Cheryl Kunzler, SRA, AI-RRS One of the Thought Leaders in Residential Valuation

by Woody Fincham, SRA. AI-RRS, RAA

kunzler

 

I have known our  interviewee for over a decade.  I first met Cheryl Kunzler, SRA, AI-RRS when she came out to teach a class for my then Chapter, the Hampton Roads Chapter of the Appraisal Institute.  Since then few people have done more to help me along in my career professionally.  Cheryl has allowed me to co-teach and audit many of the classes that she teaches.  I have learned so much from her both as an instructor and as an appraiser.  Cheryl is a true leader in the professional being an outstanding appraiser.  I hope you all enjoy learning a but about one of my friends and colleagues.

VN:  How long have you been in the profession?

CK: I have been an appraiser, reviewer and consultant for 40 years.

VN: What is your favorite thing about the profession?

CK: I have always enjoyed the freedom this job has given me.  I can set my own appointments, do my research in my own way and constantly learn new thought processes and different ways of accomplishing the same thing; an opinion of value. Besides others in the profession, I have been interacting with agents, property managers and property owners to learn how to be a better appraiser.

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

CK: My father, Lew Pollvogt, was my first mentor; when I expressed an interest in appraising, he suggested I first take some beginning courses to learn what the work entailed. I worked with him for more than 20 years and learned how to be an appraiser.

I was also influenced by some of my instructors also, for expanding my understanding and love of the profession.  Richard Lodge, MAI and John Ammon, SRA both now deceased, along with Thomas  Craddock, SRA, MAI, were very instrumental in my participation in the Appraisal Institute governance and teaching. There were other instructors; just can’t bring them all to mind.

Right now, my idol is Sandy Adomatis. She has developed and written about everything green; an influence on value that I don’t think existed before she began.  Sandy has accomplished so much for our profession in disseminating up-to-date knowledge about a very important topic, for residential and commercial appraisers. She has also encouraged me over the years to move in different directions.

And I admire you, Woody, for your excitement and dedication to appraising and teaching.  I have learned so much from teaching with you. I am so happy to have our profession populated with extremely knowledgeable, dedicated and forward- thinking appraisers such as yourself.

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

CK: I absolutely love teaching appraisal courses and seminars.  Over my many years of teaching, I have been able to pass on much of my body of knowledge, which was passed on to me by other instructors and appraisers. I learn so much from the students every time I teach. Since many starting an appraisal career started out in another career, they have a wealth of knowledge to share. The other students, just starting out in the beginning courses, have so much enthusiasm and are eager to learn and test out what they already know.  It is just so exciting!

 

I have also been involved with reviewing courses and seminars for the Appraisal Institute and writing test questions for AI and others. It really expands and tests my own knowledge!

I would love to have residential appraisers receive more recognition for their abilities and expertise.  I have run across so many people (both appraisers and non-appraisers) who believe that those specializing in residential are “just” house appraisers. Though I have completed residential and commercial appraisals for years, the extent of recognition for the residential side has not changed much in 40 years. I wish I had a way to change that attitude.

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

CK: I started traveling internationally over the past four years. I love going to other countries and see their use of wind farms, solar panels, green roofs and unique architecture. Right now, I am taking a Russian language course; I am traveling there next year, and it makes my brain think in a different way.

I also enjoy gardening, but now I must balance that with the times I am out of town!

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

CK: In three-to-five years, I think the demand for appraisers will continue to decline.  Lenders have always tried to find ways to eliminate the appraisers from the mortgage lending process. But as I tell my students, look outside the lending arena; attorneys will always need valuations for estates, for divorces, for property disputes. I have always enjoyed completing review appraisal work. It can be interesting to see how others solve an appraisal problem. And regardless of what many appraisers think, there is not always a problem to be discerned with an appraisal review assignment.

In five years, wholly dependent on the trends of our economy, I believe more and more clients will rely on online databases, spreadsheets, hybrid appraisals and other processes to value properties. That is not to say that appraisers will not be needed; just that other skills and areas of expertise will be needed by appraisers. Perhaps more research and analysis, and not as much physical inspections.

In ten years; sorry Woody, I don’t have a crystal ball! In about 2005 or 2006, I appraised a 20-acre residential parcel with three separate houses located on the site. It was for estate purposes, and the highest and best use was for subdivision development. Seven or eight years later, I was requested to complete another assignment on that property, (which by the way, was physically the same as is was at my first valuation). I was unable to take the assignment at the time. However, I looked back on my report and realized there was no way now to support the discounting I had applied originally. The recession had occurred beginning in 2008, and the original market information I had gathered was not at all appropriate. So, I really don’t have enough information to forecast ten years from now.

