livevaluation magazine june 2011

. b e y o n d c u s t o m a r y & r e a s o n a b l e .

2 | LVM

ACI is a division of Verisk Analytics (NASDAQ: VRSK), a leading provider of risk assessment solutions to professionals in insurance, healthcare, mortgage lending, government, risk management, and human resources. Verisk Analytics includes the holdings of Insurance Services Offi ce, Inc. (ISO) and its subsidiaries, which provide essential solutions to the insurance, mortgage lending, and healthcare markets. For more information, visit www.verisk.com.

Easily defi ne your subject’s neighborhood boundary using geo-coordinates. Add maps to your reports that include supporting visual tools to further assist in defi ning the representation of your subject property’s neighborhood.

Neighborhood Boundaries in MapPoint

Save Time, Get SMART™

The SMART Market

Analysis solution works

with your MLS* system

to Import Active,

Expired, Pending, Withdrawn,

and Sold listings. SMART auto-populates the 1004MC.

*Call to verify MLS availability. MLS providers are continually updated.

ACIChoiceCredits™

PDF Import Flood Insights Bing™ Maps

SMART™ AppraiserBASE™ Pictometry®

ACI2010™$699* All Inclusive Package

Form100 01/10

t 800-234-8727 f 386-246-3811AppraisersChoice.com

THE APPRAISER’S CHOICE™









ACI2010™

ACI2010

™

800-234-8727

AppraisersC

hoice.co

m

Printed on Recycled Paper

› Appraisal Forms Library

› Order Tracking

› Photo Management

› Comps Database

› ChoiceCredits™(500 to use for SMART™ Market Analysis Tool, Flood Maps, Location Maps, MLS Import Service, AppraiserBASE™, Long-Term Storage, File-Sync and more)

› GPAR™ Forms Series

› ACI Sketch™

› Digital Signature (One)

› Free PDF Creator

› Premier eServices(One Year)

› Concierge Service (Conversion Utility)

* Limited Time Offer

Innovative Technology - 30 Years and Counting - ACI has been a pioneer, providing innovative tools that save appraisers time and money. Look to ACI to provide the foremost solution as the industry embarks on new compliance and delivery requirements. Visit AppraisersChoice.com for UAD updates and information.

Benefi cial Partnerships - ACI features solid integration with sketching software, location maps, fl ood data, cost data, and market analysis tools that streamline the appraisal report writing process. It is through these partnerships that ACI appraisers have many options, and why ACI is ”The Appraiser’s Choice.”

Premier Service - Toll-free technical support, LIVE chat operators, and over 140 online videos on AppraisersChoice.com provides ACI appraisers with multiple support channels.

Best Value - Hands-down, ACI offers the most comprehensive real estate appraisal software package available in the industry. We invite you to experience ACI’s industry-leading appraisal technology and service.

You Know Value... ACI Adds Value

Are You Ready for UAD?UAD marks a signifi cant event in appraisal history, and ACI is once again preparing appraisers for a smooth transition. In addition to creating UAD-compliant software that features UAD interactive guidance, we’re providing FREE online UAD

webinars to ACI appraisers to ensure that we’ve got you covered.As an industry pioneer, we have set the standard for valuation technology. And that is a role we take very seriously. Through our journey we have worked with tens of thousands of

appraisers who continue to inspire us to produce smarter, faster, and better technology. We look forward to the coming months and in fostering the relationships that have made us who we are.ACI- The Appraiser’s Choice™

SMARTER Features. FASTER Reports. BETTER Software.

ACI Clients are Invited to

Sign-up for a webinar on how you can stay UAD compliant with ACI.

Visit AppraisersChoice.com for more information and to register for an

upcoming session.

Free UAD Training!

SHARE - SAVE - EXPLORE

ACI is...and we’re helping appraisers every step-of-the-way.

JUNE 2011 * LIVEVALMAG.COM | 3

ACI is a division of Verisk Analytics (NASDAQ: VRSK), a leading provider of risk assessment solutions to professionals in insurance, healthcare, mortgage lending, government, risk management, and human resources. Verisk Analytics includes the holdings of Insurance Services Offi ce, Inc. (ISO) and its subsidiaries, which provide essential solutions to the insurance, mortgage lending, and healthcare markets. For more information, visit www.verisk.com.

Easily defi ne your subject’s neighborhood boundary using geo-coordinates. Add maps to your reports that include supporting visual tools to further assist in defi ning the representation of your subject property’s neighborhood.

Neighborhood Boundaries in MapPoint

Save Time, Get SMART™

The SMART Market

Analysis solution works

with your MLS* system

to Import Active,

Expired, Pending, Withdrawn,

and Sold listings. SMART auto-populates the 1004MC.

*Call to verify MLS availability. MLS providers are continually updated.

ACIChoiceCredits™

PDF Import Flood Insights Bing™ Maps

SMART™ AppraiserBASE™ Pictometry®

ACI2010™$699* All Inclusive Package

Form100 01/10

t 800-234-8727 f 386-246-3811AppraisersChoice.com










ACI2010™

ACI2010

™

800-234-8727

AppraisersC

hoice.co

m

Printed on Recycled Paper

› Appraisal Forms Library

› Order Tracking

› Photo Management

› Comps Database

› ChoiceCredits™(500 to use for SMART™ Market Analysis Tool, Flood Maps, Location Maps, MLS Import Service, AppraiserBASE™, Long-Term Storage, File-Sync and more)

› GPAR™ Forms Series

› ACI Sketch™

› Digital Signature (One)

› Free PDF Creator

› Premier eServices(One Year)

› Concierge Service (Conversion Utility)

* Limited Time Offer

Innovative Technology - 30 Years and Counting - ACI has been a pioneer, providing innovative tools that save appraisers time and money. Look to ACI to provide the foremost solution as the industry embarks on new compliance and delivery requirements. Visit AppraisersChoice.com for UAD updates and information.

Benefi cial Partnerships - ACI features solid integration with sketching software, location maps, fl ood data, cost data, and market analysis tools that streamline the appraisal report writing process. It is through these partnerships that ACI appraisers have many options, and why ACI is ”The Appraiser’s Choice.”

Premier Service - Toll-free technical support, LIVE chat operators, and over 140 online videos on AppraisersChoice.com provides ACI appraisers with multiple support channels.

Best Value - Hands-down, ACI offers the most comprehensive real estate appraisal software package available in the industry. We invite you to experience ACI’s industry-leading appraisal technology and service.

You Know Value... ACI Adds Value

Are You Ready for UAD?UAD marks a signifi cant event in appraisal history, and ACI is once again preparing appraisers for a smooth transition. In addition to creating UAD-compliant software that features UAD interactive guidance, we’re providing FREE online UAD

webinars to ACI appraisers to ensure that we’ve got you covered.As an industry pioneer, we have set the standard for valuation technology. And that is a role we take very seriously. Through our journey we have worked with tens of thousands of

appraisers who continue to inspire us to produce smarter, faster, and better technology. We look forward to the coming months and in fostering the relationships that have made us who we are.ACI- The Appraiser’s Choice™

SMARTER Features. FASTER Reports. BETTER Software.

ACI Clients are Invited to

Sign-up for a webinar on how you can stay UAD compliant with ACI.

Visit AppraisersChoice.com for more information and to register for an

upcoming session.

Free UAD Training!

SHARE - SAVE - EXPLORE

ACI is...and we’re helping appraisers every step-of-the-way.

4 | LVM

| contents |

&table of contentscontents 28

FeatureDiving Deeper into Dodd-FrankBeyond customary and reasonable.

I am truly amazed to hear there are those who still question if appraiser pressure actually ever existed. Even worse, I know firsthand that it continues to this day. I do not need to point the finger at one specific group – honestly, I already did that several times in previous articles.


LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVMLVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVMLVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVMLVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM

your monthlyvaluation publication

9

14

Best PracticesTime is money.Kelly Mcclain & Todd RasMussen

16

PMI and the Housing IndustryReliable and credible appraisals are critical.adaM johnsTon, sRa

18

The Hot Seat Featuring Jerry Yurek senioR Vice PResidenT, collaTeRal

RisK ManageR of Pnc BanK

22

Toy Guns & Rubber Bullets What you don’t know can hurt you.josePh PaluMBo

Diving Deeper into Dodd-Frank30

Appraiser Independence

Keep Fighting for Your IndependencechucK MuReddu

34

Mandatory Reporting

A Dangerous Area of Dodd-Frankjeff dicKsTein

38

Dispute Resolution

There Are No Dumb Questions?TiM foRsyThe

42

BPOs & AVMs

Valuations Other Than Appraisalsdon Kelly

6

Publisher’s Note

8

Contributors

10

Staiger on Stats

46

Voices of Valuation

48

CoreLogic Stats

49

Directory

50

For What It’s Worth

up front

14

departments

28

inside This Month

22

LVM06.11

Diving Deeper into Dodd-FrankBeyond customary and reasonable.

28 JUNE 2011

cover. B E Y O N D C U S T O M A R Y & R E A S O N A B L E .

6 | LVM

1. Publisher | Ernie Durbin II, SRA, CRP

2. editor-in-chief | Emily Vannucci

3. copy editor | Kersten Wehde

4. creative director | Traci Knight

5. national sales Rep. & Marketing coordinator | Kate Sheehan

Printer | ovid Bell Press

advertising information | P : 858.832.8320 | E : [email protected]

subscription | [email protected]

editorial | [email protected]

Web | LiveValMag.com

© 2011 LiveValuation Magazine.

All rights reserved. LiveValuation Magazine is a California limited liability company and is the publisher of LiveValuation Magazine. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in article and advertisement herein are not necessarily those of LiveValuation Magazine, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, LiveValuation Magazine is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only. Postmaster : Please send address changes to LiveValuation Magazine, 16745 W. Bernardo Drive Suite 450 San Diego, CA 92127

Today every major social media outlet has pages, topics or forums that are dedicated to appraisers and valuation topics. LinkedIn, Facebook, Twitter and forums all have multiple outlets for appraisers to voice their opinions and collaborate

on industry news. As I have been perusing these outlets, I have noticed that the main topic of discussion is the implementation of customary and reasonable fees as outlined in the Dodd-Frank bill. Most posts are directed at whether AMCs and lenders are implementing presumption one or presumption two, while other posts decry that

nothing has changed. With the vast majority of discussion around customary and reasonable fees, other important sections of the bill have been essentially ignored.

Inside this mammoth legislation are many other concerns that will affect appraisers on a day-to-day basis. This month in LiveValuation Magazine we focus on the issues “beyond” the customary and reasonable topic. Appraiser independence, brought to the forefront by HVCC, is codified inside of Dodd-Frank. The bill also requires mandatory reporting of USPAP violations; lenders are required to inform state regulators of these deficiencies. Also, out of the limelight is dispute resolution; Dodd-Frank mandates that appraisers listen to concerns from borrowers, lenders and others involved as intended users. Much to the chagrin of appraisers (and appraiser organizations), the bill also defines a place for BPOs and AVMs in the valuation space. All of these issues are overshadowed by the discussion on customary and reasonable fees.

I understand why the customary and reasonable fees clause is the hot topic. I have been in the appraisal business for 29 years, personally experiencing the fee compression within the industry. As I stated in my publishers note last month, I do not think that the “customary” fees that are currently paid are “reasonable” for the scope of work required in today’s marketplace. It’s an important topic and we will return to it in the July/August issue of our magazine. The July/August issue will focus on the topic from several different perspectives including appraisers, lenders and AMCs.

As valuation professionals, we need to dive deeper into the additional issues affecting our industry inside of Dodd-Frank. There’s a lot below the surface that will affect the way we do business for years to come. We look forward to hearing your comments on these important aspects on our webpage at livevalmag.com. 6

| PUbLIShER |ERNIE DURbIN II, SRA, CRP

A letter from the Publisher

THISWAYIN.....

1

2

3

4

meet the team

PUblIsHer’s note $

5

8 | LVM

contrib-utors

38TIM FORSYTHe

Tim Forsythe, CEO of Forsythe Appraisals, LLC, has served on boards for several

influential appraisal industry organizations. Forsythe Appraisals was founded in 1940 by Tim’s grandfather, and is the nation’s largest independent appraisal firm. Forsythe’s brother, John, is President, and two of his sons are branch managers, marking four generations in the family business. Forsythe presently resides in Colorado.

42DON KeLLY

Don Kelly, Executive Director for REVAA, manages the operations of the

Association: an alliance of real estate companies involved in the development and delivery of real estate valuation products and services. Kelly is an author and contributor on industry panels and a member of the Board of the Bollinger Foundation, a non-profit dedicated to helping families in need. [email protected]

contrIbUtors ?

| contributors |

34JeFF DICKSTeIN

Jeff Dickstein, Pro Teck’s Chief Appraiser, is responsible for the detail oriented

culture that is at the core of our work. His diverse twenty-nine year industry background and problem-solver mentality give him a unique perspective on the future of our trade. Dickstein is a member of REVAA, CRN and is the Current Chair of the Appraisal Foundation’s Emerging Issues Task Force. He has had multiple meetings with the Government Accountability Office (GAO), the new Consumer Financial Protection Bureau (CFPB) and the Joint Fraud Enforcement Task Force/HUD regarding Dodd-Frank.

16ADAM JOHNSTON, SRA

Adam Johnston has been an appraiser for 20 years. Currently, he is Chief Appraiser

of Genworth Financial’s U.S. mortgage insurance business. Genworth Financial is a Fortune 500 global financial security company. Previously, Johnston was Chief Appraiser at a nationwide settlement services provider. Earlier in his career, he was a bank staff appraiser and founded his own appraisal company. He was a police officer for 10 years and previously served in the United States Marine Corps. genworth.com | 800.334.9270


contrib-utors ROGeR STAIGeR III

Roger Staiger III is Managing Director for Stage Capital, LLC. His areas of expertise are commercial and residential real estate portfolio investing, corporate business; and strategic planning, forecasting, valuation, financial modeling, asset repositioning and risk mitigation through financial hedging for physical assets. He holds positions at Johns Hopkins, Georgetown, and Loyola universities. [email protected]

14TODD RASMuSSeN

Todd Rasmussen is Regional Director of Appraisal

Services for Metro-West Appraisal Co, LLC. Rasmussen has spent the last 22 years as an appraiser with many of those spent in management and appraisal review. Rasmussen is a State Certified Appraiser in Arizona. Rasmussen frequently teaches classes and is a guest speaker at local real estate schools and industry events. [email protected]

14KeLLY MCCLAIN

Kelly McClain is Vice President of Client Relations for Metro-West Appraisal Co.,

LLC. McClain began her real estate career in March of 1991 and currently holds an Associate Broker Real Estate License. She is a member of the local real estate board in Michigan and a member of the Mortgage Bankers Association. McClain is a graduate of Michigan State University. [email protected]

30CHuCK MuReDDu

Chuck Mureddu is currently EVP of business development for Quality

Valuation Services, a national appraisal management company promoting quality, integrity and transparency. Mureddu began his career in the early 80s, and has been Chief Appraiser for 3 national lenders and served as a subject matter expert for the appraisal qualifications board (AQB) participating in the development of the Certified General Appraiser exam. qualvs.com | 800.693.3521

22JOSePH PALuMBO

Joseph Palumbo is currently the Director of Valuation at Weichert

Relocation Resources. Prior he was a First Vice President at Washington Mutual Bank. Palumbo has spent 25 years in the real estate industry. Palumbo holds an SRA designation from the Appraisal Institute; he is AQB certified and a State Certified residential appraiser in NJ. Palumbo is on the NJ State Appraisal Board. Palumbo attended Rutgers and University of Maryland. He has traveled to teach appraisal courses in Asia.

50MICHAeL VINCeNT JOHN SPAzIANI

Michael Vincent John Spaziani is a graduate of Harvard University Graduate School of Design in Real Estate Development (AMD) and the University of Florida Master of Arts Business Administration in Real Estate (MABA), a program sponsored by the Appraisal Institute. Spaziani is a State Certified General Real Estate

Appraiser RZ1167 and a Licensed Real Estate Broker with over 27 years of commercial and residential appraisal experience.

