Valuation Nation

Valuer’s Dozen: Mr. Volunteer

creighton

I have known Creighton Cross, MAI for a decade. We met when I sold my firm in Virginia Beach, VA and moved to Knoxville, TN to work with David Braun, MAI, SRA, AI-GRS. I wanted to focus on my designation and wanted to get away from the city. When I arrived there Creighton was welcoming and I found out we shared some things. We both played soccer and watched it d for a past time, we both loved valuation and laughing. We did not agree on college football…he is a Vols fan, and I am from Virginia. I hope you all enjoy getting to know Creighton.

VN: How long have you been in the profession?

CC: I got into the profession in January 2005. So I am working on my 14^th year.

VN: What is your favorite thing about the profession?

CC: The people we meet during inspections probably. I have encountered some of the most interesting and lovely people in this profession that I would have never had the opportunity to meet. I love everything about real estate as well and it is so different throughout East TN. One day it may be a $6 million dollar lake home or mountain home, while the next day it could be an 800 sf modular home built for the Manhattan project during WWII. https://www.manhattanprojectvoices.org/ We have an entire town built around these homes, or we may be appraising a new craft brewery or marina.

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

CC: In addition to you, I have to certainly mention David Braun, MAI, SRA, AI-GRS. He literally pulled me off a showroom floor selling motorcycles after college and gave me a chance. Like a father, he had helped to shape me and guide me in the profession. He has taught and trained people from all over, and has always been so ahead of his time with technology, Scope of Work Theory, methodology and the vision for the profession. I am blessed to have been trained by David. Otto Spence, MAI is another great teacher, visionary and motivator. When I would have down times or frustrations, Otto would be on the other end of the line encouraging me to keep going and to constantly be working toward Designation. I certainly look up to so many people in the profession, YOU have been a great friend, colleague, and advocate for our profession, Steve Roach, Leslie Sellers, Stephanie Coleman, Jim Atwood, Jim Amorin, Ben Davidson, Rick Hiton, Sandra Adomatis, Tom Munizzo, TJ McCarthy, Maureen Sweeney, Frank Lucco, Mark Verrett, Pat O’Connor, Pete Gallo, Rick Borgis, and so many more. I would take up the entire page literally. I really look up to those who have blessed the profession with teaching, complex theory, advanced techniques or that have taken the time to share their knowledge with the profession!

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

CC: I love to train and teach. I am a bit of a workaholic (Clinically Diagnosed J)…but if I could just teach, train and motivate others I would do that. I truly love the profession, and enjoy trying to bring the appraisers together for a common purpose in advancement and professionalism. ((omit: I believe we need to bring Sexy Back to the profession) (Make Appraisal Great Again) LOL.)

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

CC: I have to say my family. Abby has been by my side both personally and professionally for more than 13 years. She is always encouraging, my kids are often my guiding light when I am frustrated or down, I have photos of them around the office as a reminder of why I do what I do with the integrity I do it with. I do not take the “protect the public trust” lightly. I truly believe that I have the responsibility to support my opinions and protect the public, my family, etc. I love the lake, travel, flying. I have been trying to get my pilots license for years and Appraisals keep getting in the way.

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

CC: In three years I believe we will see the profession in a stronger light than we are currently. I believe there is going to be high demand for appraisal practice due to the pending “correction” in the market I believe will occur around 2020. That seems to bring us back into the perspective as important in the eyes of the public. 5 years, I believe we will be much more “big data” driven, automated, and will have unique specialty practices, where our analytical skillset is more applicable with less inspection and “Window Time”. 10 years….I must use an extraordinary assumption here, but I believe the profession will look significantly different. I believe the regulations will be the most significant difference. The real estate space will likely be vastly different, based on interest rates and the continual changing technology platforms. I believe there will be a significant decline in appraisers, due mostly to attrition from age. That is why I am such a proponent of appraisers taking on trainees. I feel there is a need for this generation of appraisers to give their knowledge, expertise and work ethic back to the next generation. If not, the profession will not be sustainable, outside of specialty practice long term. We must adapt, evolve and create demand for our services and set ourselves apart from other “valuation” providers.

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

CC: I bought David Braun’s company in 2009-10. I thankfully did not run his successful, 30 year old company into the ground!!! I have continued to grow and expand since acquisition and have created national partnerships. I have been extremely proud of the people I have worked with and trained. We had so many trainee’s come through and continue to come through and many have gotten their designations, started their own businesses, etc. Rusty Rolen, MAI, Seth Rohling, MAI, AI-GRS, Jason Blankenship, MAI….just to name a few that were able to get designated early. They all worked so hard to get to where they are. I love to give back…through Appraisal Institute Leadership opportunities, Appraisal Coalition opportunities…That makes me proud when we have a part in Appraisal Liability reform, or helping to have an impact on Appraisal Waivers or LDAC experiences. The people we have worked with, from all organizations and around the country has been super rewarding.

