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  #1  
Old 08-05-2013, 09:28 AM
Denis DeSaix Denis DeSaix is offline
 
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Default How to ask for a Reconsideration of Value

I don't know if this article has already been posted; it ran last week in the WSJ (and, for some reason, I didn't see it?).

http://online.wsj.com/article/SB1000..._MansionWeekly

There are some out-of-date references (like HVCC), but other than that, most of the advice is well known to us. Also, unlike some other articles, this one interviewed appraisers as well as other stakeholders.

What I read that I liked:
The article suggests to hire a professional (professional Realtor or another appraiser) to rebut an appraisal; to use the same data (MLS), and to be factual, not emotional.

What I don't particularly like, but understand:
The article suggests as an opening salvo, to go through the appraisal and to itemize any factual errors. Further, to request that if the factual errors aren't immediately corrected, then a complaint will be sent to the appraiser's regulator.
Once the opening salvo is launched, then go into what other comparables should have been considered.

The article does point out that since AMCs have come into the forefront, many experienced appraisers have left the profession (or, not said but should have been said, not doing residential mortgage work anymore); the result is less experienced appraisers. Also, the article points out the old favorite: Geographic competency issues.


Coincidently, I recently spoke to a Realtor group in Oakland. Their number one question was how to interact with an appraiser (what was allowed and what wasn't) and if there was a value dispute, how to effectively deal with it?
There are a lot of misconceptions out there (some on the Realtor side, some on the appraiser side): for example, many Realtors have been told (by the appraiser) that the appraiser cannot accept any information from the Realtor, and if the appraiser has any questions, he/she will ask them and the Realtor needs to answer those questions only.

Some of the advice I gave the Realtors is similar to the advice given in the article:
1. Read the appraisal report and understand how the appraisal defines the competitive market.
2. Based on the appraisal report's competitive-market definition, look for alternate sales within that market area (I did tell them if they disagree with the competitive market area, they can try to argue that; but that is a tougher row to hoe).
3. Never use price as a search parameter: use the significant physical characteristics (age, size, condition, etc.).
4. Be honest in your assessment of the alternatives: are they truly superior (more recent, more similar, etc., then the ones used in the report)? If so, then supply them to the lender and be factual about why they should be considered.
5. Be as professional as possible in the request. If there are better data that the appraiser missed, the lender and appraiser should be willing to consider that data. But, ultimately, the decision to change the opinion of value is the appraiser's to make. If the argument is strong enough where the appraiser doesn't change the opinion, the lender can decide to order another appraisal.

Their biggest concern was "is it an ego fight?" In other words, will the appraiser consider additional data if they did miss something? Some Realtors believed that an appraiser wouldn't change the value regardless of the strength of the rebuttal evidence because to do so would mean the appraiser made a mistake and might leave him/her open to liability from his/her client or regulator.

I told them (unfortunately) that egos can get into the way. But regardless, an appraiser's obligation to be independent, impartial, and objective would require the appraiser to analyze relevant (I stressed this) data and, depending on its quality and affect on the analysis, to consider and possibly conclude a new opinion of value.

The agents, in general, were sympathetic and frustrated.
They understood the big changes (there were zero AMC fans in the group, I can tell you that) have adversely affected the appraisal profession. They also thought the quality of the appraiser has gone down.
On the other hand, it was very frustrating for them to feel that they couldn't provide information to the appraiser for a sale, or that any request for a reconsideration was futile from the get-go.

In my opinion, it is this situation (the frustration on the Realtor side) that pushes them into taking the article's advice (complaining to the appraiser regulator).

Many appraisers who post on this forum express nothing but disdain for agents/brokers/Realtors. I have no doubt that those agents exist (and may be the majority) in some markets. In my market, it is the rare exception (not the rule) when a Realtor is less than professional. I do think appraisers can improve the relations with the Realtors while maintaining their Independence and objectivity. Some, naturally, will take this as my advising to "roll over". Nothing could be further from the truth.
But appraisers can be their own best friend, and simple professional courtesy (even if not reciprocated in full) can do much to counter the advice in the article that suggests every request for reconsideration be initiated with an opening salvo of "fix this or else" tactic.

Just my 2-cents!

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  #2  
Old 08-05-2013, 09:42 AM
J Grant's Avatar
J Grant J Grant is offline
 
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I did not read the article... I appreciate your post and agree with much of it.

In general though, pre AMC and post AMC, it is the same group of appraisers! How did it morph to suddenly only inexperienced or out of area appraisers are now the ones doing the work? While some experienced appraisers left the field or no longer do residential, a fair number of them who left did so due to loss of license for bad actions...so one cancels out the other. AS we see here, many st cert gens still take res work and many res experienced appraisers will do decent paying AMC work.

While I agree, that (some) AMC's send out less experienced appraisers, pressure them for turn time, many require min 5 years cert experience, and impose geographic restrictions...won't assign orders over 30 miles from appraiser's home /office (unless it is a rural area). I think tight turn times and ridiculous fees are a problem , but that's only part of the issue.