10

JeRRY YuReKJerry Yurek is an avid motorcyclist and scuba diver who has supported his need for speed and compressed air by working in the real estate valuation industry for over 25 years. In Jerry’s current role as SVP - Collateral Risk Manager at PNC Bank in Miamisburg, OH, he is responsible for appraisal and collateral policy. Yurek’s previous roles include FVP - Chief Appraiser at OneWest Bank (fka IndyMac Bank) in Pasadena, CA; SVP - Chief Appraiser at Aegis Mortgage Corporation in Houston, TX and AVP - Chief Appraiser at Provident Bank in Cincinnati, OH.

18

10 | LVM

As a graduate student I studied privatization at Moscow State university. “Study” is a bit of a stretch as shortly after arriving in Moscow I met Polina on the Arbat, the main market area in Moscow, and spent the majority of my time selling Matryoshka dolls with her (I blew off most lectures and braved the Moscow streets each morning to be with Polina rather than in lecture). At the time, I worried my professors would have issues with my lack of studying, but they never expressed disapproval. Rather, they would occasionally ask about how “sales” were going.

Generally, American tourists were conspicuous. Polina would offer one of the smaller dolls for a dollar and the American would want two. When Polina agreed to two, the American wanted three. The traditional Europeans, while they haggled, were not extreme, never expecting something for nothing. I asked Polina about this one evening while eating (I would have taken Polina anywhere she wanted to go in Moscow but she always chose McDonald’s) and she told me, “You American greedy. You want big house, many car, lot stuff. You want all for free.” This was not directed at me but a general statement in which I did find some validity.

STAIGeR on STATS

Industry’s latest stats

RogerStaiger III

stats


Americans are materialistic; in general we do want more, and we want it now rather than later, and for a low price.

The U.S. populace has largely achieved the “more” goal through credit, i.e., borrowing, and leveraging equity with cheap capital from abroad. The U.S.’s ability to excessively borrow was due to global perceptions of the risk-free nature of U.S. investment and the U.S. dollar as the global reserve currency. In April 2011, all of this was thrown in doubt.

For the first time since Standard & Poor’s began its outlook designation in 1991, the U.S. has been downgraded from “stable” to “negative.” This translates to a 1 in 3 chance of a downgrade in the next six to 18 months. While the significance of the downgrade has received little attention in the mainstream and financial media, it could be more significant than a congressional budget approval or debt ceiling increase! Why is this important?

How does it affect real estate?

It is significant as all rates are quoted relative to the risk-free rate (think Capital Asset Pricing Model [CAPM] from business school). A downgrade could significantly increase not just the borrowing rates for the U.S. and its citizens but also the quantity of borrowing and the currency for borrowings, i.e. the U.S. has unlimited ability to sell debt denominated in dollars, however, this could change. Noting that the U.S. borrows 40 cents of each dollar spent and Americans borrow 80 percent for most new residential mortgages, borrowing costs are extremely important for real estate values and for U.S. corporations.

Further, the realistic outlook on residential real estate in the U.S. is achieving historic norms. Real estate, in the long term, is an inflation hedge; it increases at the rate of inflation. For the period from January 2000 – February

2011, only 25 percent of the residential MSAs achieved compounded annual growth rates exceeding inflation. In fact, the composite-20, representing the aggregation of all individual 20 MSAs in the Case-Shiller index, had an annual compounded rate of about 3 percent for the period. An equivalent amount of MSA had TOTAL growth over the period of 1 percent or less, i.e., a house purchased in January 2000 has had little to no price appreciation as of February 2011.

The high point for the Case-Shiller data published February 2011 was, ironically, Detroit. The only MSA to post a month-over-month gain was Detroit, which has experienced the most significant price destruction since January 2000 (a loss of >>

12 | LVM

more than 31 percent). Nationally, the U.S., as measured by the composite-20, lost slightly more than 1 percent in value, and even the venerable DC-MSA posted a loss of approximately 15bps.

In a year-over-year basis the DC-MSA has maintained its position of prominence, posting a 270bp gain from February 2010 – February 2011. The rest of the nation, as measured by the composite-20, lost more than 330bps during the same period.


The 600bp spread between the DC-MSA and composite-20 remains.

Most significant is the futures market for real estate pricing, which experienced the largest changes in futures values with many of the indices experiencing a 50bp futures price reduction for 2012. The timing for the bottom of the residential market remained unchanged at mid-2012, but it became deeper and more pronounced.

Two additional important statistics developed in April 2011 and directly relate to future residential pricing. Home foreclosures are increasing and household formation is down from 1.3m in 2007 to 0.4m in 2011. The reduction in household formation is significant as it relates to a significant reduction in housing demand. Foreclosures relate to an increase in supply. From basic college

economics, an increase in supply with a corresponding decrease in demand is further evidence of future price declines as the market searches for a new equilibrium.

The current price corrections in U.S. residential real estate, “negative” outlook for the U.S. by Standard and Poor’s, and expansive growth in foreclosures place greater focus on Polina’s comments regarding American greed. Polina and her family had a simple flat just outside of Moscow. The flat’s furnishings were spartan but the family experienced no noticeable loss of happiness. Perhaps the current price corrections in residential real estate are a larger sign for American “values”; not the “value” of the home, but rather the “value” of happiness. 6

The high poinT for The Case-shiller daTa published february 2011 was, ironically, Detroit. the only MSa to poSt a Month-over-Month gain waS Detroit, which haS experienceD the MoSt Significant price DeStruction Since January 2000 (a loSS of More than 31 percent).

WE’VE BEEN AROUND ALMOSTAS LONG AS THIS GUY

The Herbert H. Landy Insurance Agency has been protecting professionals for more than 60 years, providing them with customized solutions for all of their Errors & Omissions needs.

14 | LVM

Best PracticesTime is money.Kelly Mcclain & Todd RasMussen

ime is money. We have all heard this bit of wisdom time and again. Let’s explore this relationship as it relates to the appraisal profession. Whether you are receiving customary

and reasonable fees (congratulations!) or not so much, you will only be paid once for each engagement. We are all finding that clients want more information and they want it in less time and sometimes for less money. Learning to appraise faster and more efficiently will help you flourish. We would like to share with you some tips to help save time and money. Once you have completed

UP frontU

T

a report and shipped it to your client, you do not want to have to touch the file again for revisions or missing items within the report. Our goal is to help all appraisers be proactive rather than reactive and to be at the forefront of the appraisal industry. We can all find ways to save time, increase quality and become

more efficient.

AMCs offer a fee for a service. The less time you spend on that service, the more money you will make. This is simple math. The more efficient you are as an appraiser,

the more appraisals you can do. Start with

the simple things. Don’t try to reinvent the entire process.

If you don’t have two monitors, stop reading this article right now to get online and buy an additional one. Much of what you are typing on your reports can be cut and pasted into other areas. This will save you time and eliminate typographical errors. You can also have your client’s engagement letter open on one side while you review your

work on the other. Use the engagement letter as a checklist. Nothing takes up more time than going back to revise a report. This is especially frustrating when it is something that was specifically listed in the engagement letter.

Get a GPS. Many of us feel that we would never need one. Some appraisers have been working and appraising in the same area for several years. This wonderful little box can reroute you based on the traffic in certain areas. You would not be able to do that by looking at a map book or Google Maps. This will save you countless hours on the road.

Know how your multiple listing service (MLS) systems work. Some of the old-school appraisers have been searching for comparables the same way for many years. Most MLS systems across the country have new and additional features that they did not have just two or three years ago. The training classes are usually free; some MLS systems offer them as webinars as well. Another thing to do is to export your

Learning to appraise faster and more efficiently will help you flourish.


paperwork and listing tickets from the MLS to a PDF. This saves you from wasting time printing. It also saves a lot of paper and ink, which saves you money.

Have a good camera. Cameras are an extremely important tool for appraisers. If you haven’t upgraded in the past two years, you are losing time. There are good digital cameras for less than $100. They download at twice the speed of older models. Get a camera just for work use. Set it to the lowest quality. Many reports these days can include more than 50 photos just to meet the requirements listed on the service agreement. The lower-quality setting will speed up the download process and will not adversely affect the quality of the pictures in your report.

Ask questions! Nearly all AMCs or lenders have a way to contact them in the engagement letter or order form they send you. Use their services. Ask questions if you are not clear about what they are requesting. They are not the enemy. They are there to serve us as well as the client and end-user. A simple five-minute phone call could save you an hour of problem-solving.

If you can manage it, hire an assistant or trainee to help you save time and concentrate on your appraisal reports. A clerical assistant can help set up your appointments, map out your day and send status updates to your clients. Some AMCs want a status update every day. This may require logging into two different systems for an update: your own internal tracking system and the website for the client. An assistant can also help with other tedious duties such as filling out applications for new clients or AMCs. In addition to or instead of an assistant, a trainee could be a big help. If you have the time and patience to work with someone, a trainee is useful to help you increase the quantity of reports you are sending out to clients.

They can assist with pulling data and helping you during the inspection. Another set of eyes on your report can help reduce errors. You may find that you can grow your appraisal practice by adding either an assistant or trainee.

AMCs will be the driving force in our industry for years to come. Lenders and clients have a need for their services. That being said, not all AMCs are created equal. There are vast differences. Some use a QUEUE system to disperse orders. Others

use the blast technique. And still others use the old-fashioned telephone. Pick the clients that best fit your needs and style. The appraisal and valuation landscape is changing. The next 12 to 18 months

will be some of the most challenging and exciting in recent and not-so-recent memory. There are amazing new products that will completely change the way an appraisal looks and the way the report is developed. Some are designed to save time and others are designed to bring more business to our profession. Why not take advantage of the time-saving methods available? Your income and future depend on it. If you do not learn to evolve, you will become extinct. These days, time is money. Carpe diem! 6

aMCs will be The driving

forCe in our indusTry

for years To CoMe.

lenDerS anD clientS have a neeD for their ServiceS. that

being SaiD, not all aMcs are

createD equal. there are vaSt DifferenceS. SoMe uSe a

queue SySteM to DiSperSe orDerS.

otherS uSe the blaSt technique. anD Still otherS

uSe the olD-faShioneD

telephone. pick the clientS that

beSt fit your neeDS anD Style.

Every time you touch a file, it costs you money.

TIME-SAVING TIPS:8 Two monitors

8 gPs

8 Multiple listing

service

8 camera

8 ask questions

8 hire an assistant or

trainee

16 | LVM

UP frontU

Mortgage insurance seemed like a distant industry with minimal impact on or interaction with the appraisal profession. However, when I joined Genworth Financial two years ago as Chief Appraiser of the U.S. mortgage insurance business, I was surprised at the extensive utilization of appraisal services by a wide variety of business functions. These business functions rely upon appraisals as a fundamental and vital part of risk management. Rather than marginalizing the role of the residential appraiser, I have witnessed an environment where the expertise of a competent appraiser is both appreciated and valued. In short, reliable and credible appraisals are important to our daily business. For example, appraisals are a critical part of our mortgage insurance underwriting process. In addition, appraisal services are utilized by Genworth’s claims, investigations and homeownership assistance functions.

As a refresher for those who may not be familiar with private mortgage insurance, the industry is most commonly involved with residential mortgage loans having loan-to-value ratios exceeding 80 percent. A portion of the loan amount will be insured against loss associated with foreclosure.

The private mortgage insurer has “skin in the game” and thus effective risk assessment and risk management are vital.

As you might imagine, understanding the value of the collateral is fundamental to understanding the loan risk. As stated in a recent paper by authors John McCrocklin, The Real Estate Center at Texas A&M University, and Realtor Property Resource, “The value of a non performing loan, apart from mortgage insurance, is determined largely by the value of the property collateral.”

While sufficient credit and capacity are certainly vital to loan risk, accurate collateral valuations are vital to understanding the equity position of the mortgagor (aka “skin in the game”). Moreover, ongoing monitoring of collateral value provides meaningful benefits to risk management.

As the market for low down payment mortgages continues to evolve in reaction to recent housing market events, prudent lenders are able to utilize private mortgage insurance to reduce their exposure to risk, and to help the growing number of buyers who want to take advantage of lower rates and home prices, but lack the

PMI and the Housing IndustryReliable and credible appraisals are critical.adaM johnsTon, sRa

or most of my appraisal career, the topic of mortgage insurance rarely entered my conversations and most certainly remained fairly unimportant to me. F


resources for a 20 percent down payment.

In contrast to private mortgage insurance, government backed mortgage insurance is offered through FHA. Historically, the FHA has served a countercyclical role, expanding its market share when the housing market faces challenges. In recent years, FHA has insured a significant percentage of mortgages originated in America. As the government scales back its role in the housing market, private mortgage insurers will continue to fulfill a vital role in helping borrowers achieve homeownership.

As an added benefit, some mortgage insurers offer job

loss protection. In the event of involuntary job loss, this protection (offered on some products by some insurers) may pay mortgage costs of up to $2,000 per month for up to six months. This gives the borrower some “peace of mind insurance” and provides the borrower valuable financial assistance.

In addition to the role of private mortgage insurance in furthering homeownership, the private mortgage insurers work closely with mortgage servicers in foreclosure prevention programs. Since private mortgage insurance companies have their own capital at risk in a first-loss position, they have a clear incentive to mitigate losses by taking action to

avoid foreclosures. For example, Genworth Financial completed nearly 40,000 workouts in 2010. Most of these loans were successfully cured, enabling borrowers to avoid foreclosure and remain in their homes.

The private mortgage insurance has helped more than 25 million families achieve homeownership, according to the Mortgage Insurance Companies of America. The private mortgage insurance industry enables lenders and investors to mitigate their risk on low down payment residential mortgages while protecting borrowers from foreclosure. A number of factors enable private MI companies to mitigate risk. Because a company like Genworth

operates nationwide, we provide geographic diversification to reduce the effect of local or regional market declines. We also offer lender diversification to decrease the impact of lender-specific operating issues. And, because MI companies are experienced in understanding risk in a high-LTV market, this experience can benefit lenders.

While I don’t anticipate that this article will result in mortgage insurance being an urgent topic at your next social gathering, I am hopeful that some of the information is helpful in providing a basic understanding of the important role of private mortgage insurance in the housing market. 6

We know you’ve been there – do stupid requests leave you pulling out your hair!? Well feel free to let loose on our Wall of shame. Everyone remains nameless so no one gets hurt - it’s just a good ol’ venting session.

submit your Wall of shame-worthy comments to [email protected]. We promise, you’ll feel better after you do!

I had a client that wanted me to write a letter stating that the subject property had not sold within past year. The report clearly stated that the property had not sold in past 12 months, so I had to send them a letter explaining that 12 months equals 1 year.

An AMC just called looking for a fee quote for a purchase upwards of $3,000,000. When I quoted

my fee the contact said our lender needs 2 appraisals and will only pay $475. I laughed and said good luck with that. (To her credit she did says thanks I’ll need it.) I should keep this email link on my desktop!!

WALL SHAME

Rather than marginalizing the role of the residential appraiser, I have witnessed an environment where the expertise of a competent appraiser is both appreciated and valued.

M

M

18 | LVM

UP frontU

20 questions - things you need to know or may have been wonderingJUNE 2011

the hot seat

THeHOTSeAT

From the best purchase he’s ever made to his outlook on the future of real estate valuation, we get

the personal and professional facts from Jerry Yurek, Senior Vice President, Collateral Risk

Manager of PNC bank, in our monthly edition of The hot Seat.


JERRY YUREK

> You can’t always be working. Take time to enjoy life, too!> My favorite website is motogp.com. I’m addicted to motorcycle road

racing at the premier level. It’s like NASCAR for motorcyclists!> My favorite magazine (besides LiveValuation) is Motorcyclist. Keeps me up to speed on my

favorite thing besides real estate valuation.> Every morning I get up and I can’t wait to get to work (except weekends). I really love my job!> I can’t go without Diet Dr Pepper – it really does taste like regular Dr Pepper!> My parents taught me how to do just about EVERYTHING! Parents never seem to get all the credit

they deserve! Thanks, Mom and Dad!> I’ve never ridden a motorcycle cross-country or been to the Ducati motorcycle factory in Bologna,

Italy, but I plan to do both!> I always look for ways to incorporate motorcycle riding into my daily activities. > The best lesson I’ve ever learned is the harder I work, the luckier I get!> The best purchase I’ve ever made was my first motorcycle. It gave me a sense of freedom and

excitement long before I was old enough to drive a car.