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

CC: We need to be more digitally driven in my office and in my model. As much as I feel that we are cutting edge with systems, I do not have any appraisers using tablets in the field for inspections. That’s just one of the items I wish I could alter for efficiency. The tools are there to help all appraisers become for efficient and I just need to adapt, evolve and get to working on that.

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

CC: I am wanting to grow our company. I am looking to hire/partner with like minded people in surrounding states to be able to provide our clients with the greatest level of service possible. It is a passion I have in meeting people and creating a network, systems and a TEAM. I would love to start teaching, and have some opportunities for more volunteer service with AI and other national organizations.

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

CC: Man…just one thing…..I’m torn, so I am giving you two. 1) I would eliminate the maximum number of trainees we can have or increase it at least. In TN it is 3. I believe that there is a need and there are supervisors out there that could take more on and create amazing, qualified and excellent appraisers. There would need to be limitations to this I know, but I believe it is restraint of trade in some regards. It should be a business decision for the number of trainee’s one can take. Other professions are not limited on the number of apprentices, Paralegals, dental hygienist, etc. they may hire or staff they train, so It frustrates me. I have had to turn away or refer excellent candidates away before when we are full of trainee’s. That is unfortunate. Some just give up when they cannot find a supervisor and that is a poor reflection on the profession. 2) I believe (non-USPAP) valuation products should be legal in all 50 states. Our clients have a need for a product that does not and should not meet USPAP…For FRT work, it is understandable, but there are times it is not and should not be necessary. Unfortunately, Appraisers are hand-cuffed into meeting USPAP or turning work down many times. Our clients that want and trust our opinions are then stuck with providing an internal evaluation or BPO type product that is frankly less qualified than an appraiser’s opinion. No matter what anyone says, it takes time, and creates hurdles to meet USPAP (When properly and completely done). There needs to be alternative standards that allow for appraisers to provide our valuation services outside of USPAP in the lending space specifically. Evaluations in TN is a great example of this type of service, but this needs to be nationally considered in some fashion. It is in the best interest of the public and the clients to have a qualified, professional appraiser provide any and all opinions of value, period.

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

CC: GET INVOLVED. Thankfully with Social Media this is a much easier thing to do than it used to be…but get involved with your local chapter of the Appraisal Institute, ASA/NAIFA, NAA, Coalitions, IRWA, AGA, RAC…etc. Go to Classes…DO NOT TAKE QUALIFYING EDUCATION ONLINE….In TN it is mandatory that all QE is in class, but I know that is not the case in much of the country, and I believe that is wrought with trouble. The most education I ever received was talking with my peers in class, at break, lunch, after class. It is so rewarding to be able to get others perspectives from around the country and you make career friendships you can rely on for future reference.

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

CC: I want to thank you for your leadership to the profession and time with this blog. I know your heart is tremendously advocating for the Appraisal Profession and I respect and admire that. It is truly people like you that are making our profession stronger. I want to make sure that I have clarified throughout this interview as well that we are in the Appraisal Profession….not the Appraisal Industry as well…..You and I feel strongly about the use of these terms, as they are not synonymous.

*****

There you have it folks. Creighton is a great appraiser and has been a friend of mine for a decade. I have always admired him for being a strong family man and his willingness to be an innovator with his business.

Does The Government Want to Do Away With Appraisals?

The Appraisal Institute has put out legislative action link that will let you communicate with your representatives on the federal level. Follow the link to make your voice heard

Urge the Federal Banking Regulators to Protect Consumers and Safety and Soundness!

The Federal bank regulatory agencies have proposed to increase the residential appraisal threshold level from $250,000 to $400,000, exempting nearly three quarters of residential real estate related financial transactions from appraisal requirements.

In 2017, the exact same proposal was evaluated and answered as part of the federally mandated EGRPRA (regulatory relief) process – a process that encompassed four different notice and comment periods and six public hearings. From that process, the same agencies decided it “would not be appropriate” to increase the threshold from $250,000 based on safety and soundness and consumer protection considerations.

Now, in an apparent attempt to pacify rural community banks, the agencies will increase the threshold unless they hear convincing comments and evidence from stakeholders, including consumers and appraisers. Standing unified in opposition to the proposal, a coalition of nationally recognized professional appraisal organizations will be submitting comments on the proposal. These organizations encourage all appraisers to do the same by the February 5th comment deadline.

To comment, simply fill in the boxes below, and hit submit. Then, a page will be displayed with talking points provided for you. Feel free to edit them, and/or add personal anecdotes, observations, and evidentiary materials as you see fit.

Read the Federal Banking Agencies’ proposed rule.

