Is Smartexchange resulting in USPAP Non-Compliance?

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

This blog is likely going to stir up controversy. It is likely going to have a few folks calling me a loyalist to a la mode, or other similar things.  Am I a loyalist?  I do not see myself as such, but a la mode has been the only software that I have used in my career for residential form reporting.  I do use ACI in the corporate setting as a reviewer and manager in my firm. I like and consider many of the staff at a la mode to be my friends, and I have had long relationships with them because of my time as a customer.  I will always have an affinity with those folks, but that does not make me a supporter of CoreLogic one way or the other.  I am agnostic when it comes to CoreLogic.  They exist and as such I have no choice but to deal with them on some level. They  are too big of a company in the real estate and valuation space to not deal with them on some level.   The whole point of this piece is to discuss the acceptability to standards when dealing with sharing comparable property data.  It is not a barometer for what CoreLogic means to valuation.

With all the social media chaos over the CoreLogic acquisition of a la mode, there has been some very loud commentary coming from appraisers. CoreLogic is not looked at in a positive light by many in the valuation profession, but that is not what this article is about.  I wanted to deal with the issue of USPAP compliance and their comparable data sharing product, SmartExchange.  I have seen and read many posts from others that claim it is not USPAP-compliant to share comparable property data among one another. I must disclose up front that yes, I did at one point receive compensation as part of the a la mode Labs group between 2007 and 2009.  I am no longer a paid employee or contractor with the company.  I am offering my opinion on the product  to discuss and look at the issue of standards compliance.

What is SmartExchange?  This is what a alamode posts on their site:

“SmartExchange is a nationwide appraisal network that puts property data back in your control by giving you immediate access to pure, UAD formatted appraisal data. This level of data is unprecedented and is unlike anything you’ve been able to gather from MLS systems, public records, and other sources. It’s going to improve the quality and consistency of your appraisal reports.”[1]

smaertexchange

Image Courtesy of CoreLogic

When UAD was pushed out by Fannie Mae several years ago, they let us all know that they would be monitoring and tracking what we used for condition and quality ratings to compare against other “appraisers in” the same market.  In other words, they wanted to see if appraisers were materially misrepresenting data to support bias.  a la mode has created a tool that will allow all participating appraisers using their software to share the ratings used so that one may look at what the peer group is saying in their reports.  It is possible to opt in to the program or opt out.

So, is this something that appraisers can and should use?  I have reached out to several USPAP experts and walked through a series of questions with them and with other practicing appraisers.  I have also done my own research to come to my own opinion. Much of social media is asking an important question about this type of technology:  Is comp data shareable or does it fall under assignment results which would be deemed confidential?  Let’s look at some definitions:

ASSIGNMENT RESULTS: An appraiser’s opinions or conclusions developed specific to an assignment.

Comment: Assignment results include an appraiser’s:

  • opinions or conclusions developed in an appraisal assignment, not limited to value;
  • opinions or conclusions, developed in an appraisal review assignment, not limited to an opinion about the quality of another appraiser’s work; or
  • opinions or conclusions developed when performing a valuation service other than an appraisal or appraisal review assignment.

Physical characteristics are not assignment results.[2]

CONFIDENTIAL INFORMATION: Information that is either:4

  • identified by the client as confidential when providing it to an appraiser and that is not available from any other source; or
  • classified as confidential or private by applicable law or regulation.5[3]

What we have above are two definitions central to this discussion.  The first, Assignment Results, essentially draws one to understand that assignment results are opinions or conclusions that the appraiser supports through the course of the assignment.  The obvious question is then, “Aren’t condition ratings and quality ratings assignment results?”  On the surface I felt that they may be but have further talked with others and looking at all the language in the definitions.  The reason I initially felt that the ratings might be assignment results is that assigning a property a rating requires judgment, and as such judgement is an opinion or some type of conclusion as we use the words.

After speaking with a few experts on this very issue, I changed my opinion.  Most importantly, what I was drawn to is the last line in the definition of assignment results:

“Physical characteristics are not assignment results”.

When it comes to comparable data, we are all using third-party sources to assign the condition and quality ratings for each property.  A couple of the experts, many being residential practitioners, go back to the definition for condition and quality that Fannie Mae developed.  Many felt that there is little room for opinions of even conclusions, that the ratings are -defined, and all the appraiser is doing is assigning to the most obvious tier.   So, the sharing of comparable data that is supported through MLS databases and other third-party sources, readily available to our peer group, does not violate USPAP.

Where we did get into some interesting discussions revolved around the subject property. There is certainly confidentiality involved when dealing with the subject property.  Let’s say that we are doing a refinance transaction.  There would be no way to support assigning ratings other than an onsite inspection where the information gathered was only available to the appraiser as part of the assignment.  What made the conversation interesting was that something came up that I never thought of before.  What if you find out something about the subject that could create a misleading situation to the client?

Let’s say that you do a divorce use report.  3 months later the home goes up for sale and sells.  The MLS data indicates that the home is in much better condition than you saw when you did the inspection.  Upon further research to use it as a comp, you learn that the MLS listing incorrectly indicates it is a C3 versus the C4 that you felt it should be from the previous information that you have.  Or, the square footage is wrong.  What should you do now that you are faced with what you know to be reality versus what a normal peer would be left to conclude form the data available? What I gleaned from these conversations was that we should not be using information that only we have privy to through a previous assignment.

USPAP requires that we do not mislead in our reporting, but it also says that we must stay beholden to assignment confidentiality.  This a bit of a conundrum.  If the difference in information is enough affect assignment conditions, can we take on that assignment?  If we do, how do we report what we know is contrary to what the overall market accepts as fact?  I think the correct answer is that one must recuse themselves from this situation.

Getting back to smartexchange, this led me to contact a la mode and ask the question of whether subject data was being shared or not.  What I was told is that it is only comparable property data.  That the shared database contains only the comparable properties, and that our local database (meaning available only to you and your office) contains your subject data but that is not shared with the users of smartexchnage.

Is this really any different than calling up your appraiser colleague across town and asking if they have used a comp and what they considered it?  I think the answer to that is both yes and no.  It is not different in that colleagues are sharing info, it is different in that the users have no idea where the data comes from.  When I call a colleague, it is normally someone that I respect and have a relationship with.  With respect comes trust, but without being able to see who supplies the data, it does make me uneasy.  I can see multiple uses of the data though, so I am able to see if there has been consistent codification of the comp over several users.  At least I can qualify my own rating and write something proactively if I am using a different code level.

In conclusion, is smart exchange a problem from a standards perspective?  I do not think that it is if it is simply dealing with comparable property data. It certainly can be helpful if the appraiser using it wants to compare the condition and quality ratings over a market area.  Beyond that, it could save some time with data input, but that is something that the user needs to vet carefully and fully every time, and honestly, by the time I do that I am better off just entering that myself.

[1] https://www.alamode.com/smartexchange/

[2] USPAP 2018-2019 The Appraisal Foundation

[3] USPAP 2018-2019 The Appraisal Foundation

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.

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.

Valuation Cowboy

andy
Courtesy of A. Arledge

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

 

moving-truck

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.

cert 11 1004

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

In Conclusion

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

 

 

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

The Queen of Green

July 6, 2018

 

sandy picture
Courtesy of Sandra Adomatis

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

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

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

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

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

 

VN:  How long have you been in the profession?

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

 

VN: What is your favorite thing about the profession?

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

 

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

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

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

 

 

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

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

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

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

 

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

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

 

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

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

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

 

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

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

 

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

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

 

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

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

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

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

 

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

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

 

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

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

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

 

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

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

*****

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

Valuers Dozen, The Professor

 

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

roach pic

Courtesy of Stephen Roach

 

VN:             How long have you been in the profession?

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

 

VN:             What is your favorite thing about the profession?

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

 

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

Valuer’s Dozen: Rachel Massey

 

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

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

 

masssey

Courtesy of Rachel Massey

VN:  How long have you been in the profession?

RM: 29-years and counting.

 

VN: What is your favorite thing about the profession?

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

 

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

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

 

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

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

 

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

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

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

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

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

 

Editor’s Note:

There you have it, folks.

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

Valuer’s Dozen, The Skapinetz

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

IMG_1971

Courtesy of Mark Skapinetz

VN:  How long have you been in the profession?

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

 

VN: What is your favorite thing about the profession?

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

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

 

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

 

Bracketing Unadjusted Sales Price, What’s the Deal?

June 20, 2018

Bracketing Unadjusted Sales Price, What’s the Deal?

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

Bracketing

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

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

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

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

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

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

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

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

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

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

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