> The most difficult property I ever appraised was the first one! I still remember it 25 years later. A new two-story log home in a subdivision full of 30-year-old brick ranches! No comparable sales anywhere.

> The biggest challenge to the appraisal/valuation community is ourselves! We have to become more organized when it comes to creating appraisal regulations and open-minded to new valuation methods and services we can provide our clients.

> The future of real estate valuation is bright because of the technology currently available and being developed to aid appraisers in offering additional valuation services that compete directly with broker price opinions (BPOs).

> The biggest technological leap for appraisers was being able to access public records and market data on the Internet. I guess I’m dating myself with this one.

> The greatest setback for appraisers was and still is, in my opinion, licensure without adequate enforcement. Many state appraisal boards still lack sufficient funding to quickly investigate complaints and enforce appraisal regulations.

> My biggest pet peeve with appraisal reports is the lack of sufficient “analysis” of the prior sales of the subject property. Just stating that the subject property sold previously is not enough. Tell me why there is a difference between the prior sale price and today’s value estimate.

> The most ridiculous thing about the valuation industry is the low fees that many appraisers are willing to accept compared to the amount of time necessary to produce a credible assignment result. What is your time really worth?

> The most fascinating thing about the valuation industry is we get paid for our opinions! How cool is that?!> Before I entered the valuation industry I was attending college and working at a bank as a teller.> Chief appraisers are invaluable. Every financial institution involved in real estate lending should have one!

PNC BANKSENIOR VICE PRESIdENT,

COLLATERAL RISK MANAGER

P E R S O N A L

P R O F E S S I O N A L

the biggest challenge to

the appraisal/valuation

community is ourselves! We

have to become more orga-

nized when it comes to creat-

ing appraisal regulations

and open-minded to

new valuation methods and

services we can provide our clients.

20 | LVM

An Appraisal Report So GoodYou’ll Want To Frame It!

REAL ESTATE COLLATERAL VALUATION REPORT

Client

00001563

4811 Kingston Avenue

TerraForma Lending Borrower James Rogers

Photo Date 03/15/2009 Source Pictometry

Total Rooms 3

Legal Description LOT 392 HIGHLANDS RANCH # 120C 0.093 AM/L

Bedrooms 3

Baths 3

GLA 1680

Site Area 3920

Year Built 1998

Stories 2+B

Car Storage G2

Basement 464

Bsmnt Finished

Design (Style) 2-Story

Comments:

Neighborhood Boundaries

NE

IGH

BO

RH

OO

D

Neighborhood Name Highlands Price($000)

185

450

380

3

35

12

Location Urban Suburban Rural

Built-Up Over 75% 25-75% Under 25%

Growth Rapid Stable Slow

Demand/Supply

Shortage

In Balance

Over Supply

Marketing Time

< 3 Mos

3-6 mths

Over 6 mths

Property Values

Increasing

Stable

Declining

Median List Price 299,900

Median Sale Price 235,000

List to Sale Ratio 96.25

Trends Last 3 Mos.

Neighborhood Description and Market Conditions:

VA

LU

AT

ION

Neighborhood Sales Price Range: $ 185,000 to $ 450,000

Average Neighborhood Sale Price: $ 380,000

Indicated Value from Regression: $ 249,576

Indicated Value Range from Regression: $ 249,574 to $ 249,579

Based on the defined Scope of Work, Statement of Assumptions and Limiting Conditions, and Appraiser's Certification, my opinion of the

market value of the subject as of 12/01/2009 252,500, which is the effective date of this appraisal, is $ .

FO

RE

CA

ST

$ 252,500Market Value

$ 246894.5Next 3 Months


$ 241289Next 9 Months


Forecast Source Veros Date 02/05/2010

AP

PR

AIS

ER

Name Sample Appraiser

Company Bradford TechnologiesAddress 302 Piercy RdCity San Jose

License # CA5778

Certification #Other #

Expiration Date 01/01/2011

Signature

State CA

State CA Zip 95138

Date 02/11/2010

Appraiser Identity and Data Authentication by

Inspection: No Inspection Exterior Only Interior and Exterior Date

CVR Executive Summary

Age (Yrs)

Low

High

Pred

The subject property is a typical improvement for the neighborhood. Given the diversity of the Highland's Ranch neighborhood, it represents a

newer home within this area.

The Highlands Ranch neighborhood is located proximate to Highway C-470, between Interstate 25 and Santa

Fe Drive in the southern tier of the Denver Metropolitan area. The neighborhood consists of more than 20,000 housing units and is considered to represent one

of the more desirable neighborhoods in the area. Housing stock varies widely in this neighborhood, with home prices ranging from $200,000 to more than

$1,000,000.

The forecast for the suject market is for continued declines.

Sales PricesListings Price

10-12 Mos 7-9 Mos 4-6 Mos 0-3 Mos

300,000

250,000

-2.22 3 Mos-3.33 6 Mos-4.44 9 Mos-5.55 12 Mos

3 Mos 6 Mos 9 Mos 12 Mos

%C

han

ge

0

-2

-4

-6

-8

Copyright 2009-2010 AppraisalWorld, Inc. 866-445-8367 All Rights Reserved Page 2 of 12

Comments:

Appraisal Sentry (TM)

File No.

Ref No.SUMMARY APPRAISAL REPORTC

LIE

NT

Address City

Contact

2445 Septimus Drive Littleton

Sample Appraiser

ST CO Zip

Phone (303) 875-5677

SU

BJE

CT

Address City

Owner

4811 Kingston Avenue Highlands Ranch

Kim Jones

STCO Zip 80126

County Douglas

APN Tax YearR.E. Taxes $2231-18-2-10-013 20081,960.41

Property Interest Appraised:

Highest and Best Use:

Fee Simple Other

Executive Summary. TheCollateral Valuation Reportwas designed so that thefirst page presents anexecutive summary of yourmarket analysis and valueconclusion.

NeighborhoodDemographics. Thestandard neighborhooddemographic informationtypically found on a 1004 isalso found on the CVR.

Market Trends. The trendsfor sales and listings for themarket area are graphicallyshown for easy and betterinterpretation of the activityin the market area.

Property Photo. Thesubject photo is on thefront page. Makes it easyto view and ensure it’sthe correct propertybeing used for collateral.

Photo Date and SourceThe date and source ofthe photo is indicated toensure relevancy andreduce fraud.

Market AreaGraphically Illustrated.The market area isgraphically illustrated ona map showing thesubject and surroundingarea

Appraiser’sOpinion of Value. Theappraiser’s opinion ofvalue and the effectivedate of the value areindicated.

Value Reconciliation. Thevalue ranges in the marketarea, the indicated value byregression and the rangeare show in one place foreasy reconciliation of theoverall values in the marketarea.

Identity Authentication.The identity of all CVRCertified appraisers hasbeen authenticated byAppraisal Sentry using “outof pocket” credentials.

12-MonthValue Forecast. Usingeconomic data, the valueof the collateral isforecasted for 90,180,270 and 360 days out. Atrend chart for a betterunderstanding of theanticipated values isshown.

Report Fraud PreventionUsing “On DocumentVerification” technology,this data matrix containsall the pertinent dataabout the appraiser andthe report. This is similarto technology used by thepostal service to preventmail fraud.

Produced by appraisers trained in real estate regression analysis

Market Area. Graphicallydefined on a map tovisually illustrate themarket boundaries andsurrounding landmarks..

12-Month Market TrendsSales and listing activityfor the last 12 months isgraphically displayed.

12-Month Value ForecastUsing economic data, thevalue of properties in themarket are forecasted.

Regression Metrics andScatter Plot. The measureof accuracy is shown in thetable. The correlation ofactual to predicted sales isillustrated in the scatter plot.

Components of Value.Appraiser driven regressioncan identify the componentsof a property that contributeto its overall value. Thevalue, its significance andwhether its acceptable isindicated in the table.

NEIGHBORHOOD DESCRIPTION AND TRENDSProperty Address

City

00001563



Highlands Ranch 80126County Douglas State Zip CodeCO

Area Location Map Neighborhood Boundary Area: 14.815 sq miles Sq Miles

$ 246894.5

$ 244091.75

Next 3 Mos

$ 241289

$ 238486.25

Source Veros

Next 12 Mos

Neighborhood Value Trend and Impact on Subject Property: The forecast for the subject market is for continued declines.

CVR Neighborhood Summary

Neighborhood Name Highland




Census Tract 0141.18 Total Properties Sold within Boundary 207

Market Conditions: Given the nature of this neighborhood, market conditions

have remained stable with sales and listings generally in balance.

Total Listings 266 224 112 89

Median List Price 299,900 259,900 239,900 229,900

Total Sales 53 74 36 44

Median Sale Price 235,000 243,000 229,900 265,000

Days on Market 2 6 34 2

Sale Price / SqFt 146.1 145.06 131.26 137.81

Low Sale Price 195,000 193,000 209,500 204,000

High Sale Price 450,000 387,500 385,000 385,000

Absorption Rate 17.67

Months of Supply 4.33

List/Sale Price Ratio 96.25 96.63 94.68 94.55

Supply/Demand Shortage Over-Supply

Marketing Time 3.0 Months

NEIGHBORHOOD VALUE TRENDValue Trend Forecast

-2.22%

-3.33%

-4.44%

-5.55%

Next 6 Mos

Next 9 Mos

Increasing DecreasingStable

Description: The subject is located within the Highlands Ranch neighborhood, in the

south-central Denver Metropolitan area. This planned neighborhood provides excellent

linkage to employment centers, retail/shopping and other amenities.





Sales and Listings Prices

Total Sales and Listings

Days on Market (Sales)

Listings to Sales Ratio

In Last: 3 Mos. 4-6 Mos. 7-9 Mos. 10-12 Mos.

In-Balance


10-12 Mos 7-9 Mos 4-6 Mos 0-3 Mos

300,000

250,000

Total SalesTotal Listings

10-12 Mos 7-9 Mos 4-6 Mos 0-3 Mos

200

100

0

2 10-12 Mos34 7-9 Mos

6 4-6 Mos2 0-3 Mos

10-12 Mos 7-9 Mos 4-6 Mos 0-3 Mos

40302010

94.55 10-12 Mos94.68 7-9 Mos96.63 4-6 Mos96.25 0-3 Mos

10-12 Mos 7-9 Mos 4-6 Mos 0-3 Mos

110100

9080

-2.22 3 Mos-3.33 6 Mos-4.44 9 Mos-5.55 12 Mos


%C

han

ge

0

-2

-4

-6

-8


File No.Ref No.

3

3

3

3

3

3

3

3

3

3

4849 Kingston Ave , 80130

9689 Adelaide Cir , 80130

10081 MACKAY Dr , 80130

4916 Waldenwood Dr , 80130

4914 Collingswood Dr , 80130

10086 Cairns Ct , 80130

4851 Collinsville Pl , 80130

5559 E Wickerdale Ln , 80130

9882 Aftonwood St , 80126

10338 Rotherwood Cir , 80130

$250,000

$258,000

$240,000

$252,500

$249,900

$279,000

$243,000

$268,000

$232,300

$273,000

1,691

1,678

1,677

1,649

1,677

1,707

1,708

1,678

1,513

5,662 SqFt

0.03 mi

0.37 mi

0.27 mi

0.34 mi

0.41 mi

0.11 mi

0.11 mi

0.86 mi

0.39 mi

0.37 mi

3,920 SqFt

5,662 SqFt

5,662 SqFt

8,276 SqFt

6,534 SqFt

6,098 SqFt

4,356 SqFt

6,969 SqFt

4,791 SqFt

1,768 3.00

3.00

3.00

3.00

3.00

3.00

3.00

3.00

3.00

4.00

09/30/2009

09/29/2009

11/16/2009

10/05/2009

08/31/2009

09/25/2009

08/24/2009

08/26/2009

10/15/2009

09/17/2009

REGRESSION STATISTICS DETAILProperty Address

City

00001563




Regression Output Statistics

RSquared

Adjusted R Squared

COVCOD

Standard Error

Statistical Measure Model Output Confidence

Components of Value

Component Most Likely Value Significance of VariableAcceptanceof Variable

GLA

Total Baths

Base Neighborhood Value

Garage SpacesCarport

Site Area SF

Basement Area

Year BuiltFireplaces

Basement Finished

$23.77

$6,344.95

$194,659.64

ExcludedInsufficient Data

$.7

$12.57

-$1,096.78$668.6

Insufficient Data

$19.92 to $27.63

$3,809.84 to $

$185,417.34 to $

$.20 to $1.19

$8.14 to $17.00

-$1,314.59 to --$4,900.71 to $

High

MediumLow

Medium

MediumLow

Accepted

Accepted

Accepted


Accepted

Accepted

AcceptedAccepted

Insufficient Data

39.48%6.94%

41.34%

5.16%5.67%

AcceptableVery Good

Acceptable

Very Good

Very Good

Number of Observations

Data Quality

Comparison of Subject to Dataset

Overall Agreement with Model Output

Overall Agreement with Model Accuracy

Evaluation of Data and Analysis

Acceptable

Acceptable

Very Good (228)

Acceptable

High

Top 10 Sales

Address GLASale Price Site Area Baths

adequate for a well-designed model. The measures of dispersion in the COV and COD, in tandem with the Standard Error at 5.16% were

sales, this dataset was appropriate and rich enough to provide ample evidence of value. The R squared and Adjusted R squared were both

both determined to represent a highly predictive valuation with minor error.

There was a sufficiency of sale data to produce an appropriate indication of value from the regression analysis. With 177 Comments :

Predicted Values to Actual Sale Prices

Actual Sale Price357,587325,079292,572260,064227,556195,048

Pre

dic

ted

Val

ue

340,000

320,000

300,000

280,000

260,000

240,000

220,000

200,000

180,000

SpaSale Date (Monthly)

Pool

Insufficient Data-$135.47

Insufficient Data

-$379.28 to $108.34LowInsufficient DataAccepted

Insufficient Data

Copyright 2009-2010 AppraisalWorld, Inc. 866-445-8367 All Rights Reserved

Date ofSale

Page 4 of 12

File No.Ref No.

DistanceBdrms

(Most relevant to Subject and Market)



Statistically Supported Appraisals.Distinguish Yourself and Profit.

Local Market Analysis Regression Analysis

Let There Be No Doubt Who The Valuation Expert Is

Training curriculum. One-on-one training is provided to ensureyou have the skill and confidence to properly apply the analytics.All the data and imagery is provided. Up to 500 comps with 3year sales history; MLS integration. 1004MC market analysis,location maps, flood maps, census tract, property imagery, aerialphotos, regression analysis, trend analysis, fraud preventionservice, unlimited support and software updates.

Expand Your Appraisal BusinessLearn how you can take advantage of this opportunity to expandyour appraisal business into the alternative valuation market.

Visitwww.appraisalworld.com

Today

Welcome to the next generation of appraisal software and theability to produce statistically supportable appraisals. IntroducingCompCruncher™, a new class of software called ComputerAided Appraisal Software.

Three years in the making, it provides appraisers with the abilityto statistically analyze markets quickly and produce supportableand accurate valuations. This is not an AVM embedded in aform-filler, this is software that puts the appraiser squarely inthe middle of the analysis and gives them complete control overthe data analysis and the valuation process.

CompCruncher is free software, but you must be certified touse it. You must successively complete the CVR Education and

Join the Experts. Join AppraisalWorld Today.Learn how you can profit with this new report.

www.AppraisalWorld.comCall Today 866-445-8308

The New Collateral Valuation ReportThe New Collateral Valuation Report

Appraiser

Introducing CompCruncherTM and the New CVRTM Appraisal ReportNow you can profit in the billion dollar alternative valuation market

CompCruncher, AppraisalWorld, CVR are trademarks of Bradford Technologies, Inc.; Other brand and product names are trademrks of their respective owners.