Knowing Green Can Save You Green

liability-shutterstock217936357

Liability Headaches

Real estate practice, both valuation and brokerage, are professions that are open season for law suits. Let’s face it, consumers can be very litigious in many situations. Reducing liability is something we should all try to do in our professional work. But outside of decreasing liability, what agents do, as well as appraisers, is work with an important element of the economy. Housing is an integral element of the overall economy and it is our collective jobs to try and protect it. That is why it is so important that we all get as competent as we can.

Pricing and valuing homes is sometimes tricky, and it is important that we all understand our markets. One area that I get lots of feedback from agents and builders, and even consumers, is dealing with high-performance, or green homes. We are starting to see data that supports homes are being both under-listed and undervalued.

Support for My Claim

Ken Harney, the real estate columnist for The Washington Post wrote a piece last fall about high-performance homes and why it is important to work with experienced green professionals. He wrote:

“Adomatis (An appraiser interviewing agents), told me that in interviews, some agents who listed certified green properties in California admitted they “had no clue what they were selling.” A few even said, “I don’t know what makes a house green.”

That’s a direct violation of the code of ethics of the National Association of Realtors, which prohibits members from marketing types of property that are “outside their field of competence” and training. The association offers members in-depth courses on green-home marketing and has urged MLS’s across the country to include “green fields” in their listings.”

In 2017, I was part of a team of experts, led by Sandra Adomatis, SRA, that did a study on the Pearl home certifications. We found in that study that the certification could add 5% in value. That’s a big number in some cases, and one that requires some marketing to achieve. We found that in some cases that agents were not marketing homes that had the certifications, thus the potential buyer pool was unaware of the features.

We noted in the study that listings that conspicuously placed the green certifications up front in the listing and marketed the features saw the best return. From the study:

“MLS marketing practices in promoting Pearl-certified home features varied and may account for some of the pairs that show little or no sales price premium found. For instance, in Silver Spring, MD, and Great Falls, VA, the pairs with the highest negative results were sales where Pearl Certificates and documents were not included in the MLS listing as attachments or as jpg files in the photograph gallery.”

This is a potentially big oversight if missed. I would think that many agents would want to cover all their bases and inquire when taking on a listing if the home has any green certifications or features. There are readily available databases that will tell you. Resnet has a data base where agents and appraisers can locate HERS rated homes. Pearl Has one as well located here. It may be a good idea to search these and other databases prior to accepting a listing. In truth, all home certification programs should have a searchable database, but many do not. That is why when you see much of my writing that I write about Pearl and Resnet so often, they have these databases. I would challenge that any certification program without a searchable database is not worth using. How else are agents and appraisers going to track quantifiable data?

What Can Agents Do?

What happens when you find out the home has a viable energy certification? You must make sure the consumers are aware, and that comes from careful and transparent marketing. This could mean placing feature signage throughout a listing that highlight the features. Having a well laid out feature sheet that includes the features an infographic or two dealing with the high-performance features.

Taking it a step further, it would not be a terrible idea to also include language in your contracts that a competent appraiser must be retained to do the work. This means the lenders will have to locate and utilize an appraiser that has experience doing it. With Fannie Mare, FHA, USDA and Freddie Mac this means that the appraiser has demonstrated competency, or rather has done this kind of work before. While the agents cannot be involved in selecting the actual appraiser used, limitations can be placed on not using unqualified appraisers. I have seen this and have been chosen for assignments in the past because I am one of a few appraisers in my market area that do the work.

The National Association of Home Builders published a blog discussing the issue of high-performance homes and appraisals. It states:

There are several reasons for this, but ultimately the issue is that too many green appraisal jobs are going to appraisers who simply aren’t trained to recognize the features and adjust valuations accordingly. This is unfortunate, because it hinders growth in high-performance homes. Builders and owners are simply less likely to invest in features they aren’t sure they can recapture when they sell.

The blog goes on to showcase a builder who requires that a qualified appraiser be used

Appraisers

Homes with solar panel valuation are complex valuation assignments and so are homes with green certifications. The biggest problem sellers run into with appraisers on these homes is that the appraisers with no experience will sometimes write off the features as having no value. The appraisers will make comment like, “I cannot find any homes with solar panels; thus, the market recognizes no value.” This is not true in many cases. Perspectives like these can create a unique liability for that appraiser as well, because that is simply not sound valuation theory or logical.

When an appraiser catches an assignment like this, there is lots of involved research to undergo. One of the simplest ways to debunk the lack of comps argument with solar panels is to ask, “Have you spoken with all the local solar panel companies and asked about all of the installs over the last 12 to 24 months?” The premise to this question is that installs do show demand. I will agree that it’s difficult to ascertain a supportable market value when you have no sales, but there are other methods to use. The Appraisal Institute (AI) teaches a class on using a discounted cash flow analysis to support value. One can also capitalize the savings gained, among other things.