 

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

CK: I am pleased at the way my business has evolved over the years; it provides enough variety related to the profession to allow me to expand my knowledge. I am doing review work, course and seminar review, teaching and serving on my county board of equalization.

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

CK: I would like to have started sooner using technology, for marketing, research and analysis. There are so many more efficient ways to complete our assignments than there were several years ago.

I would also have started specializing in litigation assignments earlier in my career; I really enjoy solving a complex problem and testifying to my results.

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

CK: I would like to complete more review assignments; they challenge my knowledge on many levels. I am lucky to be in a position that I have not completed work for lenders for the past 8 or 9 years.  I don’t want the pressure of time and making everything fit in someone’s process. I mostly complete narratives and find I can communicate better. I am not criticizing anyone who does this type of work; I did it for more than 30 years. I was just ready for a change.

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

CK:I would really like appraisers to embrace learning; many appraisers take required seminars on topics they already know or assume that they cannot learn anything new in for instance, a USPAP course. I think we all may have encountered appraisers who assume the way they did things “back then” is sufficient for now. The profession is always evolving, and I hope everyone in the profession realizes that.

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

CK: Allow yourselves to get a variety of experiences of methods of valuation and property types within your specialty. Don’t just do lender work; there are so many other uses for your services. You never know when you will find a niche not being adequately served in your market.  Get involved with the appraisal profession; find an organization that works for you. I have always been proud to be a member of the Appraisal Institute and serving on local, regional and national committees, so of course that is the one I would recommend. But get involved somewhere! Get a designation, value your expertise and don’t always reject the more complex assignments. Diversify if you are a residential specialist and maybe in commercial you can become more of an expert in one property segment.

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

CK: I will have to imitate what many others have said in this blog. Enjoy life, take chances, be adventurous, don’t wait until tomorrow, grab opportunities in work and in life, spend time with your family. Life is too short to wish you had done something else!

Listen!! Amazing what you learn when you are not speaking!

*   *   *   *

 

Sage advice from a respected professional and amazing insight on personal life as well. Many of us are workaholics, I know that I suffer from it.  Cheryl is doing lots of traveling now, I keep dibs on her through her Facebook page.  She is always off enjoying some awesome locations.   She also echoes some of the same advice that we see from many:  get out of the lender space if you can, or limit it’s affects on your business by doing less of it.

 

Thanks, Cheryl, for taking the time to do this.

Pat Turner, the Man with a Plan Valuer’s Dozen

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

pat turner

 

I have known Pat Turner for many years.  My first introduction to him was from attending a Virginia State Board meeting.  I had attended to give public commentary about the problems I saw with regulatory oversight in the commonwealth.  Pat and I struck up a conversation outside the meeting in the hallway where we discussed my disappointment with how the board looked at enforcement.  I explained to him that I was rather passionate about it.  To which he replied, ” Woody, if you have half the fight in you that I do about this profession, you will make some changes happen in the profession.”  If you know Pat at all, you know how true to his nature that reply really is.  Pat has led the charge in trying to advocate for the appraisal profession for many, many years. When I received my SRA designation Pat is the man that handed it to me, at my request.  That is how much think of him, and I know many that think highly of him as well.  I am proud to get the chance to share the Valuer’s Dozen with you, as Pat is one of my mentors and one of my friends.

VN:  How long have you been in the profession?

PT: 46.5 years

 

VN: What is your favorite thing about the profession?

PT:  I love the research and analyzing the actions of the market.

 

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

PT: My mentors were:
Jim Faulconer, Chesterfield Assessor
Dick Farmer, Assessor of Henrico County and instructor for the Society of Real Estate Appraisers
Bob Barton, MAI and an instructor and friend
Woody Aaron, MAI, instructor and friend

 

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

PT: My passion is to do the best I can in all that I undertake as an appraiser.  As you know, I am passionate about consumer protection and the appraisal profession as a whole.

 

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

PT: My wife, children, grandchildren.  University of Richmond. My close friends because they know my many faults and like me anyway.

 

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

PT: In 3 years we will have new Fannie and Freddie reporting vehicles, if they are still viable.
In 5 years we appraisers better be getting more and better education because the mortgage part will be dissolving as we know it.  Take the best educational classes offered.  Be prepared for legal work, IRS work, work from accountants, etc.

 

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

PT: Reputation and longevity, despite all the bumps along the way.

 

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

PT: Ban AMCs or at least make them more transparent regarding C & R fees.

 

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

PT: My present goal is to assist my daughter to obtain her licenses.

 

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

PT: What would I change?  The lack of enforcement, which is due to insufficient knowledge of our profession, in my opinion.