LiveValuation_06_2011:LiveValuation 5/11/2011 1:54 PM Page 1


An Appraisal Report So GoodYou’ll Want To Frame It!

REAL ESTATE COLLATERAL VALUATION REPORT

Client

00001563


TerraForma Lending Borrower James Rogers

Photo Date 03/15/2009 Source Pictometry

Total Rooms 3

Legal Description LOT 392 HIGHLANDS RANCH # 120C 0.093 AM/L

Bedrooms 3

Baths 3

GLA 1680

Site Area 3920

Year Built 1998

Stories 2+B

Car Storage G2

Basement 464

Bsmnt Finished

Design (Style) 2-Story

Comments:

Neighborhood Boundaries

NE

IGH

BO

RH

OO

D

Neighborhood Name Highlands Price($000)

185

450

380

3

35

12




Demand/Supply

Shortage

In Balance

Over Supply

Marketing Time

< 3 Mos

3-6 mths

Over 6 mths

Property Values

Increasing

Stable

Declining

Median List Price 299,900

Median Sale Price 235,000

List to Sale Ratio 96.25

Trends Last 3 Mos.

Neighborhood Description and Market Conditions:

VA

LU

AT

ION

Neighborhood Sales Price Range: $ 185,000 to $ 450,000

Average Neighborhood Sale Price: $ 380,000


Indicated Value Range from Regression: $ 249,574 to $ 249,579

Based on the defined Scope of Work, Statement of Assumptions and Limiting Conditions, and Appraiser's Certification, my opinion of the

market value of the subject as of 12/01/2009 252,500, which is the effective date of this appraisal, is $ .

FO

RE

CA

ST

$ 252,500Market Value



$ 241289Next 9 Months


Forecast Source Veros Date 02/05/2010

AP

PR

AIS

ER

Name Sample Appraiser

Company Bradford TechnologiesAddress 302 Piercy RdCity San Jose

License # CA5778

Certification #Other #

Expiration Date 01/01/2011

Signature

State CA

State CA Zip 95138

Date 02/11/2010

Appraiser Identity and Data Authentication by

Inspection: No Inspection Exterior Only Interior and Exterior Date

CVR Executive Summary

Age (Yrs)

Low

High

Pred

The subject property is a typical improvement for the neighborhood. Given the diversity of the Highland's Ranch neighborhood, it represents a

newer home within this area.

The Highlands Ranch neighborhood is located proximate to Highway C-470, between Interstate 25 and Santa

Fe Drive in the southern tier of the Denver Metropolitan area. The neighborhood consists of more than 20,000 housing units and is considered to represent one

of the more desirable neighborhoods in the area. Housing stock varies widely in this neighborhood, with home prices ranging from $200,000 to more than

$1,000,000.

The forecast for the suject market is for continued declines.


10-12 Mos 7-9 Mos 4-6 Mos 0-3 Mos

300,000

250,000

-2.22 3 Mos-3.33 6 Mos-4.44 9 Mos-5.55 12 Mos


%C

han

ge

0

-2

-4

-6

-8


Comments:

Appraisal Sentry (TM)

File No.

Ref No.SUMMARY APPRAISAL REPORT

CL

IEN

T

Address City

Contact

2445 Septimus Drive Littleton

Sample Appraiser

ST CO Zip

Phone (303) 875-5677

SU

BJE

CT

Address City

Owner

4811 Kingston Avenue Highlands Ranch

Kim Jones

STCO Zip 80126

County Douglas

APN Tax YearR.E. Taxes $2231-18-2-10-013 20081,960.41

Property Interest Appraised:

Highest and Best Use:

Fee Simple Other

Executive Summary. TheCollateral Valuation Reportwas designed so that thefirst page presents anexecutive summary of yourmarket analysis and valueconclusion.

NeighborhoodDemographics. Thestandard neighborhooddemographic informationtypically found on a 1004 isalso found on the CVR.

Market Trends. The trendsfor sales and listings for themarket area are graphicallyshown for easy and betterinterpretation of the activityin the market area.

Property Photo. Thesubject photo is on thefront page. Makes it easyto view and ensure it’sthe correct propertybeing used for collateral.

Photo Date and SourceThe date and source ofthe photo is indicated toensure relevancy andreduce fraud.

Market AreaGraphically Illustrated.The market area isgraphically illustrated ona map showing thesubject and surroundingarea

Appraiser’sOpinion of Value. Theappraiser’s opinion ofvalue and the effectivedate of the value areindicated.

Value Reconciliation. Thevalue ranges in the marketarea, the indicated value byregression and the rangeare show in one place foreasy reconciliation of theoverall values in the marketarea.

Identity Authentication.The identity of all CVRCertified appraisers hasbeen authenticated byAppraisal Sentry using “outof pocket” credentials.

12-MonthValue Forecast. Usingeconomic data, the valueof the collateral isforecasted for 90,180,270 and 360 days out. Atrend chart for a betterunderstanding of theanticipated values isshown.

Report Fraud PreventionUsing “On DocumentVerification” technology,this data matrix containsall the pertinent dataabout the appraiser andthe report. This is similarto technology used by thepostal service to preventmail fraud.

Produced by appraisers trained in real estate regression analysis

Market Area. Graphicallydefined on a map tovisually illustrate themarket boundaries andsurrounding landmarks..

12-Month Market TrendsSales and listing activityfor the last 12 months isgraphically displayed.

12-Month Value ForecastUsing economic data, thevalue of properties in themarket are forecasted.

Regression Metrics andScatter Plot. The measureof accuracy is shown in thetable. The correlation ofactual to predicted sales isillustrated in the scatter plot.

Components of Value.Appraiser driven regressioncan identify the componentsof a property that contributeto its overall value. Thevalue, its significance andwhether its acceptable isindicated in the table.

NEIGHBORHOOD DESCRIPTION AND TRENDSProperty Address

City

00001563




Area Location Map Neighborhood Boundary Area: 14.815 sq miles Sq Miles

$ 246894.5

$ 244091.75

Next 3 Mos

$ 241289

$ 238486.25

Source Veros

Next 12 Mos

Neighborhood Value Trend and Impact on Subject Property: The forecast for the subject market is for continued declines.

CVR Neighborhood Summary

Neighborhood Name Highland




Census Tract 0141.18 Total Properties Sold within Boundary 207

Market Conditions: Given the nature of this neighborhood, market conditions

have remained stable with sales and listings generally in balance.

Total Listings 266 224 112 89

Median List Price 299,900 259,900 239,900 229,900

Total Sales 53 74 36 44

Median Sale Price 235,000 243,000 229,900 265,000

Days on Market 2 6 34 2

Sale Price / SqFt 146.1 145.06 131.26 137.81

Low Sale Price 195,000 193,000 209,500 204,000

High Sale Price 450,000 387,500 385,000 385,000

Absorption Rate 17.67

Months of Supply 4.33

List/Sale Price Ratio 96.25 96.63 94.68 94.55

Supply/Demand Shortage Over-Supply

Marketing Time 3.0 Months

NEIGHBORHOOD VALUE TRENDValue Trend Forecast

-2.22%

-3.33%

-4.44%

-5.55%

Next 6 Mos

Next 9 Mos


Description: The subject is located within the Highlands Ranch neighborhood, in the

south-central Denver Metropolitan area. This planned neighborhood provides excellent

linkage to employment centers, retail/shopping and other amenities.





Sales and Listings Prices

Total Sales and Listings

Days on Market (Sales)

Listings to Sales Ratio

In Last: 3 Mos. 4-6 Mos. 7-9 Mos. 10-12 Mos.

In-Balance


10-12 Mos 7-9 Mos 4-6 Mos 0-3 Mos

300,000

250,000

Total SalesTotal Listings

10-12 Mos 7-9 Mos 4-6 Mos 0-3 Mos

200

100

0

2 10-12 Mos34 7-9 Mos

6 4-6 Mos2 0-3 Mos

10-12 Mos 7-9 Mos 4-6 Mos 0-3 Mos

40302010

94.55 10-12 Mos94.68 7-9 Mos96.63 4-6 Mos96.25 0-3 Mos

10-12 Mos 7-9 Mos 4-6 Mos 0-3 Mos

110100

9080

-2.22 3 Mos-3.33 6 Mos-4.44 9 Mos-5.55 12 Mos


%C

han

ge

0

-2

-4

-6

-8


File No.Ref No.

3

3

3

3

3

3

3

3

3

3

4849 Kingston Ave , 80130

9689 Adelaide Cir , 80130

10081 MACKAY Dr , 80130

4916 Waldenwood Dr , 80130

4914 Collingswood Dr , 80130

10086 Cairns Ct , 80130

4851 Collinsville Pl , 80130

5559 E Wickerdale Ln , 80130

9882 Aftonwood St , 80126

10338 Rotherwood Cir , 80130

$250,000

$258,000

$240,000

$252,500

$249,900

$279,000

$243,000

$268,000

$232,300

$273,000

1,691

1,678

1,677

1,649

1,677

1,707

1,708

1,678

1,513

5,662 SqFt

0.03 mi

0.37 mi

0.27 mi

0.34 mi

0.41 mi

0.11 mi

0.11 mi

0.86 mi

0.39 mi

0.37 mi

3,920 SqFt

5,662 SqFt

5,662 SqFt

8,276 SqFt

6,534 SqFt

6,098 SqFt

4,356 SqFt

6,969 SqFt

4,791 SqFt

1,768 3.00

3.00

3.00

3.00

3.00

3.00

3.00

3.00

3.00

4.00

09/30/2009

09/29/2009

11/16/2009

10/05/2009

08/31/2009

09/25/2009

08/24/2009

08/26/2009

10/15/2009

09/17/2009

REGRESSION STATISTICS DETAILProperty Address

City

00001563




Regression Output Statistics

RSquared

Adjusted R Squared

COVCOD

Standard Error

Statistical Measure Model Output Confidence

Components of Value

Component Most Likely Value Significance of VariableAcceptanceof Variable

GLA

Total Baths

Base Neighborhood Value

Garage SpacesCarport

Site Area SF

Basement Area

Year BuiltFireplaces

Basement Finished

$23.77

$6,344.95

$194,659.64


$.7

$12.57

-$1,096.78$668.6

Insufficient Data

$19.92 to $27.63

$3,809.84 to $

$185,417.34 to $

$.20 to $1.19

$8.14 to $17.00

-$1,314.59 to --$4,900.71 to $

High

MediumLow

Medium

MediumLow

Accepted

Accepted

Accepted


Accepted

Accepted

AcceptedAccepted

Insufficient Data

39.48%6.94%

41.34%

5.16%5.67%

AcceptableVery Good

Acceptable

Very Good

Very Good

Number of Observations

Data Quality

Comparison of Subject to Dataset

Overall Agreement with Model Output

Overall Agreement with Model Accuracy

Evaluation of Data and Analysis

Acceptable

Acceptable

Very Good (228)

Acceptable

High

Top 10 Sales

Address GLASale Price Site Area Baths

adequate for a well-designed model. The measures of dispersion in the COV and COD, in tandem with the Standard Error at 5.16% were

sales, this dataset was appropriate and rich enough to provide ample evidence of value. The R squared and Adjusted R squared were both

both determined to represent a highly predictive valuation with minor error.

There was a sufficiency of sale data to produce an appropriate indication of value from the regression analysis. With 177 Comments :

Predicted Values to Actual Sale Prices

Actual Sale Price357,587325,079292,572260,064227,556195,048

Pre

dic

ted

Val

ue

340,000

320,000

300,000

280,000

260,000

240,000

220,000

200,000

180,000

SpaSale Date (Monthly)

Pool

Insufficient Data-$135.47

Insufficient Data

-$379.28 to $108.34LowInsufficient DataAccepted

Insufficient Data

Copyright 2009-2010 AppraisalWorld, Inc. 866-445-8367 All Rights Reserved

Date ofSale

Page 4 of 12

File No.Ref No.

DistanceBdrms




Statistically Supported Appraisals.Distinguish Yourself and Profit.

Local Market Analysis Regression Analysis

Let There Be No Doubt Who The Valuation Expert Is

Training curriculum. One-on-one training is provided to ensureyou have the skill and confidence to properly apply the analytics.All the data and imagery is provided. Up to 500 comps with 3year sales history; MLS integration. 1004MC market analysis,location maps, flood maps, census tract, property imagery, aerialphotos, regression analysis, trend analysis, fraud preventionservice, unlimited support and software updates.

Expand Your Appraisal BusinessLearn how you can take advantage of this opportunity to expandyour appraisal business into the alternative valuation market.

Visitwww.appraisalworld.com

Today

Welcome to the next generation of appraisal software and theability to produce statistically supportable appraisals. IntroducingCompCruncher™, a new class of software called ComputerAided Appraisal Software.

Three years in the making, it provides appraisers with the abilityto statistically analyze markets quickly and produce supportableand accurate valuations. This is not an AVM embedded in aform-filler, this is software that puts the appraiser squarely inthe middle of the analysis and gives them complete control overthe data analysis and the valuation process.

CompCruncher is free software, but you must be certified touse it. You must successively complete the CVR Education and

Join the Experts. Join AppraisalWorld Today.Learn how you can profit with this new report.

www.AppraisalWorld.comCall Today 866-445-8308

The New Collateral Valuation ReportThe New Collateral Valuation Report

Appraiser

Introducing CompCruncherTM and the New CVRTM Appraisal ReportNow you can profit in the billion dollar alternative valuation market

CompCruncher, AppraisalWorld, CVR are trademarks of Bradford Technologies, Inc.; Other brand and product names are trademrks of their respective owners.

LiveValuation_06_2011:LiveValuation 5/11/2011 1:54 PM Page 1

22 | LVM

| josePH PalUmbo |

&rubber bulletstoy guns

What you don’t know can hurt you.


You may have heard

t h e c l i c h é , “What you don’t know won’t hurt you.” O b v i O u s l Y , that isn’t true all Of the time.

As we continue to spin the perpetual l e t ’ s - t r y - t o - f i x - t h e - re a l -e s t a t e - m a r k e t w h e e l ,

s o m e s e l f - s e r v i n g , shor ts ighted so lu t ions have been proposed. some of these solutions involve changing laws.

Four states recently proposed legislation that would prohibit appraisers from using REO and/or short sale properties as comparable sales in appraisals. Those states are Illinois, Maryland, Missouri and Nevada. First we had the HVCC (Home Valuation Code of Conduct), then licensing of appraisal management companies (both appraisal process related changes), and most recently the proposed interference with the appraisal itself (the latest proposal was actually telling us “how” to do our analysis). What’s next? Do we tell lawyers what kind of evidence to use? Do we tell doctors to examine us and properly and accurately diagnose, but only do a cursory exam? Fortunately for all of us, as of this writing, these bills are dead or stalled. Two bills missed procedural deadlines, one has been amended and the other was withdrawn by its sponsor. Still, I believe it is worth the effort to explore why these bills would not have been a good thing for the profession or the public. Let’s look at several areas of this pragmatic solution. The Appraisal Qualifications Board of the Appraisal Foundation (AQB) criteria to become a licensed appraiser is 150 hours of

education and 2,000 hours of practical experience. The practical experience cannot be gained in less than 12 months. Anyone who has recently gone down this road knows that the criteria and the exam (which was made more challenging in 2008) are not easy to conquer. The understanding and development of what the valuation process is and what it takes is not an overnight reading exercise. Looking at appraisals over several years as a builder, lawyer, Realtor, underwriter or loan officer does not make one an expert on appraisals, just as working in a garage does not make one a mechanic. Photos, sketches, market grids and commentary are not indicative of what the appraisal process is.