I wrote a blog for appraisers last year that deals with appraisers can do to help themselves become competent. The demand is strong out there for this specialty practice but there are not many appraisers doing the work. I have a strong suspicion that is because the lenders and appraisal management companies are not trying to hire appraisers that do the work. If they were, I feel like more appraisers would be grasping at the opportunity.

Lenders and Appraisal Management Companies (AMC)

The lenders and Appraisal Management Companies should be making sure the appraisers retained are qualified, but borrowers will often not mention or have any clue the home under contract needs such expert valuation services. I sometimes get on site for a lender and must call them and explain that the subject home has a large solar array and is a platinum Pearl home. It is not the lenders fault that the borrower failed to communicate the information to them. But I do hope that the lenders are asking about high-performance features during the application process.

If you are a lender or work with an AMC there is a great resource through the Appraisal Institute (AI). You can locate appraisers that are trained in the valuation of green homes through their registry. This is such a great resource that the AI allows non-AI members to be included on the registry. There truly is a responsibility on the lenders that extends to the AMCs to locate and utilize competent appraisers. I have yet to find one lender or AMC that qualifies appraisers based on high-performance homes. Some do ask if I do them, but they never ask for sample reports which show demonstrated competency (something required by the secondary market and agencies).

When you sign up with a lender or AMC, they always want sample reports, but I have never been asked for a high-performance home sample report. They usually want a sample of an FHA report, a condo report and some type of complex assignment. Some lenders that do lots of new construction even ask for a new construction sample. That no clients are asking for high-performance home reports is concerning.

Conclusion

In the end, high-performance homes offer a unique and complex assignment type for both agents and appraisers. The only way to competently accept this work is to get educated and get some experience to do the work. For agents, who can advocate for their clients, it is important that you communicate what you are selling to the consumers, to the lenders and finally to the appraisers when they come out to do their inspections. That is a lot of responsibility, be mindful of it.

The Six Elements of Green Part 2 The First Two Elements

Now that we have talked about how important communication is between agents and the consumers and the agents and the appraisers, let’s get into the meat and potatoes, as they say. As an appraiser, one must be able to understand and identify high performance home (HPH) features. As I eluded to in the first part of this series, green washing can be a real a problem in this space. It is easy to add a few “green” features and have an agent advertise a home as being an HPH.

HPH or “green” homes are not just about saving energy. To accomplish a truly HPH one must look at the “building as a whole” entity and not just the systems. Another way to look at it is a “cradle-to the grave” approach, or from design phase of the home through the razing of it and returning to a site. What many appraisers and consumers don’t see immediately with HPH is how much more comfortable they are to live in.

The US Environmental Protection Agency describes green building below:

green building. The practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building’s life-cycle from siting to design, construction, operation, maintenance, renovation, and deconstruction. This practice expands and complements the classical building design concerns of economy, utility, durability, and comfort. Green building is also known as sustainable or high-performance building.

So, what goes into looking at an HPH? I am glad that you asked. Well, there are six elements[i]

Site
Water efficiency
Energy efficiency
Indoor air quality
Materials
Operations and maintenance

We are going to dig into the first two elements in this article.

site pic

Site

When I am contacted by builders or borrowers that want to maximize their values from creating an HPH, I spend some time discussing site orientation. It is important. Obviously the homesite will have a huge influence on the home. The site will dictate what can be built. Location of the site within a market is a big deal. Every site has pluses and minuses and from the concept of location, it can mean a long commute to the store or a short walk.

One of the tools that I use on my appraisals, and one that is available in many multiple listing systems (MLS) is walkscore.com. This metric will give you an idea of how “walkable” a location. It takes into consideration distance to important market locations such as the downtown area of an MSA or shopping and retail areas. The more “walkable” the property and the surrounding neighborhood are, the higher the score.

Site is not just about market area location, it is also about several other factors. An important one is site orientation. How a site is orientated, meaning how does it lie when considering north, south, east and west orientation can impact the building in significant ways. Considering where the southern exposure of a home lies will affect the way solar energy interacts with the property.

Orientation, done correctly, can take advantage of passive solar technology. It can also minimize the amount of light that impacts the home through windows. Solar radiation really does affect the indoor temperature, which mean sit can require more heating or cooling to accommodate too much or too little solar radiation. Orientation can also impact the availability of optimal solar PV system placement. If done right, the site will allow better incorporation to the southern exposure for solar panels.

Drainage of the site is also an important consideration. In areas that allow for cistern storage of rainwater this can help reduce the amount of water needed to water the lawn or other vegetation on the site. Having less impervious surfaces that allow natural absorption and usage of water can enhance the “greenness” of the site.

