and international brokerage firms.

VN: What is one thing about your personal business that you are most proud?

SDR: I am proud that we have found a niche that we find interesting, keeps us busy, keeps us challenged, and compensates us well. I’m proud of our great team of appraisers who excel in solving difficult problems. I’m proud of the fact that we see a wide variety of different problems, and that we figure out the question and then solve it. I’m probably most proud of the fact that our clients call us back for future work, reinforcing to me that we helped them solve their problem the last time they called.

VN: If you could change one thing about your business model what would it be?

SDR: Big picture – nothing. I very much enjoy the kinds of assignments we work on, and I love the fact that we have relatively little competition in our space. I could certainly use a cleanup of my desk, but if that’s my biggest complaint, I suspect that life is pretty good.

VN: What are some present goals for you and what you do are doing in the valuation space?

SDR: I still enjoy what I do. In the past few years, I have transitioned a bit into more complex litigation, and I’m doing a lot of review and methodology testimony. I’d like to continue down that path. It sounds funny, but my professional goal is to sign my name as few times as possible in any given year; this isn’t because I want to work less or bill less, but I’d rather work on complex assignments that take some time.

VN: If you could change one thing in valuation, what would it be?

SDR: I would make the profession more academic. I see what we do as a true profession, but I fear that we are often not seen that way from the outside. That’s largely our fault, in my opinion, as I see and hear a number of appraisers who really don’t seem to be interested in life-long learning and growth. I’d like to see us all strive to educate ourselves on the body of knowledge and apply it correctly every time. This is an honorable profession, and I fear that some treat it like a mere job.

VN: What advice would you give someone just getting in the profession?

SDR: Head to the top, not the bottom. There’s a lot of competition, mission creep, external threats, and low competitive fees in certain parts of the profession. That’s not true in other areas of the profession. Also, get a professional designation. No one will treat you like a professional if you don’t act like one. Lastly, get involved with your profession. Your volunteer work will pay off more than you suspect in ways that you cannot now know or even suspect.

VN: This last one is for you to discuss or talk about whatever you would like.

SDR: Life is beautiful and wonderful, but unfortunately, it’s relatively short. So, let the small stuff go and uplift each other. And hug your parents and tell them how much you appreciate everything they have done for you. Trust me – I had that opportunity with only one of mine, and it will mean the world to you when they are gone. Spend time with people and things that make you smile and be that person who makes others smile. Finally, stop putting ice cream on pie – it ruins both.

There you have it folks. Stephen is a great advocate for the profession and an example of someone that has made a career out of not staying inside the proverbial box. There is life outside of the lending world. Happy Fourth of July.

Please suggest anyone that you may feel would make a great subject for this series. I want to see some of our colleagues get some exposure. wfincham@valucentric.com

Valuer’s Dozen: Rachel Massey

Rachel Massey, SRA, AI-RRS, IFA and a member of RAC, is not just a colleague but a friend. I have now known Rachel for at least 5 years. We have written many blogs together and share conversations via telephone many times a year. Rachel is a well-respected residential appraiser. She cares deeply about the profession and is always willing to try and help whether it’s with a simple question from a colleague on social media or volunteering her time with various appraisal and real estate organizations.

I hope you all enjoy learning more about my colleague and friend, Rachel Massey:

masssey

Courtesy of Rachel Massey

VN: How long have you been in the profession?

RM: 29-years and counting.

VN: What is your favorite thing about the profession?

RM: Solving problems. I really enjoy looking at what the problem to be solved is and tucking in and doing so.

VN: Who are your mentors and idols within the profession?

RM: My early mentors were a handful of local SRAs, Jim Miner, Tim Somers and Marlene Consiglio, who all were willing to spend the time helping me understand the process and what I needed to do to solve problems. Recent mentors and idols include Denis DeSaix, George Hatch, Maureen Sweeney and countless others, all of whom are willing to provide time and expertise to assist others, and to do so without judgement and without leading the appraiser to feel inferior. To me, this is the mark of a true mentor, and true professional.

VN: What are some of your passions inside the profession?