These proposed laws were being brought forth by builders and Realtors who just can’t adapt to the new world. Noteworthy sources have published article after article detailing why people can’t afford new homes and why they are losing their homes. I won’t say the dynamics of why are simple, but the reality is that the entire mechanism of lending, selling, investing and building is forever changed. Are there appraisals that contain less than the

required due diligence? Of course there are, but any homebuilder sales office can show you how many of those lost

deals exist compared to the anemic demand overall. The foreclosures, distressed sales and short sales these laws were seeking to prohibit from being used in appraisals were sown in the gardens of the builders and Realtors who believe these laws are the panacea for all U.S. housing woes. It wasn’t long ago when the builder’s increase adjustment was the fill-in-the-

gap solution for making sense out of the inferno-like price appreciation. Remember when the Realtor would meet you at the property and say, “Good luck with this one; it sold higher than anything in town”?

Moving away from the root cause, let’s look at the practical and legal premises behind these flawed bills: the market, existing USPAP (Uniform Standards of Professional Practice) requirements and common sense.

Here is a very practical reason involving supply, demand and economic theory. Many markets, including the real estate market, work on the basic premise of substitution. Substitution means that the market will gravitate to the best >>

whaT’s nexT? Do we tell lawyerS what kinD of eviDence to uSe? Do we tell DoctorS to exaMine uS anD properly anD accurately DiagnoSe, but only Do a curSory exaM?

24 | LVM

substitute property at the lowest price. Further, it is arguable that the current definitions of market value that contain similar criteria are still subject to interpretation. For example, two items extracted from the definition of “market value”1 state:

both buyer and seller are

typically motivated or well

advised

both buyer and seller are

acting in what they consider

their best interest

“Well advised”? “Best interest”? These terms can mean different things. Are we saying here that buyers and sellers aren’t advised (i.e., consult experts)? And in selling, while not at the desired price, are they not acting in their best interest at any point in time? Surely they can try to sell at a different price, wait out the market or even counteroffer.

When the prevailing economic situation is not favorable, sellers are motivated by the need to sell and a specified time period can affect the net result. Well advised can be taken to mean many things for both the buyer and seller, but the bottom line is the sellers generally know market conditions are favorable or unfavorable. Regardless, they want the most they can get for their property. By logical extension, the buyer is motivated by similar forces on the opposite side, which is to not pay too much. This dynamic is an immovable force. Market activity takes place and the appraisers interpret the activity. The fact that prices drop as a result of buying and selling is a result of market

conditions. Using the indicators (sales and listings) available in the defined market is to acknowledge reality. Forced exclusion of some of these indicators will create a false market picture using the current definition of “market value” via the Federal Register required by

lenders. Simply put, either you want an analysis that accurately reflects what the true value of the home is or you want a

fantasy valuation that is useless when tested.

Lenders seek a market value appraisal, which in reality, is never tested without a sale, but the appraisal should still be constructed as if it would be tested in the relocation business. 95 percent of all appraisals will be tested via the actual sale of the property. These relocation appraisals, which are not market value but contain some similar elements of the market value definition, need to be especially accurate because these homes will be out there among the competition. It is a common misconception that the use of sales and listings of short sales and foreclosures in appraisals are unfair benchmarks at face value. Here is why this is not practical thinking: Buyers see prices of homes sold and expect the same prices; they do not care how the prices were achieved. Prospective buyers also see listings and sales and negotiate the best price they can regardless of the seller’s situation. As long as all sales and listings are exposed in the market through the same mechanism (i.e., MLS, open to the masses, willing buyers, and willing sellers), everything becomes relative, and market forces will prevail. Short sales or foreclosures not exposed in this manner should be analyzed to determine if they should be discarded just as sales outside the market norm should be.

In the end, it is the appraiser’s job to interpret what the market is, not to make the market. The appraisal process involves analysis of large amounts of data, some relevant and some not. In the end there may be several sales that are not used for many reasons. To exclude

Looking at appraisaLs over severaL years as a buIldeR, lawyeR, RealtoR, undeRwRIteR oR loan offIceR does not make one an expeRt on appRaIsals, just as woRkIng In a gaRage does not make one a mechanIc.

$

MandaTing ThaT

appraisers exClude

CerTain Types of sales

froM Their analysis is like giving

our soldiers Toy guns

and rubber bulleTs.

they look gooD anD take on the

appearance of what they neeD, but in reality they

Don’t work.

1 Federal Register- Volume 73 No 224 11/19/08 page 69661 Office of the Comptroller of the Currency (OCC), Federal Reserve Board (FRB), Federal Deposit Insurance Corporation (FDIC), Office of Thrift Supervision (OTS), and the National Credit Union Administration (NCUA).


these sales exclusively based on the reason they are being sold or listed is nothing more than adverse selection. Especially since distressed sales, foreclosures and short sales account for 34 percent of total market sales2.

Now let’s look at the messy legal argument that would force appraisers to break the law. Appraisers are required to comply with the Uniform Standards of Professional Appraisal Practice in federally related transactions. If these bills were enacted into law, appraisers would be put in the difficult position of having to choose which law to violate. USPAP Standard Rule 1-4 (a) mandates that appraisers “must analyze such comparables sales as are available.” The standard cannot be voided by a state or local government. Not following USPAP could subject the appraiser to action taken against their license. Appraisers would have to decide to commit a USPAP violation – which in the case of federally related transactions would be a violation of state law – or to violate the law prohibiting the consideration of distressed sales as comparables.

Also important is the issue of credible results. Appraisers have discretion in choosing data and performing their analysis. But the responsibility of the end product is that the results must be credible.

( C r E d i b l E as defined by the Appraisal Foundation is:

Worthy of belief3.

Credible assignment results require support, by relevant evidence and logic, to the degree necessary for the intended use. For those who think the alternative is a value based on a hypothetical condition, think again because those need to:

Fall into one of the acceptable categories for

valuations with hypothetical conditions (see

USPAP Standard Rule 1-2 (g).

be credible like all valuations. A valuation not

based in reality, absent of being done as part of

a legal mandate is hardly credible.

So I ask you, how believable is a value determination of a property using only certain types of data and ignoring others? It looks good on the surface but in reality, it is likely to be flawed because it is nothing but a façade. Mandating that >>

PRIDE. PASSION.

PROFESSIONALISM.

Relocation Appraisers & Consultants

RAC is a nationwide organization of Independent Appraisers who are trained professionals in relocation appraising.

What distinguishes RAC from all other appraisal organizations l Our exclusive focus on relocation

appraising and consulting.

l The majority of our organizational activities are devoted to education, research, and client outreach.

l Each of our select group of members is considered the relocation appraisal experts in their respective markets.

For more information visit our web site at:

www.RAC.net

&

2 Bloomberg News, November 24, 2010.3 Uniform Standards of Professional Practice, 2010 The Appraisal Foundation 1155 15th Street, NW, Suite 1111.

26 | LVM

appraisers exclude certain types of sales from their analysis is like giving our soldiers toy guns and rubber bullets. They look good and take on the appearance of what they need, but in reality they don’t work. Just so we are clear, I am not advocating the arbitrary use of distressed sales in a valuation. I am merely suggesting that the entire data set is examined and the best data is used and ultimately decided by the appraiser. The scenario of “just use certain data” is not a new one to the appraisal business. The difference this time is that the request to exclude or include certain data in the past has been a client-imposed assignment condition. If not acceptable by the

appraiser, a simple phone call or discussion could take place. If a law is passed that requires the appraiser to forgo impartiality and objectivity, the appraiser would have to adhere to such a law creating an Unacceptable Assignment Condition. Unacceptable Assignment Conditions, which severely limit the scope of the assignment and prohibit the appraiser from rendering credible results, exist in other situations. A list of a few examples can be found in USPAP in Advisory Opinion 19. The bottom line here is that taking the impartiality and objectivity out of the appraisal is creating an Unacceptable Assignment Condition.

The boTToM line here is that taking the iMpartiality anD obJectivity out of the appraiSal iS creating an unacceptable aSSignMent conDition.

:

:

:

Since the recession started, there have been several attempts at fixing the appraisal industry. It started with the HVCC (Home Valuation Code of Conduct) and the licensing of appraisal management companies was next (see LiveValuation Magazine article “The Fool’s Gold of AMC Licensing,” April 2010). From there, the Dodd-Frank legislation was the solution; I guess fixing the appraisers will last for a while. As a problem solver, I always try to bring a solution to the table.

Solution No.1: Pass a federal law that allows any appraisal user to take an existing appraisal, cross out the conclusion and make one of their own. of course they would be the liable party. This is a great idea for those perpetual second-guessers.

Solution No.2: change the way loans are underwritten so the lender can make a decision based on the adjusted value range. no single value point would be selected by the appraiser.

Solution No.3: get rid of appraisals as we know them today and ask the appraiser to fulfill an Assignment Needs Request.

the solutionAn Assignment Needs Request would include a property inspection, measurement of the property, a quality and condition rating and it would supply sales that meet certain lender-defined criteria. This new Assignment Needs product would contain no value conclusion or range of value and would not involve the judgment of the appraiser. There would be no selecting or determining comparability or any analysis of the sales, just a listing of the features as described on MLS. An analysis of comparability would have a net effect of producing an appraisal, so it would have to be avoided. The Needs Assessment Report form could include the 1004MC- type data without any trending conclusions. This new valuation product would allow the appraiser to provide the highly sought after (Utopian) data report

that many lenders/investors are seeking these days. (Who are these investors anyway and what planet do they live on?) The lender/investor would then have to make their business decision (how much to lend) based on the information provided in the Assignment Needs Report. In conclusion, it is clear that going into summer 2011, we are all still challenged with the new economic reality. Appraisers, builders, Realtors and tax assessors all work together in many areas. Does anyone out there believe the appraisal community is happy to see 34 percent of the sales data available in a distressed category? In working together there needs to be a regard for professional core competency. Let’s work together to make the new economic reality into an understood reality. 6

28 | LVM

The Dodd-Frank Issue *APPRAIseR InDePenDence | MAnDAtORy RePORtIng | DIsPute ResOlutIOn | BPOs & AVMs | APPRAIseR InDePenDence | MAnDAtORy RePORtIng | DIsPute ResOlutIOn | BPOs & AVMs | APPRAIseR InDePenDence | MAnDAtORy RePORtIng

b e y o n d

1. CHuCk MurEddu Keep fighting for your independence 2. jEff dICkSTEIn a dangerous area of dodd-frank 3. TIM forSYTHE There are no dumb Questions? 4. don kELLY Valuations other Than appraisals

1.

2.

3.

4.

diving deeper into dodd-Frank

c u s t o m a r y r e a s o n a b l e


APPRAIseR InDePenDence | MAnDAtORy RePORtIng | DIsPute ResOlutIOn | BPOs & AVMs | APPRAIseR InDePenDence | MAnDAtORy RePORtIng | DIsPute ResOlutIOn | BPOs & AVMs | APPRAIseR InDePenDence | MAnDAtORy RePORtIng

b e y o n d

1. CHuCk MurEddu Keep fighting for your independence 2. jEff dICkSTEIn a dangerous area of dodd-frank 3. TIM forSYTHE There are no dumb Questions? 4. don kELLY Valuations other Than appraisals

c u s t o m a r y r e a s o n a b l e

30 | LVM

The Dodd-Frank Issue chucK MuReddu

Appraiser independence has been a topic of

conversation for many years before HVCC and Dodd-

Frank were ever conceived, and why not? After all, independent analysis and reporting is one of the foundations of our profession. Yet we continue to struggle to convince others that appraisers need to do their job independently, without coercion, control or undue influence. Appraiser pressure was practiced almost routinely in order to satisfy one’s agenda. In the end, this compromised the integrity of our economy. I am truly amazed to hear there are those who still question if appraiser pressure actually ever existed. Even worse, I know firsthand that it continues to this day. I do not need to point the finger at one specific group – honestly, I already did that several times in previous articles. But I do feel strongly that

pressure on appraisers will continue. Since the mortgage meltdown, our industry has been inundated with regulatory reforms that in some cases make good sense and in some cases do not. HVCC was a good start and although it has sunsetted, I am happy to see that Dodd-Frank and the Interim Final Rule support the spirit of HVCC.

As I mentioned earlier, appraiser independence requirements have been around for some time. They first popped up in 1990 under the code of Federal Regulations Title 12 – Banks and Banking chapter 5, section 564.5 of FIRREA. This section requires that a staff appraiser must be independent of the lending, investment and collection functions. It goes on to say that if the only qualified persons available to perform an appraisal are involved in those functions of the regulated institution, the regulated

institution shall take appropriate steps to ensure that the appraisers exercise independent judgment and that the appraisal is adequate. It also states that if an appraisal is prepared by a fee appraiser, the appraiser shall be engaged directly by the regulated institution or its agent, and have no direct or indirect interest, financial or otherwise, in the property or the transaction. Again, this section had very good intentions, but let’s face it, it was significantly abused and its enforcement was almost absent. In order for any regulatory code to be effective it must be enforced. In the case of Dodd-Frank, I believe the enforcement may finally have some teeth, as there are now civil penalties involved. As much as I believe pressure will always exist, I also believe that these penalties may finally deter many from the act.

*

APPRAIseR InDePenDence | APPRAIseR InDePenDence | APPRAIseR InDePenDence | APPRAIseR InDePenDence

keep Fighting for your Independencedodd-fRanK eMPoWeRs aPPRaiseR indePendence.


It is always interesting to get a historical perspective on a topic that is challenged constantly. A topic that is easily forgotten when times are good. In reviewing old textbooks to see how they changed over the years, I found my Encyclopedia of Real Estate Appraising Third Edition, published in 1978. I decided to look for anything that would remotely touch on independence. The Code of Ethics section references codes established by several appraisal organizations, most of which are still with us today in one form or another. Uniform Standards were not written yet and would not be until 1987. If an appraiser was not a member of a professional appraisal organization,

they were most likely not tied to any code. It’s a scary thought, but I would bet that many appraisers had some direct or indirect affiliation to one of these organizations at the time. Reading this section, I could only find two paragraphs that can be tied to promoting independence. The first reads: “When performing a real estate appraisal assignment, a member must render his professional services without advocacy for his client’s interest or the

accommodation of his own interest.” Another section states, “It is unethical to accept an assignment to appraise a property for which his employment or fee is contingent upon his reporting of a predetermined conclusion.” I could not find the word “independence” once

in any of the text, but it was definitely implied. The definition of “appraiser” in 1984 was described in the Real Estate Appraisal terminology revised edition as one who conducts appraisals; specifically, one who possesses the necessary qualifications, ability, and experience to execute or direct the appraisal of real or personal property. In 1985 and 1986, hearings held by the House Subcommittee of Consumer and Monetary Affairs regarding faulty and fraudulent appraisals found that between 1983 and 1985, the real estate portfolios of more than 800 federally insured thrifts, and 25 percent of all such institutions were found to have “significant” appraisal deficiencies. It was found that as much as 40 percent of the VA home loan guaranty program’s $420 million loss in 1985 was caused by dishonest or inaccurate appraisals. Much of this was tied to users of appraisal services and pressure on appraisers. Soon after, although always expected, the requirement for appraiser independence was clearly brought to light and added to the definition of >>

in the case of

dodd-frank,

i believe the

enforcement may

finally have some

teeth, as there are

now civil penalties

involved. as

much as i believe

pressure will always

exist, i also believe

that these penalties

may finally deter

many from the act.

Chuck MuReddu

THE HISTorY of ApprAISEr IndEpEndEnCE ?

1984: Appraiser: one who conducts appraisals; specifically, one who possesses the necessary qualifications, ability, and experience to execute or direct the appraisal of real or personal property. -Real Estate Appraisal terminology revised edition

1985 & 1986: house Subcommittee of Consumer and Monetary Affairs found that between 1983 and 1985, the real estate portfolios of more than 800 federally insured thrifts and 25% of all such institutions were found to have “significant” appraisal deficiencies.

percent of the VA home loan guaranty program’s $420 million loss in 1985 was caused by dishonest or inaccurate appraisals. Much of this was tied to users of appraisal services and pressure on appraisers.

Soon after: Appraiser independence was added to the definition of “appraiser,”: “One who is expected to perform valuation services competently and in a manner that is independent, impartial and objective.”