Normally, educated builders and consumers will recognize the importance of site orientation and location right away. It is important for appraisers to recognize it as well. Sometimes homeowners insist on placing the home in an odd orientation to maximize views. Depending on what market you are in a mountain view or bay-view premium may trump a truly beneficial southern exposure vantage. When both performance and view combat one another in a consumer’s mind, the appraiser must be aware and able to measure impact of the issue to the overall value of the home. With proper planning, there are usually acceptable compromises that can be incorporate din the design phase of the home.

water image

Water Efficiency

This element directly impacts the consumer’s monthly budget and because of that, it can be measured directly. This element is more than low-volume toilets and installing low-flow faucet aerators. It, like all things, require careful planning. It also includes lessening the amount of water needed to water plants. This can include rain barrels, cisterns, and the like. There is also advantages to utilizing gray water; this is the waste water from the kitchen, tubs, washers, etc. Everything except water that has been exposed to sewage. As mentioned in the site planning portion, some local governments prohibit the use of rainwater. So as part of site planning, it may be necessary to choose to live someplace other than a rainwater restrictive location.

Some of the things that homeowners can do include the flowing items. With retrofitting, one of the big water savers is finding and fixing any leaks. Upgrading appliances to more efficient models. This includes dishwashers and clothes washers. Installing low flow faucets and toilets are another big water saver. Utilizing the correct plants for your locality is a game changer as well. The correct plants include using native species and other species that grow and live best in the climate where you are located. This prevents the need to do extra watering.

Valuation Thoughts

The recognition of site attributes is not overly difficult but can be troubling for appraisers that have never seen or know about some of things that we have discussed thus far. Water efficiency technology may be easier to see if components are properly labeled. When you are not sure, ask questions. The homeowners may be familiar with these types of improvements, as well as the agent or builder. The best that an appraiser can hope for is that the homeowner and/or agent are up to speed as to what is present in the site and home. Homeowners that built the home will most likely be pretty I enthusiastic to share, where as a homeowner that is the second, third or more homeowner after the build or retrofit may not be as aware of the features present.

What are some proactive ways to get more competent? Take some classes. The Appraisal Institute offers three classes in sustainable residential properties. The AI also offers a list of appraisers that completed the program at Appraisal Institute’s Residential Registry for Sustainable Buildings. Earth Advantage also offers a three-day class on sustainable homes. They also maintain a designation called the Accredited Green Appraiser (AGA). You can also affiliate with an appraiser that has experience in these types of homes.

We will get into some valuation methods in a later part of this series. There are several tools in the tool box for appraisers that will prove familiar to most of us. We will also discuss the very important Appraisal Institute Residential Green and Energy Efficient Addendum Form. Another important topic we will discuss are the various home certifications out there in the markets. Knowing what these are is extremely helpful.

[i] Residential Green Valuation Tools by Sandra Adomatis, SRA LEED GA

The Six Elements of Green Part 1 Speaking the Language

The purpose of this series of articles is help appraisers and agents see why communication is so important. For agents it can be important for ethical market and for appraises it can be a major property productivity analysis item.

*****

As residential real estate professionals we keep getting smacked over the head with the term “green” homes. What does green really mean? It certainly is not the color of the home or the carpet. Most of the time, agents or consumers use the word green to describe some features within a home that show some form of energy efficiency. This can range from having one single energy star branded appliance to a home that produces all the energy it will need without using power company generated energy that is purchased. The difference between these two examples can be stark, and as a result the market will perceive each home differently. Meaning they’ll both have different marketability. Right out of the gate I want to do away with a term that all of us should lose: green. I prefer the use of the term: high-performance home (HPH).

The word green is a misused word when dealing with HPHs. There is a term used often among real estate professionals, “green washing” which means that a home may have a few “green” features and is then marketed as a “green home”. Sellers and agents, not realizing what they are doing, may try to communicate that a home is very green when in fact it may only have a few features to merit such description. That is why concise and meaningful language is needed for this type of, and all, real estate valuation.

HPHs are becoming a normal thing in my market area and many other markets as well. Technology and building science continue to evolve and the costs to implement the technology is coming down. I want to create some introductory and easy to grab onto suggestions for real estate professionals to understand that this is a language that we all need to understand and use effectively. The most pragmatic reason from a business perspective is that clear communication can reduce professional liability. And remember, communication is a two-way street. We must clearly convey ideas and information, so the receiver can clearly receive the ideas and information.

For appraisers it can be a difficult job sorting through the data out there about what is and is not valuable. One of the biggest issues that appraisers have is with the basic researchers’ tool when it comes to HPHs: the multiple listing services (MLS). Most MLS systems are not set up in an appraiser friendly manner. Take my own MLS for an example. The first image shows the searchable fields for inputs that agents can use when creating a listing. The second is just one of those fields expanded to show the options, in this case heat is used. Most fields have a similar number of options.

carr 1

CAAR MMLS

caar 2

CAAR MMLS

So that gives us 13 fields with somewhere around 10-15 options for each field. Let’s say there are 10 options for each field, that is a total of 130 possible indications of HPH property characteristics. Seems impressive right? Guess how many of these features show up on a standard full list sheet report?