While AMC's sending some inexperienced appraisers out might be the cause of some issues, it's true is that prior to HVCC, RE agents had control, or the mortgage broker/lender had control, over who was selected to do the appraisal. And far too often, the selection was geared to number hitters . RE agents themselves used to actively blacklist appraisers with loan officers and mtge brokers compliant in this.

Now, RE agents have lost control over who does the appraisal. They are thus frustrated, and lobbied for the reconsideration of value to be in play. My personal opinion is that a ROV should not be part of the appraisal process. I find it a colossal waste of time, in all the ROV I have ever received, the "comps" are absurd, and any decent comp they sent was already in the report (only they failed to note that, for some reason)

As RE agents are not our client, I think it is wrong, since they are a party with a vested interest in the outcome of the report, I think it is wrong that they are able to "rebut" appraisals. But we are stuck with it.the better clients handle ROV better and don't bug the appraisers with ridiculous data.

You might think I am one of the folks disdainful of RE agents. I am not, on a personal level, I know they work hard, and some of them have in-depth local market knowledge, and in verifying comps some of that knowledge is helpful ( and other parts not so much)

What I am disdainful about is their trashing appraisers in the media, refusal to acknowledge their own shortcomings in list prices or negotiated prices in leading to a value opinion lower than a SC price, and their refusal to acknowledge their past actions of blacklisting and bullying contributed to our current state of affairs of loan officer no longer allowed to select the appraiser.

Last edited by J Grant : 08-05-2013 at 10:03 AM.
  #3  
Old 08-05-2013, 10:29 AM
leelansford leelansford is offline
 
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For each and every appraisal where the subject is under contract of sale and where an agent is involved, I invite the listing agent to provide me with relevant (i.e., I stress "provide the 3 best sold comparisons") market data and I will be certain to consider what is provided as I develop the opinion of market value.

What surprises me--in this forum and elsewhere--is that some appraisers turn away from this option.
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  #4  
Old 08-05-2013, 10:40 AM
J Grant's Avatar
J Grant J Grant is offline
 
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Often the agent will give me comps at inspection. It is an option that many appraisers take, however, that still differs from an ROV....

My opinion stands that a ROV is absurd and should never have been allowed to transpire, but here it is ...a vested interest party, a RE agent or seller, can submit sales they think will help their cause.

I believe the best interests of the buyer kepts swept aside in all this...and sometimes even the best interests of our client. The buyer though their lender, relies on the appraisal for a fair and unabised opinion .Do borrowers even know what a ROV is, or notified when it happens? Are they area aware that a RE agent who might not represent them, is senindg sales data to try to sway a value opinion?

I bet they have no idea that this is going on.

Imo, if a reconsideration of value is on the table, the borrower should be notified. They should have a right to refuse it go forward, or approve it. Whatever option they choose, they should be put on notice. The buyer pays for the appraisal, not the RE agent. The buyer is the one at risk for losing their equity by paying too much, not the RE agent. I find the lack of concern for buyers appalling.

This is an attempt to influence a direction of value, after the appraiser has already developed their opinion. Thus, there should be disclosure to the borrower.

Prior to the opinion of value, an agent can submit sales data. I think opening up the process after the appraiser has already derived their market value opinion is problematical on many levels,.

Last edited by J Grant : 08-05-2013 at 11:09 AM.
  #5  
Old 08-05-2013, 11:01 AM
J Grant's Avatar
J Grant J Grant is offline
 
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Many appraisers who post on this forum express nothing but disdain for agents/brokers/Realtors

I believe that most of this is venting on the forum. I likely am one of those you assume has disdain, but in my personal dealings with agents/brokers/Realtors, I am polite and courteous, and will accept and look at data they give me.

What I find puzzling is the concern appraisers will show for the cause of agents, with no concern about a buyer's best interest.

The RE agents putting forth a ROV often represent the seller, not the borrower, or are dual agency..rarely do they represent the borrower. The borrower, who paid for the appraisal and relies on it, usually does not know about a ROV or that it may impact the value opinion.
  #6  
Old 08-05-2013, 11:24 AM
Mike Garrett, RAA's Avatar
Mike Garrett, RAA Mike Garrett, RAA is offline
 
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Much of the problem is our own fault. A certain number of appraisers hold the opinion they are always right and the agent (REALTOR) is always wrong. After more than 33 years in this aspect of the real estate industry I can honestly tell you..."that ain't always the case!". There are many good appraisers out there and there are also a great number of really good agents too. We need to realize those agents are looking out for the best interests of their clients as well as themselves. We, on the other hand, are to be impartial and independent.

Lets start by neutralizing the agent from the very beginning. The first step it to "involve" the agent by requesting their market analysis and any sales they believe to be comparable BEFORE doing the appraisal inspection. The second step is to create an atmosphere of confidence for the agent by letting them know our experience level and the fact we will do our best BUT THE DATA IS THE DATA AND THE MARKET IS THE MARKET.

I do it this way...

"Hi, Mildred...my name is Mike Garrett and I have been assigned to appraise your listing at 123 Main Street. I would like to look at the property tomorrow and you will be happy to know I have a Board of REALTORS® lock box key so it won't be necessary for you to be there.

