I was recently featured in an interview with Pearl regarding green house certifications and high performance homes.
I was recently featured in an interview with Pearl regarding green house certifications and high performance homes.
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.
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.
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.
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?
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.
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.