None.

If the MLS user does not create customized fields on the output report and unless the listing agent puts HPH related details in the comments section, then these features are lost to a researcher.

Communication is a key element in any type of valuation assignment. Per normal, it falls on the appraiser to ask the questions and understand what we really need to look for in order to do our jobs properly. It falls on the agent to ask the correct questions of the sellers to make sure the features of the home are accurately conveyed to consumers and appraisers. The biggest take away that I can give agent sis to reference a study that I helped prepare in 2017 for a HPH certification. It was obvious after we compiled our research that even the “greenest” home we looked at would not sell at a premium if it were not marketed as an HPH. Agents that spent time highlighting the comfort and efficiency of the home saw a better return when the home was purchased.

One of the common things that I hear around the country when I talk to other appraisers is that the market doesn’t recognize “green” yet. Maybe it does, and appraisers miss it because they do not realize that the MLS is a flawed data set that requires the researcher to take additional steps to complete the proper due diligence. It would be great if all MLS systems would be open to adopting a uniform way to report such things, until that happens agents must be thoughtful in how the homes are listed and appraisers must spend time learning how to research these homes.

I appraise homes regularly that are not marketed on the MLS in a way that a quick read of a listing sheet will allow one to get any insight as to whether a home has HPH features or not. It isn’t until I am on site and I see things that prompt me to ask questions. Or I see a feature sheet on a counter that delves into the HPH features. I have seen this on net-zero homes, LEED certified homes, Pearl Certified homes, and homes with HERS scores. Many appraisers will blame the agents for not communicating effectively and while there is truth to this, in the end, it falls squarely on our shoulders to do an effective property productivity analysis. Appraisers must ask the right questions.

One resource that is of note, concerning HERS rated homes, is the Appraisal Institute member accessible database. HERS rated homes are a common home certification that is seen on a national level. This is a searchable database that allows one to look for homes that have HERS scores. This offers the appraiser quantifiable information that can be used to help develop adjustments and gain insight to sales premiums. Below is an example of the information that can be found for a HERS rated home in that database.

hers

RESNET

In conclusion, the real meat of this article is to remind agents and appraisers the importance of clear communication. Appraisers cannot value properly if they are not aware of all the features a property may have. It is paramount that an effort is made from both the agent’s perspective and from the appraiser’s perspective. Agents should always communicate all features they think are important; a feature sheet is always a good idea. Appraisers should trust their instincts and ask the right questions. If something seems unclear, ask about it.

Experienced and New: A Review of Appraiserfest 2018

Originally posted at :

http://appraisersblogs.com/experienced-n-new-appraiserfest-review

Experienced and New: A Review of Appraiserfest 2018
By Tom Horn, SRA and Woody Fincham, SRA, AI-RRS, RAA Member of RAC

A Newbie Conference Attendee’s Take on Appraiserfest 2018
Tom Horn, SRA

I just got back from the first ever Appraiserfest conference, held in San Antonio, Texas, and while it is fresh on my mind I thought I would share my thoughts. This is my first national appraisal conference to attend and I have to say it did not disappoint.

I have been an appraiser for quite a while but have never been interested in spending my money or time to attend a conference that was not close by where I live. This may be the same way other appraisers think also but I hope this article gives you some insight into what happens at one of these conferences and what you can get out of it.

One analogy that I have heard about appraisers, and one that was mentioned at the conference, is that we are very similar to lone wolves. Many of us work by ourselves and we do not get a chance to talk with other appraisers whenever we need another professional’s opinion.

Ithink one of the messages that the conference wanted to get across is that appraisers must try and shake off this mentality. We must try and go from lone wolves to a pack of wolves. It is only through this transition that we will be able to affect change at the national level because there is strength in numbers.

This change can start at the most basic level, like that offered by social media groups. One of these groups that comes to mind is the 100% Appraiser Group, started and ran by appraiser Mark Skapinetz. I truly believe that this conference would not have been as strong as it was without the camaraderie that this group has built, or at least the friendships that appraisers have developed online.

The natural progression of these online friendships is to move them offline and in person. Taking this a step further these relationships also develop into state appraisal coalitions that have been so effective over the past several years. Again, when appraisers work together like this it becomes a more effective method for communicating with government officials to get things changed in a positive way for the appraisal industry.

The underlying themes for Appraiserfest 2018 included:

Finding alternative forms of appraisal work that do not involve lenders
Making yourself the local expert by analyzing the market and reporting your findings to other local real estate professionals
Being aware of antitrust laws so that you stay out of trouble
Learning as much as you can about your state appraisal laws in order to avoid mortgage fraud
Educating ourselves on the new technologies such as blockchain so that we can position ourselves as valuation experts
Staying on top of the main economic indicators so that we can plan for market changes in our businesses
Learning how to use social media to our advantage in order to grow our non lender business and finally
Thinking differently about the current real estate appraisal model by providing value to consumers by helping them manage the equity of their largest asset, their home.