Writing, review, and relocation appraisal work. If I could figure out a way to make a living as a writer, I would strongly consider it, but short of that, I have found an abiding passion for doing review work, as well as relocation work. Now if I could just marry the two, and combine it with writing, then my appraisal world would be complete 😊

VN: Where do you see the profession in 3 years? 5 years? 10 years?

RM: There is no doubt that the mortgage appraisal side is changing. Technological advances are everywhere, including the valuation side, and unless appraisers step forward and provide something that cannot be provided by an algorithm, we are likely to have a lessened role in the future, even within three years. That said, if the market melts down again, I see us back in the role of truly being the eyes and the ears of our clients.

We, as a profession, need to be able to tell our customers and clients exactly what we see and what we have analyzed, without the fear of being removed from panels and turned into the state licensing boards because people do not like our answers. If we present reasoned, supportable analysis in a manner that is easy to understand, we should be valued by those who hire us, regardless of whether they like our opinion of value or not. In order to continue to be a profession, we have got to be able to be honest and forthright without losing business. This is an ongoing problem with the field, that has not lessened due to changes after the Great Recession.

So, in short, we could continue being viable if we collectively have a backbone, and if not, we are likely to go the way of travel agencies.

VN: What is one thing about your personal business that you are most proud?

RM: My seminal achievements personally have been obtaining my SRA designation and becoming an AQB Certified USPAP Instructor. Both taught me a tremendous amount about the valuation process, and about critical thinking.

VN: If you could change one thing about your business model what would it be?

RM: It would be to marry the passions I have into a perfect job. That would be to be a lead appraiser with a relocation company, writing the occasional review within the appraisal and relocation industry, and writing guidance and doing education within the organization. Otherwise I am very happy with my current trajectory as a post-funding reviewer for a mortgage lender.

VN: What are some present goals for you and what you do are doing in the valuation space?

RM: My current goals revolve around more teaching and developing of small educational offerings, writing articles and being available to help others. Immediate goals include learning about Green Valuation, something I see as upcoming, although it has not hit my area with any significance yet, it will and I need to be prepared.

VN: If you could change one thing in valuation, what would it be?

RM: Quality over quantity. Slow down a bit and do not cut corners and be rewarded for going beyond the minimums. In the mortgage arena, good enough is good enough. No one wants poor quality, but there is no reward for excellence within much of the mortgage field (there are exceptions, but those tend towards the private client group realm). This is not solely an appraisal issue, but is an issue with business in general, where good enough is rewarded over excellence due to time and cost restraints. I wish I could change that, but it is not likely feasible, or desired.

VN: What advice would you give someone just getting in the profession?

RM: Be a sponge and soak up what everyone has to say. Do not be discouraged and surround yourself with those whom you admire. Try not to sink into negativity and try always to do your best work. Be proud of what you do, and let that pride speak through your written words, and through your professionalism in the field.

VN: This last one is for you to discuss or talk about whatever you would like.

RM: Here I would like to make a plea to all appraisers to get involved in supporting the field. There are multiple organizations that are working on behalf of appraisers, some national and established, others state grass roots organizations. There are so many different avenues to get involved in the profession and to help it, that no matter what we are doing, something will fit. Just get involved, and while doing so, help everyone you can. Do not denigrate other appraisers or organizations. Just get involved in whatever way you can. This is an honorable and valuable profession and it needs all of us to be involved in advancing it. Doing so will benefit the public, and since appraisal is about protecting the public trust, we owe it to not only ourselves, but to everyone.

Editor’s Note:

There you have it, folks.

I want to emphasize Rachel’s last point. Get Involved. The amount of negative comments and trying to put one organization over another is not productive. Find an organization that you like. Hopefully the organizations out there will also start working together rather than trying to prove their worth is greater than any others. Get plugged in and contribute. We are a small profession but an important one. The more divisive we become the more easily controlled we become by the users of our services.

Valuer’s Dozen, The Skapinetz

I am starting a new series for Valuation Nation, called The Valuer’s Dozen. It is a spotlight piece on individual appraisers that are of note to the profession. I am excited that our very first spotlight will be an appraiser out the Atlanta, Georgia MSA. Mark Skapinetz. Mark has become quite the celebrity within the residential space over the last couple of years. He started and administrates a very popular Facebook page, called 100% Real Estate Appraisers. This is a well run private group that allows appraisers to share information. Recently, Mark has also helped found Appraiser Fest, which is a new conference that is happening this November in San Antonio. Welcome, Mark!!

Courtesy of Mark Skapinetz

VN: How long have you been in the profession?

MS: I have been in the profession for 16-years. I Started in New Jersey and I now practice in Georgia.

VN: What is your favorite thing about the profession?

MS: I like the ability to see how others live, see homes I could only dream of living in. I like the flexibility I have and being able to work when I want and how hard I want to work.

VN: Who are your mentors and idols within the profession?

MS: I started in the business with George Stiuso in New Jersey as well as Jeffrey Michaels in New Jersey. They both taught me a lot to get started with. As far as idols I don’t have any, but I really look up to Jonathan Miller, Lori Noble, Ryan Lundquist, Phil Crawford, (You too, Woody) and Greg Wilkenson. All of them have contributed to where I am today, and all have different skill sets. Its taking a little of everyone that has made me a better appraiser and a better person.

VN: What are some of your passions inside the profession?

MS: I love meeting new people and talking to them. I’m very much a people person. I like driving and exploring new areas and trying new places to eat and or trying new fun things in these areas.

VN: What are some passions of yours outside of the profession?

MS: Playing Softball, taking my dog Destiny to Dock Diving Competitions, traveling with the wife, and watching all sports. I’ve recently gotten into Blogging and I am starting a new podcast.

VN: Where do you see the profession in 3 years? 5 years? 10 years?

MS: Honestly, I see turmoil if things don’t change. So many are pushing for these new hybrid appraisals and desktops. I think there is a divide now between those that support AMCs and alternative appraisals and those who support the appraiser and what they do. There is no way to predict what the profession will be in 3 years or 5 or 10. The whole damn thing can blow up again and then more changes will be made. I think appraisers will always be needed as I think many people trust dealing with someone directly they can talk to other than a computer, but I do think appraisers will need to expand their businesses to doing other work than lender work if they will want to survive down the road.

VN: What is one thing about your personal business that you are most proud?

MS: That I have created a reputable company that people seek out. I started at the bottom here in Atlanta and now have become a very successful company.

VN: If you could change one thing about your business model what would it be?

MS: I would take the time to expand it more, bring on some new people and grow it.

VN: What are some present goals for you and what you do are doing in the valuation space?

MS: Well first I want to continue to grow and become a better appraiser. Secondly, as you know I run the 100% Real Estate Appraiser Group on Facebook and I am looking to expand that possibly into another forum site, as well as starting the 100% Real Estate Appraiser Podcast. Third, APPRAISERFEST. As one of the co-founders of the event I really want to make this first event in November a huge success. If we can accomplish that we will continue to take the Fest to new levels each year as well as possibly run some smaller events. Fourth, I want to continue to be a voice in the profession and use the group as well as my Blog, “The Peoples Appraisal Blog” to continue to put out information on issues and help not only appraisers but consumers understand the things we face.

VN: If you could change one thing in valuation, what would it be?

MS: USPAP being as big as the yellow pages. It should be more simplified. You said 1 but I have many other things as well. Lol

VN: What advice would you give someone just getting in the profession?

MS: Do your homework and research. I would shadow someone for a couple days to make sure you really want to be in it. The appraisal industry is changing and getting started today is a little more challenging.

VN: This last one is for you to discuss or talk about whatever you would like.

MS: EVERYONE REGISTER AT WWW.NOV123.COM FOR APPRAISESERFEST. Also check out my Blog page www.thepeoplesappraisalblog.com and my website for my business www.whatsitworthapp.com

Well, there you have it folks. Now we know a little bit more about one of our fellow valuers. If you would like to be featured or want to suggest someone that should be, please send me an email. wfincham@valucentric.com

Bracketing Unadjusted Sales Price, What’s the Deal?

June 20, 2018

Bracketing Unadjusted Sales Price, What’s the Deal?

I see posts every day on social media about bracketing. It seems that many AMC reviewers and lenders have grabbed hold of bracketing to prove adjustments as the most important thing to do. The posts are normally scathing and just short of wanting to tar and feather the clients. I get the chagrin, appraisers are put under so much scrutiny anymore, and to have clients be so pushy about this topic shows the misunderstanding that many underwriters and non-appraisers have about it.

Bracketing

A process in which an appraiser determines a probable range of values for a property by applying qualitative techniques of comparative analysis to a group of comparable sales. The array of comparables may be divided into three groups—those superior to the subject, those similar to the subject, and those inferior to the subject. The adjusted sale prices reflected by the sales requiring downward adjustment and those requiring upward adjustment refine the probable range of values for the subject and identify a value bracket in which the final value opinion will fall.

It can be a handy tool to utilize, but it is just a tool in a toolbox with many options. In many cases, clients are starting to misunderstand why it’s a good tool and how to use for a reliable result. Many of the client’s out there have preferred guidelines that have adopted bracketing as one of the most important things that an appraiser can offer for an analysis. In some cases, I understand what they want, and I agree it can be a reliable way to look at things. But it isn’t the best method out there in every situation.

Where I tend to have my own heartburn with it is with unadjusted sales prices. Many clients want there to be enough comps in the report or analysis to bracket either side of the opinion of value, with the unadjusted sales prices of the comps being used. This is not always possible, but some of these clients require the appraiser to add in an additional sale that will meet this preference no matter what. Seems harmless enough, right?

There is a major concern that I have with this myopic way of looking at data. Appraisers know, instinctively and expressly, that selecting comparable properties based just only on sales amount is not a good thing. If the only reason you select a property as a comparable is price, then you are ignoring what selecting comparability is all about. In any other situation, if I told a client that I am selecting comps because of how much they sold for, I would get in some hot water, and fast. You see, there is a certification in the 1004 that preempts appraisers from selecting sales like this. The Fannie Mae 1004 form has a required Appraiser’s Certification printed on it:

I selected and used comparable sales that are locationally, physically, and functionally the most similar to the subject property.

Fannie Mae wants the appraiser to use judgment when selecting comparable alternatives. Judgement that rests on soundness and long held valuation theory. We need to use properties that are comparable to the subject. Not select a comparable based on something as arbitrary as what price it sold for when it closed. Why then, do clients (AMCs especially) require this type of preference? I wish I could answer that, because the logic escapes me.

Bracketing is a relatively safe methodology to utilize when dealing property characteristics such as gross living area or bathroom counts. It can act as a method to isolate market preference easily and can show that a property characteristic is typical or even ideal. If you have a subject property that has all of it’s salient features falling squarely in the middle of the comps selected for the analysis, then you have a property with a relatively safe that it is neither inadequate or super adequate to market tastes.

I use bracketing when I can for property characteristics but expecting an appraiser to use it solely for pricing is not just bad technique. It is possibly requiring the appraiser to not follow the spirit of what Fannie Mae, FHA, VA, USDA and Freddie Mac want the appraiser to do. I often hear colleagues state that it’s Okay to follow such requests. “You don’t have to give that comp any weight”. That seems like harmless advice, but it still doesn’t make it sound technique.

I would love to hear back from the clients that require this and understand the basis in economics or property theory that support it. Maybe there is a good reason for it, but I have yet to speak with anyone that works at a lender or at an AMC that offer any insight into what it is about. It seems like most AMCs simply require it because the lenders that hire them and say this is a requirement. The AMCs simply obey and enforce it on appraisers.

I am not writing an anti-AMC post, but I am writing a pro-appraiser post. This is one of many things I see in the day-to-day life of many appraisers and it is a worthwhile topic to inquire about. Since so many of my clients require it, and I have yet to understand why this is such an important thing to do. I would love some insight into it. This becomes an especially difficult thing to accomplish on many of the assignments that I do because I do odd and unusual properties as a specialty. In these types of assignments, I am often dealing with the only house like it and bracketing, even the simplest of property characteristics is hard to use bracketing on the analysis.

Whether it is in my case, a property that is unusual, or another appraiser’s situation where they are valuing a property in a four-model subdivision, it is simply choosing a sale to use as a comparable based solely on sales price. Whether it is a directly or even indirectly competing property is irrelevant. It is simply asking an appraiser to appease a guideline that makes little sense at all. If adding something to a report adds little to no credibility to an analysis, should it be added at all?

