Rels Valuation National Review Department Quality Control Advisory Report – June 2016

[Mike Kennedy]

(from an Appraiser-Friend on the West Coast via email this morning / NOT a Client)


Rels Valuation
National Review Department

Quality Control Advisory Report – June 2016
Introduction:

Rels Valuation has multiple quality control processes in place to ensure compliance with USPAP, regulatory and lender requirements. These processes enable us to proactively identify and resolve issues, and to improve the overall quality of the appraisal reports that are being delivered to our clients.

They also provide us with the ability to track lender suspense items and to identify the underlying issues that are causing them to occur. In order to help you to avoid these types of suspensions, this Advisory Report provides a summary of common suspense items and revision requests along with specific guidance on how to prevent them from occurring.

Please review each of these items and the accompanying guidance. Then, incorporate this information into your workflow as necessary to ensure that you are addressing each of these items properly on a go forward basis.

Following, are Common Suspense Items and Guidance on How to Prevent Them from Occurring:

1. Suspense Item: Alternate Sales Provided for Consideration - Appraiser is asked to review and comment on alternate sales.
Guidance: Underwriters and Reviewers continue to review available data sources and provide alternate sales to appraisers when they appear to be similar or better than those used in the appraisal. As such, be sure to thoroughly analyze all sales within the subject’s immediate market area to ensure that the most comparable and relevant sales were utilized in the report.

If additional competing sales were identified during your research and not included in the appraisal report, it is recommended that commentary be provided in an addendum addressing the reasoning for their exclusion. This is particularly important when they are located in close proximity to the subject, exhibit similar characteristics and where it would be reasonable for the reader of the report to question their absence.

2. Suspense Item: Handrail Commentary Requested - The subject property has missing handrails and insufficient or no commentary was provided.

Guidance: If the subject property has missing handrails on steps, decking or other areas where they would ordinarily be present, the appraiser will need to provide commentary advising whether their absence creates any health, safety, or marketability issues.

If the answer is yes, the report should be completed subject to the installation of the missing handrails.

3. Suspense Item: Missing Multiple Parcel Commentary & APN #s - The subject site has not been adequately described.

Guidance: Prior to completing the appraisal, you will need to determine if the client wants the appraisal to be completed As-Is or Subject to the lots being legally combined into one. If not clearly communicated in the order guidelines, please contact Rels for clarification prior to proceeding with the order.

If the subject is comprised of multiple lots, ensure that all applicable APN numbers are listed on page one of the appraisal. Additionally, thoroughly describe this feature within the appraisal and ensure that your commentary specifically answers each of the following questions:

· Which APN #/lot is the house located on?

· What is on the other lots/what are they used for?

· Are all of the lots contiguous to one another?

· Are any of the lots used for agricultural or commercial purposes?

· Is the Highest and Best Use the current use or to sell them separately?

4. Suspense Item: Solar Panel Commentary Requested - The subject property has solar panels or a similar energy system and insufficient or no commentary was provided.

Guidance: If the subject property has solar panels, the report must contain commentary that both describes this feature and specifically states whether they are owned or leased by the home owner. If they are leased, the solar panels would be considered personal property and not included in the valuation of the property. If they are owned, the commentary must also explain the market reaction to this feature.

When at all possible, comparable sales with similar solar panels should be provided in the report to illustrate support for any adjustment that is applied. If need be, consider expanding your search as needed to properly bracket and adjust for this feature. If there are literally no sales of homes with solar panels, disclose that a search was conducted, that no similar sales were able to be identified and provide the search parameters in time and distances that were used in your research.

5. Suspense Item: Operational Utilities Commentary - The appraisal lacks commentary that addresses whether the utilities were on and operational at the time of inspection.

Guidance: If the subject property is being appraised for any FHA transaction, a purchase transaction, a renovation or is a vacant home, provide commentary stating whether the utilities were on and operational at the time of inspection.

If they were not on or they were not able to be tested, the report should be made subject to the utilities being turned on and confirmed to be operational.

 

[Mike Kennedy]

(part 2)

Following, are Common Revision Request Items from the National Review Department and Guidance on How to Prevent Them from Occurring:

1. Revision Request Item: Inaccurate or Incomplete Reconciliation - The reconciliation statement is lacking in detail, not supportive of the final value opinion and/or conflicts with other data within the report.
Guidance: The objective of the reconciliation commentary is to convey the rationale for arriving at a particular value. As such, the use or omission of each approach to value should be discussed and the commentary should contain the level of detail needed to enable the reader of the report to easily understand how the opinion of value was arrived at.

Per USPAP, the reconciliation must address why the indicated value was selected. Each comparable should be discussed, and the weighting applied to each and accompanying reasoning should be described. Similarly, the commentary should explain how active listings, expired listings and/or pending sales were considered in the final reconciliation process.

Additionally, all relevant approaches to value must be used as necessary to develop a credible report. If an approach is deemed by the appraiser to be needed, it must be utilized even if the form or client does not require its use.

Be sure to proofread the entire report to ensure that the reconciliation commentary does not conflict with other information in the report.

2. Revision Request Item: Additional Sale(s) needed to Bracket Subject’s Unique Features - The comparable sales are dissimilar to the subject and do not bracket its features.
Guidance: If the subject has a unique design, features and/or amenities, they should be bracketed by comparable sales with similar characteristics when available. This is particularly important when the features are such that they significantly impact the marketability and/or market value of the subject.

Because of the importance of using like sales in these instances, consider expanding the search parameters when needed to locate sales of similar homes. The purpose of which is to demonstrate marketability for the features in question and to show support for any resulting adjustments. Be sure to specifically disclose the search parameters that you utilized and the results of your research within the appraisal.

If no similar sales are found after expanding the search parameters, provide detailed commentary to describe the market’s reaction to the subject’s unique features, how these features compare to those of the comparable sales, which sales would be considered to be most similar to the subject and the impact that these features have on the marketability of the subject.

3. Revision Request Item: Inconsistent Site Adjustments - The site adjustments applied in the report are not consistent or adequately explained.
Guidance: Review the site adjustments and ensure that they are applied correctly and consistently throughout the report.

Provide market data and detailed commentary within the report to explain and support how the site adjustments were derived. If the site adjustments include differences for views or location, be sure to explain in detail why these adjustments were not addressed via individual line items.

If inconsistencies exist among the adjustments, provide detailed commentary to explain the reasoning for these differences/ensure that the reader of the report understands that these were not inputted in error.

4. Revision Request Item: Inadequate or Missing Support for Adjustments – The adjustments lack supporting market data and commentary explaining how they were developed and applied.
Guidance: Explain how each adjustment was developed and applied within the commentary. In the course of doing so, be sure to identify what market data/which comps were used to support each adjustment.

If you are unable to bracket a particular feature of the subject property, be sure to disclose your search parameters in time and distance, and any impact on the subject’s marketability this may have.

5. Revision Request Item: External Obsolescence - The subject’s location is dissimilar to that of the comps and the adjustments and/or commentary do not appear to adequately address the market’s reaction to these differences.
Guidance: If the subject or comparable sales are located on or near busy streets/highways and/or are located in close proximity to non-residential uses (RR tracks, commercial, retail, industrial, place of worship, school, etc.), the adjustments and commentary must thoroughly address these characteristics and the resulting impact on marketability.

Like sales should be used when at all possible. If the subject has an adverse site condition, one or more sales with a similar negative site influence should be included in the report.

Conversely, if the comps have an adverse site condition and the subject does not, care must be taken to ensure that this negative feature is properly adjusted for.

In addition to the site inspection, be sure to review aerial photos and drive the neighborhood to ensure that all adverse site conditions are listed in the report and accounted for in your analysis.

Following, are Common Technical Compliance Request Items from the QC Administrative Department and Guidance on How to Prevent Them from Occurring:

1. Revision Request Item: Competing Neighborhood Commentary – One or more of the comparable sales are located outside the subject neighborhood boundaries and/or on the other side of a major roadway or natural barrier.
Guidance: If a comparable sale is located outside of the subject neighborhood, on the other side of a major roadway or natural barrier or its proximity exceeds typical distance guidelines, provide commentary that explains whether the locations are considered comparable and if a potential buyer would consider them to be equal when making a purchasing decision.