In addition to getting value from the above noted curriculum the ‘fest also provided great value in other ways also. The friendships that were built online were taken offline and strengthened even more. While I don’t have any other national appraisal conference to compare it to I have attended regional or local get togethers and this was much different.

This gathering had a special vibe to it because everyone seemed to already have a bond with each other because of their online communications. It was this aspect of the ‘fest that I believe sets it apart from all others.

A very special part of the weekend involved a ceremony that honored all of the appraisers that had served in the military. Each of their names were displayed on the big screen and they were all given medals. This was an emotional time for everyone attending.

Everyone in the group has a genuine love for appraising and the desire to continue providing value and help to consumers, because without an unbiased third party involved in the mortgage transaction this could negatively affect the national economy.

So, my final thought about Appraiserfest 2018 is that I would definitely attend another one because the value received was so much more than the cost and time involved and the 14 hours of continuing education doesn’t hurt either. If I can answer any questions about attending the ‘fest feel free to contact me.

An Experienced Conference Attendee’s Perspective
Woody Fincham. SRA, AI-RRS, RAA Member of RAC

Appraiserfest 2018 has ended. I admit it, I was a skeptic that it would ever happen. Not only did it happen but is was an astonishing success.

Wow, what an experience. I think all of us that attended had a bit of withdrawal when we got home. This is one of many valuation conferences that I have attended in my career. It was certainly different than most. This was my sixth and final one this year. Appraiserfest is a different beast than what most appraisers would be familiar with. It is not just one stuffy panel after another. Pretentiousness was checked at the door and we were all simply appraisers working towards a single goal. That goal being successful valuation practice.

Starting out, the energy was vibrant. Everyone that attended expressed how much positive energy they felt there. In a time where residential appraisers feel isolated and preyed upon by lenders, AMCs and GSEs, this conference helped turn some frowns upside down. The networking was excellent. I was able to meet many appraisers that I have emailed with or spoken to on the phone or exchanged correspondence with over social media. It was great to shake hands and get hugs from folks I have befriended over the last few years.

The introductions that were done included music, video and lots of pumping up the crowd. The leadership that put together the fest did it right. Phil Crawford has a great ability to interact with the crowd, very personable. Mark Skapinetz “Skap” is well…Mark, it is hard not to love the guy. They keep saying this is a “Happening”, it was more like a “Skapening”. He is certainly a genuine person who wants to see good things happen for all of us as professionals. Lori Noble, as we say in the south, was certainly the belle of the ball. Everyone, Phil and Mark included, had such wonderful things to say about her and it seems she was the glue holding much of it together. These three deserve all the accolades for getting this thing to work.

A personal highlight for me was being able to sit on a leadership panel with Mike Ford, Maureen Sweeney, George Dell, John Russell, Jonathan Miller and Jim Park. It was neat to see the crowd from the stage. It was a perspective only a few of us got. The biggest take away for me sitting up there: Appraiserfest is a diverse group. The number of women appraisers that attended seems much higher in comparison to other conferences that I have attended. That is great!

Over the next couple of days there were a slew of great presenters and lots of networking. I walked away with dozens of business cards. That is always a great thing about attending conferences and classes in person. You can meet folks and not feel like you are an island unto yourself. Many of us are single appraiser entities and we forget that there is strength in fellowship and unity. I mean the Fest even brought David Samnick back to the 100% Appraiser Facebook page. Many missed his “As the Liver Turns” posts, I am glad to see that he is back as well.

I will certainly be attending the next one, and I hope to be a part of the leadership and presenters again. I do hope to see a larger cross section of the profession at the next one. I was surprised at the absence of the Appraisal Institute. This was a large gathering of residential appraisers and this would have been a great platform for the AI to reach out and talk with the boots on the ground appraisers out there. Maybe next year.

So now you have a new conference attendee’s perspective from my friend, Tom Horn. (By the way, I had never met Tom in person, it was great to finally do so.) He liked what he saw at the Fest. You have my perspective from a veteran conference attendee, and I have no issue saying it is unlike anything else out there. It is worthy of your time and resources to attend next year.

Appraiser Fest

Folks, we are just a couple of weeks from AppraiserFest. If you serve the housing and financial services sector, The Henry B. Gonzalez Convention Center in San Antonio, TX is the place to be this November 1-2-3. The Appraisers Economic Forum (AppraiserFest) is a unique conference offering to the valuation profession that I am very interested to see. This is the inaugural event and it is bringing together diverse mix of professionals. It is truly rare that a conference founded by appraisers, for appraisers and run by appraisers even exists.