If you have any sales you would like me to consider you can email them to me before the inspection. Since I have been a member of our board for the past 40 years you can appreciate the fact I probably research the market the same way you did when you priced the house. If you have a CMA and would like to share it with me you can email that too."

This will usually totally dis-arm the agent from the git go. It also frees up the agent to do other things...something most of them really appreciate...at least in my market. If it looks like there is going to be a value issue let the agent know this IN ADVANCE. This is not a violation of USAP, license law, or client directive provided it is done in the right way.

I handle it this way....

"My initial research revealed several sales that appear to be quite similar. Those are: (and I give the agent the addresses and sales prices). Do you know of any others that might be more comparable?" Notice I didn't say the sales price is too high or the comparable sales are too low...I just provided the data I have and ask if the agent has any other sales I might consider. Let them draw their own conclusions. Most of the time they already know if there is going to be a problem with the appraisal.

If you involve the agent from the start there is a 100% chance there will be no request for reconsideration. One of my favorite lines is....

"I will do my best but it is what it is and I'm required be independent and objective...I'm sure you understand that...don't you"?

I honestly wish more appraisers had a real estate sales back ground so that they could develop better people skills when dealing with agents and home owners. How you say things is important. Doesn't mean you need to roll over...just learn to control the situation.
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  #7  
Old 08-05-2013, 11:59 AM
J Grant's Avatar
J Grant J Grant is offline
 
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Mike, I agree with you that involving agent from beginning can be a good idea, if nothing else then to stop a ROV later. I would prefer it in fact to be expected, that a RE agent be provided an option to submit data up to one day after eff date of inspection, in exchange for there not be a ROV afterward.

While I believe agents should have the option of submitting data, it should be before value development, not by having an entitlement to submit data after the value is developed.

Regarding the below, respectfully would like to comment:

Much of the problem is our own fault.

How is this a "problem", or our fault? The only problem is that our value opinion may differ from an agent, which means they might not close the deal or get a commission. Since they are not our client and have a vested interest in the outcome, I dont' see why their problem should be our problem.

A certain number of appraisers hold the opinion they are always right and the agent (REALTOR) is always wrong.

How can a value opinion be right or wrong? It is either credible or supportable, or not. Our client is hiring us because they want OUR value opinion. The fact that an agent may have another value opinion, that may be more "right", so what? That is a client issue, not our issue.

Perhaps a Realtor does have a "right" opinion of value on a property. If a client wants a Realtors value opinion, they can order it as a stand alone product. (which they do in a BPO, many of which are deficient / not credible)

After more than 33 years in this aspect of the real estate industry I can honestly tell you..."that ain't always the case!".

There are many good appraisers out there and there are also a great number of really good agents too. We need to realize those agents are looking out for the best interests of their clients as well as themselves. We, on the other hand, are to be impartial and independent

Precisely the problem. Which is why, no matter how "good" an agent is, the client is hiring us for OUR opinion, not the agent's

Again, if a client wants the agent's opinion, let them request that opinion in a BPO and use it how they see fit.

That phrase....the RE agent represents the best interest of their clients...is a REALTOR an attorney? Why does their representing their clients have to impede our appraisal? Moreover, they usually represent one client (seller, or if dual agency, their "client" is the deal) . They rarely represent the buyer's interest and the buyer's best interest is often compromised by REALOTR involvement in the appraisal process.

Last edited by J Grant : 08-05-2013 at 12:04 PM.
  #8  
Old 08-05-2013, 12:14 PM
Mike Garrett, RAA's Avatar
Mike Garrett, RAA Mike Garrett, RAA is offline
 
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I'm sorry, J,

Perhaps I didn't explain myself adequately....

"Much of it is our fault" refers to the communication not the appraised value. Also, we need to remember an agent is an advocate.

I concur...reconsideration is a big pain in the butt and usually doesn't cause a change of value opinion. My major concern is helping other appraisers to develop techniques that would lessen the requests by using communication as a tool.
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  #9  
Old 08-05-2013, 12:18 PM
J Grant's Avatar
J Grant J Grant is offline
 
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I spent 5 years as a RE agent, 3 in NY and 2 plus in FL before going into appraisal. I kept my RE license active several years after and then let it drop.

What I find troubling is that appraisers who are so supportive of RE agent/REALTOR input fail to make the connection that the RE agent is working for the seller, or at best dual agency (the deal).

They rarely, if ever, represent the buyer.

Why are appraisers so concerned that the seller's best interest be served, at expense to the buyer's best interest?

The buyer paid for the appraisal and generated the appraisal order through the client, yet I see clear bias of appraisers for the RE agent/seller's best interest. These same appraisers fail to see how agent involvement works against best interest of a buyer, which is troubling.
  #10  
Old 08-05-2013, 12:19 PM
J Grant's Avatar
J Grant J Grant is offline
 
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Appreciate your last post # 8, Mike!

Our communication is not at fault, the system is at fault for allowing a ROV, or at the very least for allowing it without buyer notification and approval.

Imo, agents should have a window of opportunity to submit data up to and including eff date of inspection, or 24 hours following...but not after the appraiser develops their opinion of value.

Last edited by J Grant : 08-05-2013 at 12:33 PM.
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