4.27.1987: Effective date of the original USPAP.

1989: Appraisal Standards board unanimously approved USPAP and adopted it.

FAst ForwArd TO PRESENT DAY

7.21.2010: DODD-FRANK WAS PROPOSED AND PASSED WIThIN MONThS AND SIGNED INTO LAW.

10.28.2010: Governors of the Federal Reserve board published an Interim Final Rule designed to ensure that real estate appraisers use their independent professional judgment in appraising homes without influence or pressure from parties interested in the loan transaction.

32 | LVM

“appraiser,” which is simply: “One who is expected to perform valuation services competently and in a manner that is independent, impartial and objective.”

The bottom line is that it took the thrift crisis of the mid- and late 1980s to discover that appraiser independence broke down. As a result, the most significant change to our industry is the creation of the Appraisal Subcommittee (ASC) pursuant to Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). The ASC monitors and reviews the practice, procedures, activities, and organizations structure of the Appraisal Foundation. The effective date of the original USPAP was April 27, 1987. In 1989, the Appraisal Standards Board unanimously approved and adopted it. It is now developed, interpreted and amended by the Appraisal Standards Board of the Appraisal Foundation. As for independence, USPAP requires the appraiser to perform assignments with impartiality, objectivity, independence and without accommodation of personal interest under the Ethics Rule.

You would think that we learned our lesson in the 1980s, but here we go again in the early and mid-2000s. Mortgage lending was becoming more aggressive again. Brokers and correspondents were becoming more abundant and many were loosely regulated at best. House prices were

increasing at a very rapid rate; in some instances, subprime became the new conforming product. New exotic loan products were being introduced almost daily. Who in their right mind thought that taking a calculated risk in a no-income, no-asset, 100 percent LTV loan made sense? I still cannot believe it today. Looking back during my chief appraiser days, the lack of independence was not only an issue for appraisers but it was clear that loan processors and underwriters were pressured as well.

I remember sitting in a meeting when a senior level sales manager insisted that an underwriter should be fired for not ripping up a W-2 income statement that disclosed half of what the borrower was reporting. The loan was supposed to be a no-income verification product and the sales manager felt that it was completely legit to still make the loan on the higher amount. Everyone was being pressured to get that deal closed. Those who know me can imagine the choice words I used that morning and I am very happy to say that we did not close the loan. More surprising, the same sales manager kept his job and continued to constantly pressure whomever they could to get the next deal closed. Of course, those of us on the risk side kept fighting the fight, acting as the internal watchdog. Did we act more appropriately, like the parent teaching their child right from wrong? After all, it all comes down

to “doing the right thing.” Morality and ethics are easy concepts to learn if taught at a young age.

Fast forward to present day. Responding to the mortgage meltdown starting in 2007, the most significant change affecting almost every aspect of the nation’s financial services industry was signed into law. Dodd-Frank was proposed and passed within months and signed into law July 21, 2010. Furthermore, on October 28, 2010, the governors of the Federal Reserve Board (FRB) published an Interim Final Rule (the Interim Rule) designed to ensure that real estate appraisers use their independent professional judgment in appraising homes without influence or pressure from parties interested in the loan transaction. The Interim Rule implements amendments made to the Truth in Lending Act (TILA), which was enacted as Section 1472 of the Dodd-Frank Wall Street Reform and Consumer Protection to establish new requirements for appraisal independence for consumer loans secured by a consumer’s principal dwelling. The Interim Final Rule is also broader as it does not limit coverage to closed-end loans and includes Home Equity Line of Credit. It should also be noted that the Interim Final Rule applies to persons that provide services without regard to whether they also extend consumer credit by originating mortgage loans. They include creditors, appraisal management companies, appraisers, mortgage brokers, realtors,

The interim Rule implements amendments made to the Truth in lending act (Tila), which was enacted as

section 1472 of the dodd-frank Wall street Reform and consumer Protection to establish new requirements for

appraisal independence for consumer loans secured by a consumer’s principal dwelling.

Chuck MuReddu


title insurers, and other firms that provide settlement services.

The Interim Final Rule requires lenders to have the valuation management functions independent of the lending, investment and collection functions. Valuation management functions are defined as, recruiting, selecting or retaining an appraiser, contracting with a person to prepare a valuation, managing or overseeing the process of preparing a valuation, and reviewing or verifying the work of a person that prepares a valuation.

There is a mandatory reporting requirement. Creditors or settlement service providers who have a reasonable basis to believe that an appraiser has not complied with USPAP or ethical or professional appraiser requirements under federal or state law, must report such a failure to the appropriate state licensing agency, where it is likely to significantly affect the valuation. Unfortunately, the timing to report a violation is somewhat vague. “Within a reasonable time” can be open to interpretation.

Lastly, the rule does not prohibit a person with an interest in a real estate transaction from asking an appraiser to consider additional appropriate property information, including information regarding additional comparable properties to make or support an appraisal. A person can also ask the appraiser to provide further detail, substantiation or explanation for the appraiser’s value conclusions or correct errors in the appraisal report. I understand why this is allowed but I also think that there needs to be a standard policy, process, and even a standardized form for Reconsideration of Value (ROV). This may be a good future topic.

As you can see, although HVCC is now sun-setted, certain provisions of the Interim Final Rule are consistent with HVCC. In fact, Dodd-Frank and the Interim Rule strengthen its original purpose by establishing the Consumer Financial Protection Bureau, which will provide a hotline for complaints and will be tasked to investigate those complaints. It will also have the authority to assess substantial penalties for non-compliance. Those penalties are significant to the tune of $10,000 per day for the first offense and $20,000 per day for subsequent offenses. The jury is still out to see if function of the Consumer Financial Protection Bureau will be effective but this is the first time I’ve seen something that may finally have teeth.

So what is independence? The contributors of Tin Can Films were very gracious to allow me to quote their definition. Their website reads, “For us it is the desire and ability to freely create, not without input, not without teamwork, but with the freedom to tell a story the way we think it is meant to be told.” This is such a simplistic way to communicate a strong message that I believe is the right one. The need for independence should be a no-brainer and frankly, we should not need regulations to promote and enforce it. Nevertheless, the reality is unfortunate, as we do need regulations based on past experiences. Dodd-Frank moves us in the right direction. 6

the Interim Final rule Prohibits:

4 any person directly or indirectly to engage in coercion, bribery, extortion,

inducement, intimidation, or other similar actions designed to cause

appraisers to base the appraised value of properties on factors other than

their independent judgment.

4 a creditor from extending credit based on a valuation if the creditor knows,

at or before consummation, that coercion or other similar conduct has

occurred or that the person who prepares a valuation or who performs

valuation management services has a prohibited interest in the property.

4 Mischaracterizing or suborning any mischaracterization of the appraised

value through misrepresentation, falsification, alteration or inducement.

4 Influencing an appraiser or otherwise encouraging a targeted value to

facilitate the making or pricing of the transaction.

4 Withholding or threatening to withhold timely payment for an appraisal

report or for appraisal services rendered when the appraisal report or

services are provided for in accordance with the contract between parties.

4 a person preparing a valuation or performing valuation management

functions for a consumer loan secured by the consumer’s principal

dwelling from having a direct or indirect interest, financial or otherwise, in

the property or loan for which the valuation is or will be performed (called

“a prohibited interest”).

34 | LVM

State appraisal agencies and the Appraisal

Subcommittee (ASC) have been tasked with a large and

important assignment as a result of the passage of Dodd-Frank: to make sure that appraisals reflect the actual value of a property, as well as market conditions and condition of the subject property. The appraisal is once again an important “C” in the three of lending: credit, capacity and collateral, and one of the most important documents in the lending of funds for home ownership. Without confidence in the appraisal, the finances of the entire housing market comes into question.

The Dodd-Frank Financial Reform Act was signed into law July 21, 2010. Within the act are a number of changes that impact our profession.

They include:

4 TITLE XIV: the Mortgage Reform

and Anti-Predatory Lending Act

4SuBTITLE f: Appraisal Activities

4 SECTIon 129E: Appraisal

Independence Requirements

Section 129E addresses appraiser independence, prohibitions on conflicts of interest, mandatory reporting, no extension of credit, appraisal report portability, customary and reasonable fees, the sunset of HVCC and outlines penalties for violations. While customary and reasonable fees have been given most of the attention, it is important to point out that a violation of any item in this act carries the same penalty of a fine of not more than $10,000 for first violation and not more than $20,000 for subsequent violations.

Lenders, bankers, brokers, real estate brokers and appraisal management companies should all be concerned about the mandatory reporting section of the act. Most concerning is that as we come closer to the one-year anniversary of the passage of Dodd-Frank, rules are still confusing and/or incomplete as written.

The original drafT of The mandaTory reporTing secTion reads as follows:

‘‘(e) MANDATORY REPORTING. – Any mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, or any other person involved in a real estate transaction involving an appraisal in connection with a consumer credit transaction secured by the principal dwelling of a consumer who has a reasonable basis to believe an appraiser

The Dodd-Frank Issue jeff dicKsTein*

MAnDAtORy RePORtIng | MAnDAtORy RePORtIng | MAnDAtORy RePORtIng | MAnDAtORy RePORtIng | MAnDAtORy

a dangerous area of dodd-FrankMandaToRy RePoRTing Raises conceRns foR eVeRyone inVolVed.


is failing to comply with the Uniform Standards of Professional Appraisal Practice, is violating applicable laws, or is otherwise engaging in unethical or unprofessional conduct, shall refer the matter to the applicable State appraiser certifying and licensing agency.”

The first feedback I saw from the appraisal community on this issue was the concern around “unprofessional conduct.” What would be considered “unprofessional conduct”? How is it defined? If an appraiser wears shorts to inspect a dwelling, would that be considered unprofessional? If the appraiser didn’t take off his shoes while completing an interior inspection, or if dust was spread when inspecting an attic, would those instances be “unprofessional” enough to warrant reporting the appraiser to the applicable state appraisal agency?

Mortgage lenders, brokers, bankers, real estate brokers, appraisal management companies and others would have to wait until the Interim Final Rule were released to see how the board would define this section of the act.

In December 2010, the Interim Final Rule for section 129E was released.

The Interim Rule implemented Section 129E of the Truth in Lending Act (TILA), which establishes new requirements for appraisal independence for consumer credit transactions secured by the consumer’s principal dwelling. This set of rules went into effect April 1, 2011.

The Interim final rule attempted

to define the statute as passed,

however did ask for additional

comments be submitted to the

board on:

“…whether reporting should be required only if a material failure to comply causes the value assigned to the consumer’s principal dwelling to differ from the value that would have been assigned had the

material failure to comply not occurred by more than a certain tolerance, for example by 10 percent or more.”

It would appear the board is considering setting a tolerance level for material failure, but couldn’t a material failure also be a USPAP

violation and have to be reported regardless of tolerance levels?

The Interim Final Rule does go further to define reporting required, reasonable basis, examples of material failures to comply, coverage of reporting requirements and timing of reporting.

“Reporting required” is defined as failure to comply with USPAP, or of an ethical or professional requirement under applicable state or federal statute or regulation, only if the failure to comply is material – that is, if it is likely to significantly affect the value assigned to the consumer’s principal dwelling.

California is one state that publishes a table of most frequent allegations found in complaints filed against appraisers that might fall outside the items outlined in mandatory reporting in the rule. California states

that approximately 20 percent of all complaints are filed by a borrower/homeowner. Another 45 percent come from regulators or lenders, including Federal Deposit Insurance Corporation, Office of Thrift Supervision, Office of Comptroller of Currency, mortgage brokers, loan officers and review appraisers for banks. Appraisers file approximately 20 percent of the complaints and the remaining 15 percent fall into the “Other” category.

california frequenT allegaTions include:

4 froM BorroWErS/

HoMEoWnErS

Property description errors; errors

in comparable sales information;

errors in valuation; payment disputes;

non-delivery of pre-paid appraisal;

obnoxious behavior/rudeness; and

untimely delivery or non-delivery of

report.

4 froM BrokErS/LEndErS

Unwillingness to correct errors in

report; altered license; failure to

provide operating income statement;

and failure to return phone calls.

4 froM ApprAISErS

Failure to recognize professional

assistance by others; signing reports

without reviewing them; competency;

over-valuation; and fraud.

As you can surmise, mandatory reporting as it currently stands has a number of challenges. I have spoken with many appraisers who are currently performing forensic field review work for lenders, servicers and GSEs. Because the act states that creditors, brokers, bankers, real estate brokers, AMCs and “any other persons providing a service for a covered transaction” are responsible for reporting appraisers to appropriate state licensing boards, >>

lenders, bankers, brokers,

real estate brokers and

appraisal management

companies should all

be concerned about the

mandatory reporting

section of the act.

Jeff dicKsTein

36 | LVM

many are confused about when to get involved. Is the reporting of a historic appraisal under review that contains material failures the responsibility of the reviewing appraiser, the lender, servicer or GSE that requested the review, or all parties responsible? Also, item V, Effective Date and Mandatory Compliance Date in the Interim Final Rule, states that compliance is mandatory for all applications received by a creditor on or after April 1, 2011. With so many appraisals being performed today for foreclosures and loan buybacks, when one uncovers “material failures which contributed to the value assigned to the consumers’ principal dwelling to have been overstated” in an earlier appraisal, does it have to be reported to the appropriate state agency if the credit application was dated before April 1, 2011?

The other challenge will be the actual reporting of these occurrences to the various state agencies. As we all know, most state agencies do not have the number of resources needed to effectively enforce regulation and investigate enforcement issues within their states. This was addressed in an open letter from the Association of Appraiser Regulatory Officials (AARO) to Chairman Christopher Dodd on June 14, 2010 (aaro.net/pdf/SenatorDodd.pdf).

It should also be noted that per the Appraisal Subcommittee State Operations and Requirement, there are still a number of states that operate on voluntary license/certification programs.

VolunTary sTaTus is ouTlined as follows:

Certified/licensed appraisers not required for any appraisal/evaluation assignments.

If appraisers wish to perform appraisals in such federally related transactions and real estate-related transactions, appraisers can choose to become certified/licensed and submit to the state’s regulatory jurisdiction.

sTaTes ThaT are shown To be VolunTary are:4Alaska 4Iowa 4Massachusetts 4North Dakota 4Oklahoma 4Wyoming

That being said, some of these appraisers might not have a valid license or certification in these states.

The other challenge in reporting to the appropriate state agency is that most creditors, brokers, AMCs and servicers operate on a national level in all American states and territories. Currently there is no consistency in the reporting criteria for each state, and these national companies do not have the resources to keep up with all state and territory reporting requirements.

some examples of The differences beTween sTaTes include:

4 TEXAS Two copies of the

appropriate complaint form as well as

any documents that assist the board

need to be compiled and submitted.

4 CALIfornIA A five-page complaint

form with detailed information and

data needs to be filled out and

submitted.

4 fLorIdA A complaint form

must be submitted, along with

documentation including but not

limited to: sales contract, canceled

checks (front and back), lease/rental

agreements, listing/management

agreements, closing statement,

multiple listing printout, appraisals,

repair bills, monthly statements,

correspondence, agency disclosure

form and any judgment/civil lawsuit.

There is also an issue on disciplinary actions and enforcement from state to state. Some states require additional education based on infractions, some states simply fine the appraiser, and others do both.

State agencies have been given access to grants through higher fees paid to the Appraisal Subcommittee by appraisers and AMCs. We can only hope that the states will be able to properly staff and respond to these changes. Only time will tell if state agencies will see an increase in reporting and if there will be any consistency in enforcement and disciplinary actions if violations are uncovered.

State appraisal agencies as well as the ASC have to make sure that appraisals reflect the actual value of a property. Most good appraisers, AMCs, brokers and lenders have no issue with the tighter rules – most have been doing it right for many years. Unfortunately, after the financial meltdown, we will all need to “do it right” to bring back confidence in the market.