I have attended just about every notable valuation conference there is and mostly they are events set up by specific organizations that require or solicit membership. The Appraisers Economic Forum however brings folks from all over the valuation sphere. To the benefit of appraisers, AppraiserFest brings a lot of folks together that have had to pass on other education offerings because they may not be members to certain organizations and even other conferences that are focused on certain specialties. Just looking at the conference agenda it is apparent that there is a little something here for everyone.

Lori Noble, SRA and member of RAC, is one of the coordinators of the conference. She shared some of her personal insight about AppraiserFest:

“One of the great things about AppraiserFest is that it’s bringing so many of us together for the first time which is something appraiser have said they wanted. The venue is spectacular, and I am confident it will be a memorable presentation for everyone because we’ve cut no corners to make it exceptional. There is expected to be a lot of fun and laughter; Mark (Skapinetz) and Phil (Crawford) will make certain of that. I’m also excited about the takeaway of knowledge we can all use in our businesses from the speaker series. Real estate markets are a central role in the welfare of local and global economies and AppraiserFest brings some of the best speakers on appraiser economics to the forefront.”

Lori has done a phenomenal job putting together an excellent 14-hours of continuing education that is approved in most states with more coming on board each week. It certainly makes it a worthwhile way to write off a quality education conference. Yes, it can seem expensive, but the investment in ourselves is an intangible value that comes out of a quality education conference where relationships are built through the networking and the personal connections that we make in person. The value of bringing together folks from all over the valuation space means a lot. We will have members from the ASA there, the AI, the AGA, RAC, TAF, the ASC and more.

This business, unfortunately, creates small clicks of folks that tend to see their group as the best option for everyone. Valuation, because of how small it is, needs to remain agnostic when it comes to organizations. There are lots of good ones out there and what is important is most important is that we come together as a whole.

AppraiserFest offers that opportunity and I hope the momentum continues. Many that know me know that I spend lots of my time working with the AI. That is my personal preference. But I welcome the opportunity to work with members form the AGA, the ASA and the other organizations that are out there. All of them bring something worthwhile to the table and a space like AppraiserFest allows a neutral ground for folks to check their “colors” at the door and see what common ground there is to work as a community. I hope this is a theme that continues to grow and that we see more direct participation from the various groups out there in future conferences.

I look forward to seeing many of you there. Make sure you say hello as I will be there enjoying the event with everyone.

Going Concern Valuer in Virginia

Heather M. Placer, MAI, SRA, CCIM, IFAS, ASA is an appraiser located in Midlothian, Virginia. Heather is a career long appraiser that got started at an early age. She volunteers her time to the Appraisal Institute (AI) and is currently the president of the Virginia Commonwealth Chapter of the Appraisal institute. It would require too much space to list everything that she does and is a part of with the AI. Heather is also the lead non-residential appraiser on our Virginia team for our company, Valucentric. As well as Vice-President of the company. She is also an active commercial real estate agent.

VN: How long have you been in the profession?

HP: 25 years (started in 1993 as an assistant to an appraiser)

VN: What is your favorite thing about the profession?

HP: I love the flexibility of my hours and the challenges of the assignments. I also like visiting different businesses and learning about how they are successful. One of the most interesting things is talking to small business owners and seeing what makes them successful.

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

HP: Any of our leaders at the Appraisal Institute have been exceptional. Scott Robinson, MAI, SRA, AI-RRS, AI-GRS our most recent past president, did a great job at trying to get younger people into the profession. We have a number of professionals coming up that exemplify the passion we need to continue moving the industry forward.

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

HP: I am really interested in going concerns-anything that seems strange or odd in the commercial world fascinates me.

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

HP: I am also a commercial sales agent. I recently earned my CCIM. That has been a different experience. I also enjoy teaching. In my downtime I have a passion for anything with water and my next goal is to buy a lake house.

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

HP: As technology continues to impact the profession I think that in 3/5/10 years the most successful appraisers will be those that can specialize in one area and those that have earned their designations.

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

HP: I have spent a considerable amount of time studying vineyards. I am really enjoying branching out into assignment types that many appraisers do not like.

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

HP: I would try to get away from the standard “cookie cutter” bank work

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

HP: I am working on really trying to learn more about the going concern models. I want to continue to build a database to get a good foundation of multipliers and other ratios to contribute to the study of separating intangible components.

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

HP: Doing away with AVM’s and banks that think they can apply a standardized model to our profession. This is not an industry that can be automated.

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

HP: You may have to make less the first two years while you are training but it will be worth it

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

HP: I cannot stress enough the importance of continuing to take education, whether you are new in the business or a seasoned veteran. This industry changes continuously; the best appraisers are the ones that continue to keep up with these changes.

*****

There you have it folks. Heather is a testament to what education and hard work can get you. She has vigorously chased and earned several designations. I have personally done several assignments with her and she knows value.

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.

****

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: