Verifying Sales

[Renee Healion]

>snip>> What irks me is reviewing the same slop again and again by the same appraiser, but knowing the AMC/lender won't drop them from their panel because they meet fee and turn-time demands.

I had to start telling myself that they are owed personalized name plaques to be attached over a doorway to a room in my house because they paid for it by doing, and continuing to do, work like that.

 

[Meandering]

With regard to our hiring process for appraisers, our company has no control over appraiser selection. We utilize national AMCs and the VA Portal; they select the appraiser. Damned AIR forces this issue.

Interagency Guidelines: Page 6
An institution or its agent must directly select and engage appraisers. The only exception to this requirement is that the Agencies’ appraisal regulations allow an institution to use an appraisal prepared for another financial services institution provided certain conditions are met. An institution or its agents also should directly select and engage persons who perform evaluations. Independence is compromised when a borrower recommends an appraiser or a person to perform an evaluation. Independence is also compromised when loan production staff selects a person to perform an appraisal or evaluation for a specific transaction. For certain transactions, an institution also must comply with the provisions addressing valuation independence in Regulation Z (Truth in Lending).


An institution’s selection process should ensure that a qualified, competent and independent person is selected to perform a valuation assignment. An institution should maintain documentation to demonstrate that the appraiser or person performing an evaluation is competent, independent, and has the relevant experience and knowledge for the market, location, and type of
real property being valued. Further, the person who selects or oversees the selection of appraisers or persons providing evaluation services should be independent from the loan production area. An institution’s use of a borrower-ordered or borrower-provided appraisal violates the Agencies’
appraisal regulations. However, a borrower can inform an institution that a current appraisal exists, and the institution may request it directly from the other financial services institution.

Your institution has no control over your agent that is choosing your appraisers? Your institution is operating outside of the Interagency Guidelines? How could that be?

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[ucbruin]

For your edification, I did both. But that is not the point. If the information for a participating party to particular sale is available from MLS, CoStar, or any other place, make the call. Ask around to other brokers if the participating brokers won't return your call. Even solicit other appraisers in the market if you have to. Don't just confirm the sale price in MLS or CoStar with public record; public record knows nothing about a sale but who the parties were, how it was deeded, and what the sale price was.

Please clarify for me if you would, at what point do you verify, with the agent or buyer/seller, about the sale comp?

 

[NLCApprMgr]

Please clarify for me if you would, at what point do you verify, with the agent or buyer/seller, about the sale comp?

Before I used it in a report. I never used sales I could not verify. I never knew any other way.

 

[ucbruin]

Before I used it in a report. I never used sales I could not verify. I never knew any other way.

Great. Again, I apologize for assuming, but I believe most appraisers would agree that their comp selection starts prior to them actually inspecting the subject property. Meaning, sometime before the appraiser goes to the subject property, he/she already has whittled down the number of potential comps that will be considered after the inspection. For example: there may be 18 sales similar to the subject in physical characteristics, including location, therefore 18 potential sales comps. My guess is that only 4-6 potential sales comps are actually driven by and photographed.

And then once back at the office, of the 4-6 comps, 3 are chosen. And maybe the appraiser has called the agents on all 6 potential comps. But what about the other 12 potential comps that the appraiser has decided not to use. Are agents for the remaining 12 sales called? I doubt it. To be consistent shouldn't agents for all 18 sales have been called prior to completing the report? Don't review appraisers appreciate consistency in the report?

I hope I'm not coming across as attacking your point of view, because I don't mean to be.

 

[Alpine]

I had to start telling myself that they are owed personalized name plaques to be attached over a doorway to a room in my house because they paid for it by doing, and continuing to do, work like that.

Yes, but... I'd rather make my living doing a better report for the client in the first place, than sorting through the excuse for a report done by the guy they hired.

On a similar note: I recently did what I typically vow never to do, and accepted an order for a 1004D re-inspection for an appraisal done by someone else. It was from a good, smaller lender client who actually uses their own in-house appraisal management staff, so I wanted to cooperate. They said the original appraiser was out of town and the closing was scheduled before he returned. I looked the report and "subject to" items over before committing, and it seemed reasonable (it was).

Later I noticed that the appraiser's address is a two-hour drive up the interstate from me and the subject, and thought: 1) The guy is probably not out of town, but unwilling to drive four hours round-trip for a 1004D fee. And 2) How am I losing out on a percentage of their orders to a guy who lives/works that far away?! Yeah, yeah, geographical competency and all that, but there are dozens of highly qualified appraisers in my metro area--vetted professionals who deserve the work-- and simply no reason to risk that someone from a city two hours away is truly expert in local nuances.

 

[Renee Healion]

Well I have to tell myself that or just repeatedly bash my head against the same doorway.
You could have used a doorway of your own for the 1004D experience!

Look at Walmart. They so beat their suppliers on price that formerly decent quality products by makers with good names are now made shoddy to meet the price. And every competitor races to beat them. When I buy something I think about the cost as being more than the price. Value may well be different from price. But wherever I look, the price tag is all that matters.

Now if I want to buy something of decent, serviceable quality I cannot even find it in any dept store. Ordinary clothing is disposable after a couple wearings, certainly a season. The fabric does not even weigh what it should because it is made to be sold cheap. Maybe these appraisers are just like the Walmart vendors.

 

[Tim Hicks (Texas)]

As an example, I am reviewing an appraisal on a duplex. The appraiser provides three sales ($215k, $270k, $280k). My first reaction is why the one sale is so low compared to the others. The appraiser explains that these are basically the only three sales in the market in the past year. I do my research, and I agree with the appraiser; these are the most appropriate sales. Still, was there something else about the one sale that made it so much lower?

I found out who the listing broker was and sent an email. He responded in an hour of my email, and we talked about the sale for 15 minutes. I found out that the property required a complete interior overhaul that probably cost $35k to $40k. This information would not be contained in either the MLS or the public record. And you can guess that the appraiser made no adjustment for condition.

Did you call on the other two sales to verify they were not in the same condition. It is an investment property and it is not uncommon for many/most/some of these properties to need rehabs of some kind due to tenant occupancy. Is it possible that you could here the same about all three properties? Was the condition for all three C4? So many questions, but not all the right questions asked.

 

[Mike Garrett RAA]

Wouldn't most of you agree that there have been substantial improvements in MLS?

Most of the listings on my MLS have a series of photos of the property. I am able to observe the interior and back of most properties that I would use as a comparable in an appraisal. In addition, my MLS gives me a complete listing history, price changes, contract date, sold date, days on market, continuous days on market, and concessions when a property sells. I have much more data now then ever before. That said, sometimes there is something that looks suspicious. It's at that point I find it necessary to contact the agent for clarification.

My source of verification includes MLS and public record. When I need more information I call the listing agent. Can't remember the last time I talked to the buyer or seller and I don't know any of my peers that do that either.

How many of you have called an agent to verify information only to be sent to voice mail and then not have that agent call back for two, three, or even more days? Worse yet, how many of you have been given different information about a property by the agent? This is especially true of sales that are more than a few month old. The agent is seldom in the office looking at the file. They are relying on memory and, if they are really good at selling properties, might have 20 or 30 properties to remember.

The best solution would be for appraisers to request more and better data to be included in the MLS listing. A rating system for condition would be very helpful. Observing the interior photos is really one of the best things to do.

Lastly, I think reduced appraisal fees and unreasonable time restraints play a part in how much research and verification is being done. If those fees and shorter and shorter time allowed to complete assignments become the norm I would suspect less and less verification will be done. Sadly, we have met the enemy and it is us. As long as we let the users of our services dictate what we are paid and how long we are given to complete an assignment things won't get better.

 

[Chandler]

Wouldn't most of you agree that there have been substantial improvements in MLS?

Most of the listings on my MLS have a series of photos of the property. I am able to observe the interior and back of most properties that I would use as a comparable in an appraisal. In addition, my MLS gives me a complete listing history, price changes, contract date, sold date, days on market, continuous days on market, and concessions when a property sells. I have much more data now then ever before. That said, sometimes there is something that looks suspicious. It's at that point I find it necessary to contact the agent for clarification.

My source of verification includes MLS and public record. When I need more information I call the listing agent. Can't remember the last time I talked to the buyer or seller and I don't know any of my peers that do that either.

Exactly the way I do it. I probably need to contact agents 5-7% of the time on something (if concessions are not noted for example, or if it appears to be a distressed sale however is not noted). I review all of the interior photo's twice (once at comp selection - briefly, and again as I'm doing the grid, looking for anything that stands out and should be accounted for). Not really a need to call on things that the agent already noted on the MLS, and reviewing all of the interior photos also provides a lot of info.