Here’s hoping that through a combination of more consistent appraisal practices, increased enforcement, education and some long-needed economic good news, the housing market will soon once again be the engine that drives our economy. 6


Peace-of-mind is just one of the advantages we offer.In addition to our unsurpassed real estate appraiser E&O program, we offer coverage for:

n AMC Professional Liability (E&O) coverage, worded by LIA specifically for AMCs

n Bonds for appraiser client contracts and state regulatory AMC requirements – extremely competitively priced

n General Liability coverage for real estate appraisers including additional insured options required by HUD and other clients

n E&O insurance for high risk real estate appraisersn Health insurance for appraisers and their families through the

same exclusive program endorsed by the AMA for its 400,000 physician members – includes 3-year rate guarantee options

LIA’s products are in response to requests made by real estate appraisers and other valuation professionals, seeking to meet the day-to-day challenges of the appraisal industry. In addition, LIA remains to be the leader in loss prevention and appraiser liability education.

Serving the Appraisal and Valuation Industry

since 1977CA License #0764257

16oo Anacapa Street, Santa Barbara, CA 93101 Ph: (800) 334-0652 I Fax: (805) 962-0652 I www.liability.com I [email protected]

LIA Administrators & Insurance Services

For more information, visit our website at www.liability.com, or contact:

Robert A. Wiley, Asst. [email protected], 800-334-0652, Ext. 128

Peter Christensen, General [email protected], 800-334-0652, Ext. 148

LIA Conf Ad2.indd 1 10/7/10 3:11:27 PM

38 | LVM

Dispute resolution is a complex topic that is

full of land mines for appraisers, lenders and AMCs.

The purpose of this article is to clarify and simplify the subject of dispute resolution so that appraisers can feel safe as they follow new guidelines.

It is no wonder appraisers are angry when it comes to dispute resolution. Many appraisers feel that they simply can’t win. If they use eight comps, they are asked to provide 10; if they carefully explain why they selected the comps, they are asked to discuss the comps they didn’t use. Between lower appraisal fees and the tendency of AMCs and investors to tear apart every report and nitpick appraisers with silly requests for more addenda, how doesan appraiser make a sustainable living today?

On the other hand, appraisers will try to “hide” behind recent regulations: “How dare you question my value? I’m starting to ‘feel pressure’ that you are trying to get me to change my value.” Appraisers are becoming overwhelmed with the number of changes in the industry. We have more regulations and changing interstate guidelines, and more analysis is required on every report. My heart goes out to the sole proprietor appraiser who needs to keep up on all these challenging changes; earning a living must sometimes feel like a secondary goal. Fortunately, those of us with larger appraisal firms often have chief appraisers; smart guys that can keep an appraisal company safe by carefully monitoring all the moving parts of our industry. Dispute resolution is on the short list of things causing stress in the appraisal industry.

dispuTe resoluTion has always been a challenge for appraisers

Before we look at recent regulations that impact dispute resolution, let’s acknowledge that dispute resolution has always been a struggle for appraisers. This will never change. My grandpa started Forsythe Appraisals 71 years ago and I contend that dispute resolution probably caused him hair loss (he was bald by the time I was born). There are a number of reasons why appraisers have always struggled with dispute resolution. appraisers don’T wanT To admiT when They are wrong

In fact, they don’t even want to be questioned. Many appraisers have a reputation for being stubborn and bull-headed. On the other hand, I contend that appraisers are courageous. Every

The Dodd-Frank Issue TiM foRsyThe*

DIsPute ResOlutIOn | DIsPute ResOlutIOn | DIsPute ResOlutIOn | DIsPute ResOlutIOn | DIsPute ResOlutIOn

there are no dumb Questions? The neW Bill says QuesTions can Be asKed.


time they do an appraisal, they put their neck on the chopping block. If their conclusions are wrong, they could lose credibility and their reputation could be damaged; if this happens they could lose a good client and future business. An appraiser could even be put on a “do not use” list (a black hole for appraisers). We are human and we make mistakes. We need to teach appraisers that it’s OK to be wrong. We remind them that we are already “sold on them” or they would not be working for us. When someone questions an appraiser’s analysis or the quality of the appraisal, let’s not waste time being defensive. We are all too busy, and frankly, life is too short. We have seen appraisers spend too much energy supporting a shaky analysis when it would have been a lot quicker to take a fresh look and respond in a detached, professional manner.

Even after a thoughtful analysis and thorough support, good appraisers will sometimes be wrong. This was true 71 years ago and it is true today. Forsythe Appraisals, like good appraisal firms everywhere, is committed to ethics and quality. However, one of our core values and beliefs is “We are human and we make mistakes”.

The appraisal is a critical step in the underwriting process and developing a professional and ethical way to handle dispute resolution is important if that process is going to work. less pressure since hVcc

Clients have always questioned appraisals and until HVCC, mortgage brokers were often very aggressive in their attempts to pressure appraisers to change their value. Most good appraisal firms have occasionally made

decisions when it was time to “fire a client” in order to stay ethical. I’m guessing most readers heard statements similar to this from a mortgage broker: “We love you guys, you give great service and great quality, but this is the second deal you’ve ‘come in low’ this month so we’re not going to work with you anymore.” Thankfully these conversations seem to be a thing of the past. The appraisal indusTry is sTill aTTempTing To find a healThy balance

While we all celebrate the fact that the industry is better when an appraiser can give a well-documented opinion of value with no undue pressure, we still need to have a process for dispute resolution. Let’s start by agreeing that a client has the right to ask for clarification, or additional support or a better analysis without crying foul or claiming they’re being pressured to change their value.

Let’s also agree that it is human nature for an appraiser to find support for the opinion that he or she worked so hard to support in the first place. Part of being a professional is being honest and willing to admit when we are wrong. We owe it to the borrower, the loan officer and the bank to effectively and professionally participate in the dispute resolution process and to admit when we are wrong.

It is understood that the appraiser must always have control over the appraisal and to have final say in the dispute resolution response. To share an idea that has been very successful

at our company: Forsythe Appraisals found that it is very effective to do a “committee approach” as part of our dispute resolution process. Our chief appraiser will participate and invite another appraiser who works in the same neighborhood to provide feedback from an unbiased peer that the appraiser respects. Even the best appraisers have a tendency to be bull-headed and will find data that supports their original opinion. Sometimes a peer taking a fresh look is beneficial.

We at Forsythe Appraisals have also found that it is helpful to send the client our Appraisal Data Concerns Request. This provides a structure for the client to provide their input and concerns in writing. The readers are welcome to use this document.

If we want better dispute resolution, we are going to need participation from the appraisal industry, underwriters, appraisal management companies and Wall Street investors. Everyone agrees that there are too many “touches” and too many addendum requests. The redundancy borders on the ridiculous. Any good appraisal firm has a real live human being do a line-by-line review as part of their internal quality control process. The appraisal then >>

it is no wonder

appraisers

are angry

when it comes

to dispute

resolution.

Many

appraisers

feel that they

simply can’t

win. if they

use eight

comps, they

are asked to

provide 10; if

they carefully

explain why

they selected

the comps,

they are asked

to discuss the

comps they

didn’t use.

TimfoRsyThe

40 | LVM

gets sent to an appraisal management company where it is reviewed again. Finally, the report is sent to the investor and they do their own review. That’s three separate reviews; each time an individual is being paid to pick apart the report and to question a beleaguered appraiser. To make matters worse, each investor has their own list of instructions to the appraiser

so an appraiser has to do each report differently, and there are sometimes many pages of instructions to the appraiser. Much of the instruction is “boilerplate,” but if the appraiser does not read it carefully, the report will not meet minimum guidelines and they will fail. The result is more addenda, more frustration, and of course, more dispute resolution.

here is how To do iT

The proper response for effective dispute resolution is to include an analysis that explains why you feel different sales or different adjustments to the original appraisal would lead to a more accurate value estimate. The key is to provide a thoughtful analysis of the data. For example, if comparables used were from an adjoining neighborhood, an analysis of MLS data may suggest that over the past two years, the neighborhood sold for 8 percent less than the subject neighborhood. As a result, the indicated adjustments for the neighborhood difference are $15,000. Underwriters would welcome this type of response from appraisers. It would be far more effective than simply coming back with an endless number of comparables, none of which are as meaningful as the ones that were originally used. Adding layers and layers of more data, more comps, and more current listings is not nearly as effective as a thoughtful explanation of the appraisal analysis. Recent legislation in the Dodd-Frank Act is an attempt to level the playing field to litigate disputes with brokers. It gives the SCC the broad authority to prohibit or limit the use of mandatory arbitration agreements and to design a dispute resolution mechanism that satisfies the demands of investors for fairness as well as the desire of industry participants to arbitrate rather than litigate in court.

appraisaL Data ConCerns reQUest

Date: LenDer/CLient: inQUirer’s naMe/titLe: teLepHone: eMaiL: FiLe or orDer nUMBer: boRRoweR: subject addRess:

If you find material discrepancies in the appraisal report and you can supply information to forsythe appraisals that indicates an appraisal data concerns Request is appropriate, please provide that relevant information below. Please note: in order to ensure the appraisal was obtained in a manner compliant with appraisal independence Rules, no expression of value is to be communicated to the appraiser.

1. physIcal descRIptIon Specifically note items felt to be inaccurately stated in the appraisal, what you believe to be the correct information and your source (i.e., tax records, blueprints, pictures, etc.).

2. compaRable data supply data for up to three comparable sales for consideration below (sales should be

at least as proximate and recent as used within the appraisal):

addresscitydistance from subjectsales pricedate of saleageabove grade sq. ft.Basement# of garages

3. otheR (note objective, factual errors and what is believed to be correct.)

per the dodd-frank wall street reform and consumer protection act, any person with an interest

in a real estate transaction can ask the appraiser to provide a response to one or more of the following:

4 Request that the

appraiser consider

additional property

information and/

or comparable

properties.

4 Request that

the appraiser

provide further

detail, support or

explanation for their

conclusions.

4 Request that the

appraiser correct

errors in the

appraisal report.


TSI Appraisal®

TSI Appraisal® is hiring 200+ staff appraisers to supplement its existing appraisal

numerous open staff appraiser positions. Our focus is on major metropolitan areas

in the following markets: Alabama, California, Colorado, Connecticut, Georgia,

Indiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire,

New York, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania,

Rhode Island, Tennessee, Texas, Virginia, Washington and Washington D.C.

877.762.5342 tsiappraisal.com TSI Appraisal 1450 W. Long Lake Road, Suite 400 Troy, MI 48098

We’re Hiring. Join Us!

tsiappraisal.com/appraisers

a dispuTe resoluTion policy for your appraisal firm

Recently, TAVMA, the (Title/Appraisal Vendor Management Association), wrote a list of policies that a good AMC should follow. I feel that with some editing, this list is applicable for appraisal firms. Following these bullet points is a good start for a dispute resolution process for an appraisal firm.

Because appraisers are human, dispute resolution will never be easy. An appraiser’s fears and insecurities will always be a challenge. In addition, the client’s requests often seem unreasonable and silly; following a thoughtful and well-defined dispute resolution process structure eliminates some of the frustration and keeps appraisers safe. 6

• Appraisal firms should encourage their appraisers to make reports of inappropriate contact on the part of clients to appropriate regulatory authorities.

• Appraisal firms should spell

out what actions on the part of their clients are not acceptable and would result in a decision to terminate a business relationship with that client.

• Appraisal firms should only UtilizE dispute resolution processes outlined as part of an agreement with their appraisers.

• Appraisal firms should attempt to resolve disputes through an internal rather than public process whenever possible.

• Appraisal firms should ask

clients to provide written notice to their appraisers if they are subject to possible removal from an approved appraisal panel.

• Appraisal firms should permit

any of their appraisers who have been identified for possible removal from a lender’s panel to respond in writing.

for A dISpuTE rESoLuTIon proCESSpoLICIES

42 | LVM

“No tree grows to Heaven.” - Ancient Persian proverb

In a meeting with the Federal Home Loan Bank Board officials in 1986, Doug Lovell commented prophetically to those of us in attendance that “no tree grows to the sky.” He was referring to the dramatic increase in real estate values which ultimately lead to the collapse of the “Thrift Industry” in the 1990s. I’ve always remembered that observation, albeit with mixed feelings given the prediction it unveiled.

Today we have our new or latest financial crisis and real estate valuation has played a central role in facilitating the incredible escalation that occurred. Not surprisingly, collateral valuation is playing an important part in the hopeful recovery underway. But this time around, financial institutions, investors and regulators are looking for

alternatives to business as usual and are demanding valuation techniques and approaches that deliver greater efficiency and reliability.

Dodd-Frank anticipates valuations other than appraisals as it gave credibility to Automated Valuation Models (AVMs) and Broker Price Opinions (BPOs). The law allows BPOs to be used in transactions other than origination loans on a primary residence. Even before Dodd-Frank, BPOs rose to prominence during the financial crisis, owing to their special facility to meet the need for valuation services required by the surge in mortgage delinquencies. Financial institutions increasingly realized the need to adapt to changing regulatory requirements and due diligence criteria. The record is that the old ways of doing things showed themselves to be inadequate in their great test.

Innovation was needed; efficiency was imperative.

The Real Estate Valuation Advocacy Association (REVAA) was formed by innovative real estate valuation-related companies committed to improving the entire valuation industry. These companies deliver alternative valuation services, as well as appraisals, that address the weaknesses revealed by the mortgage-driven financial crisis of 2008. REVAA promotes high ethical and professional standards conducive to a flourishing real estate valuation industry including fee appraisers.

From the outset, however, REVAA had to address those who were convinced that, with its AMC members, it was designed to lower the compensation of traditional appraisers, if not eliminate them entirely. Dodd-Frank’s

The Dodd-Frank Issue don Kelly*

BPOs & AVMs | BPOs & AVMs | BPOs & AVMs | BPOs & AVMs | BPOs & AVMs | BPOs & AVMs | BPOs & AVMs

Valuations other than appraisalsdodd-fRanK says BPos and aVMs haVe TheiR Place.


alternatives for determining customary and reasonable appraisal fees seem to some conspiracy theorists to be part of this alleged plot. The reality is that the environment had changed. Efficient, reliable value and price assessments are in high demand. Bank agencies and financial institutions need and rely on the efficient delivery of valuation services provided by innovative companies in today’s marketplace. Such efficiency benefits financial institutions and ultimately consumers as it is the consumer that pays for the various services attendant to any given mortgage transaction.

Valuation professionals today are chipping their way through a mountain of toxic assets; debris remaining from an eruption that engulfed the worldwide economy. We need to concentrate not just on recovering from past disasters, but also on designing new processes to ensure that the disastrous mischief of recent years cannot be repeated. We must deal with the troubled assets, even though that amounts to cutting losses rather than making gains. BPOs and alternative valuation products are especially useful in this work, deftly identifying value trends and property characteristics consistently and reliably.

A static or even declining number of qualified appraisers have struggled to meet the surging demand brought by the housing collapse. Inept or

unscrupulous operators—many of whom helped provoke the crisis in the first place—exploited the situation to the chagrin of the dedicated professionals. Even without the crooks, appraisers were overwhelmed by demand they could not meet fast enough. Consider the numbers. Only a tiny portion of the 100,000 licensed or certified appraisers in the United States serve the crucial residential market. In 2009, more than ten million BPOs were called for to fill the pressing demands of the market. The shortfall was especially acute in sparsely populated rural areas, where qualified appraisers are spread thin, but it bedeviled markets and delayed transactions generally. With activity finally revving up, the need for time-sensitive

alternatives becomes progressively critical for buyers, sellers and lenders alike. No one wants a good transaction to fall through for the lack of timely valuation.

Appraisers have long complained of pressures to “come in” with a desired pre-determined value or lose business. The recent legislation has sought to contain such real abuse, but the pressure is often subtle and hard to prove. Perhaps that experience leads some to take alarm at the implementation of the Dodd-Frank mandates as unwittingly containing another invitation for abuse. Yet, the reliance upon objective data makes subtle skullduggery comparatively easier to document.

Far from facing extinction, good appraisers often find themselves with more work than they can handle. In fact, AMCs need good appraisers—credentialed, highly educated, ethical appraisers—to succeed in their work. AMCs are responsible to their lenders for the integrity of their products. This responsibility mandates the kind of expertise that well-qualified appraisers offer.