 

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

PT: Get the best education available.  Please use the LIVE classroom.  Join the American Society of Appraisers as they are rapidly becoming the representative for residential appraisers.

 

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

PT:  Finally, I would recommend that people get involved.  Not only with our profession, but also social and civic activities.  Your personality and knowledge impress more people than you know.  Be a leader.  But if you can’t be a leader, then follow, or get out of the way.

ASA, AI, ASFMRA, MBREA, AGA RICS and Even NAR Step Up to the Plate for Valuers

Written by Woody Fincham, SRA, AI-RRS, RAA

Once again, we have some great news coming from the appraisal organizations. The American Society of Appraisers, Appraisal Institute American Society of Farm Managers and Rural Appraisers, MBREA|The Association for Valuation Professionals, American Guild of Appraisers, OPEIU, AFL-CIO and RICS signed off on a joint letter sent to the OCC, The Federal Reserve and the FDIC.  The organizations made a direct reference to the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) which already addressed this issue less than two years ago where the agencies replied with:

“Based on considerations of safety and soundness and consumer protection, the agencies do not currently believe that a change to the current $250,000 threshold for residential mortgage loans would be appropriate. The agencies will continue to consider possibilities for relieving burden related to appraisals for residential mortgage loans, such as coordination of our rules with the practices of HUD, the GSEs, and other federal entities in the residential real estate market.”

The letter is worth a read and all appraisers should be aware that there has been real effort put forth by the organizations to help protect the importance of having an unbiased party available to vet mortgage transactions through appraisals.

In addition to this, the National Association of Realtors also chimed in with a letter in support of the pragmatic soundness of using professional appraisers.  One notable quote from the letter addresses the misconception of appraisal delays (underline emphasis mine):

“The Agencies note that increased cost burden is often the result of delays due to the lack of appraisal availability. NAR’s own research shows that the typical wait time for an appraisal in 2018 was seven days, with 63 percent of REALTORS® reporting wait times to be seven days or less. The question is whether that wait time is burdensome. When asked about ease of obtaining an appraisal, 67 percent of REALTORS® felt it was “easy” or “very easy” to get an appraisal and only one percent noted it being “difficult” or “very difficult.” Given the vast majority of REALTORS® feel getting an appraisal in their area is not a problem, it is hard to imagine that the wait time for an appraisal is resulting in a large number of cost-inducing delays. Based on the average appraisal costs and REALTOR® sentiment regarding appraisal wait time, NAR does not believe that appraisals are creating a cost burden on a national level, but that the problem is likely restricted to specific markets.”

Today has been an interesting one in the world of valuation.  Well done to all the organizations that have stood up for the public trust.  One can only hope that the agencies will listen to common sense.

The Valuer in The Mirror

Written by Woody Fincham, SRA, AI-RRS, RAA 

Maybe I am crazy, but I think all of us deserve a better profession as appraisers than what we have presently within the mortgage and lending world.  We are in an era where the profession is changing fast.  We have many players out there that want to limit or possibly eliminate real estate valuations for residential lending and to some degree on the non-residential side of things as well. The profession should be aligning itself to battle this, but we seem more fractured now than we have ever been.  There is too much in-fighting and disagreement among key players in the profession.  This ranges from the individuals that have appeared as leaders and with the organizations that make up the professional trade groups and professional membership organizations for real estate appraisers.

man-looking-in-mirror

The Valuer in The Mirror

The profession is fractured.  We need to take a long hard look at ourselves in the mirror.  We need to do it as individuals and as part of the various organizations out there.  We need to start seeing ourselves as we really are, warts and all.  There is not one organization out there that is going to save the valuation profession.  There is no one organization that is to blame for all the issues we deal with as a profession. Humans love to separate into groups and then immediately set upon the other groups out there as being somehow inferior to your group.

We have reached a point where we need to stop and take stock of what the profession needs.  We are at a point where the fractures are weakening what we can be as a profession.  When I was speaking on the leadership panel at AppraiserFest last year, that was the one thing I tried to get across.  Stop with the tribalism and fracturing into groups.  Stop trying to say your team is the only viable voice out there.  All valuation voices matter.

I think the answer is to start by being open to all the various groups out there and seeing the positives in each rather than the negatives.  Every professional group out there adds some positivity to the mix.  Whether you, as a valuation professional, are a member of a group or not we must see the value in a unified front.  Remember, that what we do for the US Economy is a thankless job.  One of our biggest user groups, lenders, are also one of the biggest groups that see what we do as an inconvenience rather than a protection of the public trust.  It seems with all the alternative valuation products that are constantly being pushed over traditional appraisals that they would rather see us replaced than to deal with us.

Within the organizations themselves the jockeying for individual position holds the organizations back from being truly great. The politics are cut throat and reward those seeking personal gain more than profession-oriented growth. Most of the long tenured organizations are a political nightmare that are more leadership driven than membership driven. I truly do not understand what one gets from hurting others in their jockeying for a position.  All this type of behavior does is make individual appraisers not want to participate, thus weakening both the organizations and the individuals.

What should we be doing?

The worst thing any of us can be doing is not participating in the profession.  Many, many folks are vocal on forums and social media yet have no membership or involvement with any organizations.  What good does it do to complain but do nothing?  There are lots of folks that want change to happen but that means you must get plugged in somewhere.  Anywhere.  Join a state coalition or one of the national organizations.  Sitting on the fence and complaining will get the profession, and you, nowhere.

If you have the time attend the meetings and add your voice to the mix.  Be opened minded when you are at these meetings and be open to changing your mind about some things.  Many of us that use social media get hard-headed about somethings and forget to listen.  What I notice with in-person meetings is that social graces tend to come back.  People are not so myopic in person (usually) and we tend to be politer in person.  On social media folks can sometimes lose their connection with manners.

Not one person reading this, or the knuckle-head writing this, knows everything.  If you are not open to discourse in a professional manner, then you may want to reassess yourself.  I have found myself feeling very strongly on certain things, only to find out later that I probably should have looked at it differently.  This is true of being a member of an organization.  No organization is perfect, and they all mess up time to time. All these organizations are run by people and people make mistakes.

Any valuation organization out there worth the cost of their membership should be doing multiple meetings with the other valuation organizations out there several times a year.  While we cannot expect them all to agree on all things, they need to be exchanging information and ideas.  Some sort of valuation congress.  Even the largest organizations have weaknesses that another organization can help with.  Some organizations are residentially focused where others are commercially focused.  That’s fine.  But each organization needs to accept that

What Should We Not Be Doing?

We are an opinionated lot.  We get paid to tell others our opinions, and we dig in like a tick when we make up our minds.  Many of us are great appraisers but we lack a true understanding of other things. We are a group of professionals that excel at market research that leads to supportable conclusions yet lack the same set of skills when it comes to the larger profession. I cannot tell you how many times I speak with colleagues that have some strong opinions about something related to the profession.  Then I find out that they have never read about or researched the topic at hand but had come to their seemingly strong opinion based on conjecture.  Often, they have heard another’s opinion on the topic and drawn a conclusion from hearsay. We must treat opinions from others like we do comparable sales data. Research it and find support for it, don’t just take the opinion as fact.

If we concentrate and expend energy on the negativity out there, we are taking energy away from doing something positive.  Those that seek to make money off us as professionals benefit form the distraction in-fighting creates.  While we spend time finding more reasons to fracture apart further, they continue making money off our work.  Some also are using that advantage to try and replace us.  It is okay to agree to disagree, it is not okay to try and attack someone just because they disagree with you.

Once you are involved with an organization do not put yourself before the whole.  Trying to earn a position at the expense of a colleague is not a good thing.  I have seen some colleagues turn into bullies and try to use politics to hurt others to gain a position or to unseat a colleague.  If that is your M.O. you are better off not getting involved.  Many need to ask themselves, “Are you trying to help out or is what you are doing going to hurt what the organization is doing?”

 

In the End

We are a small group of professionals.  There are, by my account, approximately 75,000 professionals nationwide.  We do not have the same lobbying power as the lenders out there.  To be honest, the only reason that we have lasted this long is that some legislators see the benefit that we add to protecting the national economy.  Since we are so small it is imperative that we cease the fracturing from within.  Find an organization that you can support and work with them.  Volunteer and stay involved.  Organizations cannot work against their members if the members do not become passive.  Passiveness is what has hurt the profession more than anything.  Well that and bad business practices, but that is another blog post for another time.

Find an organization, or a couple of them, to work with and volunteer to do some work.  Do not wait for someone else to try and solve your problems for you.  Sitting back and watching what others do will not work at all.  Between the different organizations out there look for ones that align with your thoughts and ones that seem open to you and your views.  Not every organization for everyone, and even after you lock into one, over time, you may find that someplace else ends up being a better place for you, for that time.

If you have limited time, find an organization that you can support and join.  Like anything, not everyone can always get really involved, but your support of the organization makes funds available to help the profession.

 

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 14th 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.

Knowing Green Can Save You Green

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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]

  1. Site
  2. Water efficiency
  3. Energy efficiency
  4. Indoor air quality
  5. Materials
  6. 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.