A Valuer’s Personal Journey Entry 1

An Instructor’s Log:

I learn from You

June 20, 2018

At this juncture of my career, I am going on my 18^th year of practice. I have held my SRA designation with the Appraisal Institute since 2011.I also hold my AI-RRS designation as well, and I am a member of RAC (Relocation Appraisers and Consultants). I currently am the Residential Chief Appraiser and Vice President of Valucentric, LLC.

I dislike typing out my designations and positions. Not because I am ashamed of them, but because it sometimes seems pretentious to list out my credentials. I am not one to hang onto a credential and think that I am any better or less than anyone else that works in this profession. I am proud of my accomplishments, but I still consider myself a serious learner. Education and training and experience are still important for me to obtain. I am on a journey with no real destination; I am a life-long learner.

As I am typing this, I am finishing up instructing an amazing class in Aurora, CO. I have had the pleasure of facilitating a class for 24 designated members of the AI. Residential Review Theory is a great class that normally has students that have lots of experience and much knowledge to share. Taking a class like this is great as a student, but even more beneficial to the instructor. I get to hear many students (over and over as I teach the class more often) share their own experiences, or “war stories” as we call them.

I get busy with my day to day tasks with work, home and my own personal stuff. I get overwhelmed sometimes with it all. Taking on the responsibilities of instructing is a major commitment, but the result for me is that I get a mental break from my daily grind. I can focus my energy towards helping students earn a designation or assist them in broadening their knowledge. It feels good to help others. That is why I am willing to travel around and do this.

One of the best things about being a part of the Appraisal Institute is that I can network and help others. I have met some impressive folks that do all sorts of expert work in niche specialties. I am floored by the talent and backgrounds that many of these professionals have. I feel fortunate to meet many that I can call later and learn more about what they do and get guidance in my own work.

Being an instructor is a worthy thing to do for those that think they may want to do some of this type of work. It will make you better if for no other reason you must explain complex methods and concepts to a group of people. You will find that while you may understand something well, you understand it even more when you can get 8 different learning styles to understand it. Everyone looks at stuff from different perspectives and matching up to a room with 10 or 24 people, helps the instructor as much as it helps the student.

The best advice that I can give anyone that wants to instruct is that you must have a spirit of service to get anywhere. If you are doing it solely for prestige: there is none. For the money: it pays well enough, but it doesn’t net out to where I can exist solely doing it. Or for any other reason than you want to help students you may want to use your time for something more financially rewarding. Students appreciate the hard work that goes into preparing for and setting up a class. It’s like anything, if you pour yourself into it, you will be successful. They will recognize someone genuinely there to help them, versus someone that has other motives.

I am hoping that as I make it around to various classes, that I can keep you updated on my travels and adventures. Adventures is a word that I use with some poetic license. Those that know me will quickly say my adventures usually rotate around good food, good drink and enjoying the company of other professionals in the business. I do get to see some cool things as well.

My good friend, Ben Davidson, MAI, SRA, AI-GRS, was gracious enough to take me up to Estes Park, CO to show me what real mountains look like. I am not a heights guy, and we both enjoyed laughing at my fear of peering over a guardrail-less critical drop into one of the many valleys we drove by. Being in a moving vehicle while I am staring at what will be my assured death. All I could do is think, “I can see the news now: The remains of two real estate appraisers were found in the wreckage of a White Yukon last night. The driver seemed to be laughing at the passenger who was yellow from fear.” It was a great experience to see the things that I saw on that drive, and I will be forever grateful to Ben for showing it to me.

Valuation Nation

This is the first entry to my new blog, Valuation Nation. My hopes with this blog is to update stakeholders in the real estate valuation sector. While I will cover almost anything valuation oriented, the impetus will be residential issues. I am hopeful to attract other bloggers to guest blog occasionally, to cover relevant and recent news, and to write op eds regarding the profession.

We have several folks out there in the blogosphere that offer a similar publication. I do hope that we can offer something balanced, unique and meaningful to the profession to the public at large. I look forward to hearing from readers. I do have to include a statement that my views expressed in this site are my own and do not reflect those of my employer or any organizations to which I am a member,

Welcome to the new blog.

me capture cartoon

Woody Fincham, SRA, AI-RRS Member of RAC