Our recent bad, though less violent shocks inevitably are producing a more responsive marketplace, where a more varied array of valuation tools must respond fast to an impatient market. There is no reason that AMCs, BPOs and fee appraisers cannot all benefit by cooperating in a resurgent American real estate industry. It will take time and experience for the marketplace to work things out, as it always does.

adVocacy for bpos…sTaTe acTiViTy

With the recognition of alternative valuation in federal law and regulations as well as the demand in the marketplace, pressure for the states to refine outdated restrictions on BPOs has increased. Enactment of the federal Dodd-Frank law has spurred the states to respond with their own regulations and legislative activity. REVAA has developed and offered model legislation, which has influenced many states in their consideration of alternative valuation methodologies.

Here is where matters stand at this writing: Upon examination, many state authorities realized that their codes were unrealistically outmoded, offering safe harbors for real estate professionals providing brokerage related BPOs, but ignoring the issueregarding lien-holders and thirdparties. Arkansas, Minnesota and >>

The reality

is that the

environment

had changed.

Efficient,

reliable value

and price

assessments

are in high

demand. Bank

agencies

and financial

institutions

need and rely

on the efficient

delivery of

valuation

services

provided by

innovative

companies

in today’s

marketplace.

DonKelly

44 | LVM

What Is Becoming an NAR Designated Appraiser Worth to You?

• The opportunity to build a more selective client base

• Marketplace positioning as an appraisal expert

• Sound credentials backed by the strength and tradition

of the National Association of REALTORS®

• Access to information via the largest concentration

of real estate material in the country

• More referrals from an expanded network of colleagues

Earn Your Residential Accredited Appraiser (RAA) or General Accredited Appraiser (GAA) Designation and Show Your Customers Exactly What You’re Worth.

Residential Accredited Appraisers (RAA)

and General Accredited Appraisers (GAA)

are the only designated appraisers backed

by the strength and tradition of the

National Association of REALTORS®.

To find out how to become a RAA or GAA

designated appraiser, visit realtor.org/appraisal.

Mississippi responded with laws that adopt the Dodd-Frank recognition of BPOs in most contexts other than as the primary basis for residential loan origination. New Mexico was considering a similar bill when its legislative session had to adjourn. Only in Connecticut was comparable legislation killed in committee.

Nevada, in 2009, as well as Nebraska, in 2010, passed permissive BPO legislation in advance of the federal law, allowing BPOs for a wide range of transactions unrelated to brokerage or listing purposes. Other states acted quickly in response to Dodd-Frank. Thus, by the end of the 2011 legislative session, 43 states and the District of Columbia will have laws broadly sanctioning or allowing BPOs for lien-holders, third parties and other purposes. Broad recognition of the utility of BPOs and similar instruments obviously resonates throughout the nation.

State laws vary in details. No states have authorized BPOs as the sole basis of value in loan origination yet; and, the current demand is on the “servicing” side of lending where BPOs are most useful. Nine states explicitly allow BPOs to be performed

for lien-holders, and thirty-five others allow for BPOs to be performed for third parties or otherwise broadly permit their use. Seven states provide for safe harbor protection for BPOs in a brokerage context, but are silent as to their permissibility for lien-holders. One factor in this diversity is that most state laws were enacted before the financial crisis magnified the importance of BPOs. The real estate crisis of the 1980s prompted licensing for appraisers but that system proved inadequate to address or anticipate the current mortgage meltdown. The Dodd-Frank current-crisis legislation and new state laws reflect awareness of the use of BPOs in a restructuring real estate industry.

One of the states hardest hit by the mortgage crisis was Nevada, which responded promptly to ensure that the outdated law did not retard its recovery. Eager to meet the crisis, the Silver State did not wait for the federal statute. Effective since 2009, the state’s broadly permissive revised law authorized licensed real estate professionals to prepare BPOs for existing or potential buyers and sellers of real property, for third parties making decisions or performing due diligence for potential listings as well

as for lien-holders. The law lists the contents necessary for a valid BPO and provides rules for their electronic submission. The new Nevada law clearly addresses the current needs of the market relative to valuation.

State legislative sessions are usually short. Some occur only every other year. Nonetheless, states will continue to respond to the need to adapt, and as the opportunity unfolds, those state legislatures that have not already modernized their regulations will be well advised to consider the Nevada approach. Clearly, the tide is running in favor of broad acceptance of BPOs.

The Dodd-Frank landscape; the success BPOs enjoy in addressing the mortgage crisis and draining the toxic swamp; and the precedents in various states offer a strong impetus to reformers in those states where pre-crisis laws have yet to be amended. REVAA continues to work constructively with real estate professionals, financial institutions, consumer groups and other interested parties in the 2012 legislative sessions. Updated and modernized state laws sanctioning realistic and appropriate use of BPOs are needed to help emerge from our current mortgage crisis. 6

4 35 STATES broadly allow for Bpos: Alabama, Alaska, Arizona, Colorado, District of Colombia, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, New hampshire, New York, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin

4 9 STATES allow bpos for leinholders: Arkansas, California, hawaii, Minnesota Mississippi, Nebraska, Nevada, New Jersey, Oregon

4 7 STATES provide a safe harbor for bpos in brokerage Context: Connecticut, Delaware, New Mexico, North Carolina, Pennsylvania, Rhode Island, Wyoming

bPo Information by state


What Is Becoming an NAR Designated Appraiser Worth to You?

• The opportunity to build a more selective client base

• Marketplace positioning as an appraisal expert

• Sound credentials backed by the strength and tradition

of the National Association of REALTORS®

• Access to information via the largest concentration

of real estate material in the country

• More referrals from an expanded network of colleagues

Earn Your Residential Accredited Appraiser (RAA) or General Accredited Appraiser (GAA) Designation and Show Your Customers Exactly What You’re Worth.

Residential Accredited Appraisers (RAA)

and General Accredited Appraisers (GAA)

are the only designated appraisers backed

by the strength and tradition of the

National Association of REALTORS®.

To find out how to become a RAA or GAA

designated appraiser, visit realtor.org/appraisal.

46 | LVM

2

The Hunt for Credibility “Good article. Had a lot of good reminders that many of us have either forgotten, slipped out of their use, or just didn’t think about it. I’ve gone back into my templates and entered note blocks for myself to make sure I address the simple things that you mentioned that can keep me from conditions later. Nice job of summarizing.” - MALLen

1Last month’s articles sparked a lot of

debate. Here are some responses from our readers.

do you have something to say? www.livevalmag.com8

VOICeS OF VALuATION

voIces of valUatIon 8LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVMLVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVMLVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVMLVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM LVM

7

The Key to Local Search Marketing “Thanks for the great tip. I saw the mapped listings so many times and was never sure how it all got submitted. In a week or so I should have my own places listing thanks to you.”- PHIL KLIne

“Great article Bryan. Now please don’t talk about this anymore business is tough enough as it is...shhhh!” - terrenence P. KeLLy

Best Practices - Working with AMCs“The reason for the new forms is so it can be scanned and read by a computer program. You won’t have underwriters anymore and the whole business is gone. Appraisal Management Companies have done this and the appraisers have let them. If anyone is left they will be form fillers. I think the lenders and their clients should realize that they will get what they pay for and nothing else. Of course the appraisers have been working for nothing for a long time.” - Gerryc_2000


do you have something to say? www.livevalmag.com8

THInGSAPPRAISERS

From an aircraft parked on the front lawn to a run-in with a bear, appraisers come across many photo-worthy sights on a day-to-day basis. We are bringing back the section things Appraisers See to feature your

personal bear and aircraft moments.

So shoot us your photos at [email protected] or simply log on to our website to upload them under Things Appraisers See and look for them in an upcoming issue.

MIkE rEEd

AnonYMouS

CLAudIA ConGEr

dAVId HoffEr

AnonYMouS

48 | LVM

CoreLogic

MARCH HIGHLIGHTS 2011

coreloGIc stats

WesT ViRginia

+7.7%

neW yoRK

+3.5%

Maine

+0.4%

alasKa

+2.4%noRTh daKoTa

+4.1% illinois

-10.6% Michigan

-11.9%

idaho

-13.3%

aRizona

-12.3%

floRida

-10.6%including disTRessed sales, The fiVe sTaTes WiTh The highesT aPPReciaTion WeRe: West Virginia (+7.7%), north dakota (+4.1 %), new york (+3.5%), alaska (+2.4%) and Maine (+0.4%).

including disTRessed sales, The fiVe sTaTes WiTh The gReaTesT dePReciaTion WeRe: idaho (-13.3%), arizona (-12.3%), Michigan (-11.9%), florida (-10.6%) and illinois (-10.6%).

WesT ViRginia

+11.5%

neW yoRK

+4.5%

MississiPPi

+4.4%

noRTh daKoTa

+4.1%

alasKa

+4.0%

neVada

-8.9%

MinnesoTa

-5.0%

idaho

-8.8%

aRizona

-6.6%

Maine

-6.6%

excluding disTRessed sales, The fiVe sTaTes WiTh The highesT aPPReciaTion WeRe: West Virginia (+11.5%), new york (+4.5%), Mississippi (+4.4%), north dakota (+4.1%) and alaska (+4.0 %).

excluding disTRessed sales, The fiVe sTaTes WiTh The gReaTesT dePReciaTion WeRe: nevada (-8.9%), idaho (-8.8%), arizona (-6.6%), Maine (-6.6%) and Minnesota (-5%).


ACI800.234.8727aciweb.com

Bradford Technologies800.622.8727

bradfordsoftware.com

Forsythe Appraisals651.486.9550

forsytheappraisals.com

Genworth Financial800.334.9270

genworth.com

Global DMS877.866.2747

globaldms.com

Intercorp800.640.7601

intercorpinc.net

LANDY800.336.5422landy.com

LIA Administrators & Insurance Services

800.334.0652liability.com

Metro-West Appraisal Co., LLC

888.676.9237metrowestappr.com

NAR800.874.6500realtor.org

PNC Bank888.762.2265

pnc.com

Pro Teck Valuation Services781.899.4949protk.com

Quality Valuation Services949.206.0445qualvs.com

REVAA202.223.7800

revaa.org

Relocation Appraisers and Consultants972.658.9216

rac.net

SFREP800.523.0872

sfrep.com

Michael Vincent John Spaziani

561.655.8009

Stage Capital, LLC202.640.8912

[email protected]

TSI Appraisal877.762.5342

tsiappraisal.com

Weichert Relocation Resources

877.882.1290wrri.com

DIReCTORYdIrectory 2

| CBSA |SINGLe-FAMILY SINGLe-FAMILY

exCLuDING DISTReSSeD

MARCH 2011 12 MONTH HPICHANGeD BY CBSA

Phoenix-Mesa-glendale, az -12.0% -7.3%

atlanta-sandy springs-Marietta, ga -11.1% -5.8%

chicago-joliet-naperville, il -10.5% -3.9%

los angeles-long Beach-glendale, ca -5.7% 1.1%

Riverside-san Bernardino-ontario, ca -3.3% -0.2%

houston-sugar land-Baytown, Tx -2.7% 5.1%

Philadelphia, Pa -2.6% -0.2%

dallas-Plano-irving, Tx -1.8% 2.0%

Washington-arlington-alexandria, dc-Va-Md-WV -1.5% 3.1%

new york-White Plains-Wayne, ny-nj 1.0% 2.6%

MARCH HPI FOR THe COuNTRY’S LARGeST CORe BASeD STATISTICAL AReAS (CBSAS):

50 | LVM

This law was passed subsequent to the Federal Government requiring State Licensing and Certifications to combat the public’s perception that appraisers were not educated enough and lacked supervision from the government.

Although both the Federal and State Governments passed these laws, discrimination continued within the appraisal field. Federal and State Governments and their subsidiaries such as the Department of Environmental Protection, Water Management Districts, Internal Revenue Service, Department of Transportation and Banks gave appraisers with designations extra points on their applications to do business with them. Review appraisers, who most likely were designated members of the Appraisal Institute, would in turn give preferential job opportunities to their members (MAIs).

Appraisers who were not designated consistently complained to these government entities and placed pressure on these groups to stop the blatant discrimination. Numerous calls to the FDIC describing this discrimination were often fluffed off by the attorneys who represented them. In some cases, they would send an email to the banks quoting the discrimination, and in turn, the appraisers wanting to perform the appraisals were often eliminated from the Banks’ appraisal lists.

The new Dodd-Frank Bill was recently passed in July 2010; page 823 states “CONSIdERATION OF PROFESSIONAL APPRAISAL dESIGNATIONS.—Section 1122(d) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3351(d)) is amended by striking ‘‘shall not exclude’’ and all that follows through the end of the subsection and inserting the following: ‘‘may include education

achieved, experience, sample appraisals, and references from prior clients. Membership in a nationally recognized professional appraisal organization may be a criteria considered, though lack of membership therein shall not be the sole bar against consideration for an assignment under these criteria.’’

So there are some questions that remain unanswered:

1) Why was it discriminatory for over a decade and now it’s not?

2) If there are important items that the government requires in order for appraisers to perform assignments, such as additional education, experience, etc., that are offered by the organizations, then why aren’t these factors part of the licensing of the appraisal profession?

3) How can government agencies and banks regulate the appraisal requirements when the government does not have oversight of these independent appraisal organizations?

There are thousands of independent appraisers who were once designated members and believe this is a blatant display of discrimination. They have all worked hard, obtained college degrees, satisfied the required appraisal classroom hours, and passed their work experience as well as a State Certified test. The government lending institutions are adding additional points for designations even though this was a form of discrimination and punishable by law for over a decade. The Dodd-Frank Law should be repelled to represent the proper appraisal qualifications and to exclude any mention of designations in the bill unless the government is willing to oversee these private organizations. 6

Michael Vincent John

Spaziani

Dodd-Frank Bill HR 1473 Promotes Discrimination

FOR WHATIT’S WORTH

for WHat It’s WortH }

}

In April 1992, the Board of Governors of the Federal Reserve System passed SR92-13, which specifically states that, “Financial institutions may not exclude a qualified appraiser from consideration for an appraisal assignment solely because the appraiser lacks membership in a particular appraisal organization or does not hold a particular designation from an appraisal association, organization, or society.”


Start your own AMC today. eTrac Enterprise Edition is a hosted, ready-to-use business-in-a-box appraisal managementsolution that gives independent appraisers everything they need to start operating as an AMC-all in as little as 24 hours. Customdesigned specifically for AMCs, eTrac Enterprise streamlines and manages the entire appraisal process, from the initial request toMISMO-formatted delivery and everything in between.

• Workflow Management

• Automated Compliance Safeguards

• Automated Reviews

• PDF - MISMO Conversion

Appraisers:Make compliance laws

you -FORyouAGAINST

Visit us at www.e3amc.comor call 1-877-891-2620

1816 West Point Pike, Suite 210, Lansdale, PA 19446

not

• Network of Appraisers

• ASC.gov License Validation

• Automated Appraiser Scoring

• State Regulation Validation

work

CompLawsBleed.qxp 2/11/2011 3:51 PM Page 1

ACI and its products are trademarks or registered trademarks of ACI. | Copyright © 2011 ACI | Other brand and product names are trademarks or registered trademarks of their respective owners.

ACISketch™ is newly enhanced to include features appraisers asked for. Create professional fl oorplans in minutes using ACISketch’s dynamic tools.

Use your mouse or keyboard to quickly draw a fl oorplan and automatically calculate the total area and perimeter of the property.

Sketches import directly into appraisal reports and measurements automatically populate the forms. It’s just that easy!

now only

Trace scanned fl oor plans with Photometrics.

Photometrics

Auto-close your sketch using the F9 key.

Complete Area Tool

Unit of Measure Switch between standard feet or inches and standard decimal or metric units, quickly and easily

ACI2010™ UsersNeed a new angle on sketching?

49$

Call ACI Sales Today!.

AppraisersChoice.com Call 800-234-8727

livevaluation magazine june 2011

Documents