When exceeding typical search parameters, we recommend that you also provide median values and/or other market data as necessary to illustrate to the reader of the report that the neighborhoods/locations are in fact truly similar.

2. Revision Request Item: Deferred Maintenance - Photos within the report indicate damage to the subject and/or the existence of deferred maintenance.
Guidance: Review the engagement letter to confirm how the appraisal report should be completed when damage and/or deferred maintenance is observed. If the items are such that the appraisal can be completed as-is with a proper condition adjustment, ensure that the resulting adjustment properly accounts for the market’s reaction to the subject’s current condition.

If the issues rise to the level of health and safety concerns, and/or the order type requires their repair, complete the report subject to their repair.

Either way, thoroughly describe your observations in the report commentary and provide photos to document each of the items in question.


3. Revision Request Item: Inconsistent Bathroom Count - The number of bathrooms shown on the sketch does not match the number that are reported in the grid and/or documented in the provided photos.
Guidance: Review the number of bathrooms within the sketch and ensure that they match what is being reported in the Sales Comparison Grid.

Similarly, ensure that the number is consistent with the number of bathroom photos provided within the report.

4. Revision Request Item: Inconsistent Bedroom Count - The number of bedrooms shown on the sketch does not match what is being reported in the grid.
Guidance: Verify that the bedroom count being reported in the Sales Comparison grid matches what is being shown on the sketch.

5. Revision Request Item: The Comparable is Not Visible From the Street - The appraiser provided comparable photo does not show the entire front of the property.
Guidance: While the appraiser is required to inspect and take an original photo of every comparable that is used within the report, we request that an additional MLS photo be provided of the comparable when it is not viewable from the street.

Closing: We appreciate your support of our efforts to improve the quality of the appraisal reports that are being delivered to the lenders that we support. Thank you for proactively addressing these issues and helping us to reduce the number of suspensions and revision requests that are occurring.

Sincerely,
Rels Valuation

 

[bnmappraisal]

...Sincerely
I will not do work for your company
BNM Appraisal

 

[Tim The Enchanter]

Eff
Eye
Arrgh
Eee
Dee!

Found out what it means to me.

 

[ucbruin]

Eff
Eye
Arrgh
Eee
Dee!

Found out what it means to me.

I've nothing to add to your post....

I just wanted to say that "you're home early".....

I usually see posts from you starting around 8pm eastern time!!!

 

[Tim The Enchanter]

It's 5 O'clock somewhere. Had enough of this shtuff.

 

[djd09]

Are required handrails a national law or local building code?

 

[hastalavista]

What is objectionable about the items cited?

Is it this:

1. Suspense Item: Alternate Sales Provided for Consideration - Appraiser is asked to review and comment on alternate sales.
Guidance: Underwriters and Reviewers continue to review available data sources and provide alternate sales to appraisers when they appear to be similar or better than those used in the appraisal. As such, be sure to thoroughly analyze all sales within the subject’s immediate market area to ensure that the most comparable and relevant sales were utilized in the report.

If additional competing sales were identified during your research and not included in the appraisal report, it is recommended that commentary be provided in an addendum addressing the reasoning for their exclusion. This is particularly important when they are located in close proximity to the subject, exhibit similar characteristics and where it would be reasonable for the reader of the report to question their absence.
​

This is the one that sticks out (I don't know if Mike K. put it intentionally in red or not).
But the second paragraph is advice that is regularly given out in this forum (and I'm one who advises it).

Taken individually, I don't see any issues with any of the other items.
Specific to the one above, I don't take an issue with it as well; I understand that sometimes (and maybe many times) the request to evaluate alternative sales can be unwarranted and certainly abused.
This list appears to be part "improving the communication contained within the report" and part "housekeeping items that can be addressed prior to submission". None of which seems unreasonable to me.

Is the issue the messenger (RELS) or the message?

FWIW, I don't work for RELS.

 

[bnmappraisal]

Is the issue the messenger (RELS) or the message?

FWIW, I don't work for RELS.

for me, personally, it's RELS

I will agree with most of your post, Denis. Much of the message is reasonable and should probably be done in many reports. Although I don't typically include anything regarding "comps" I did not use in my reports, I can see some appraisers points about it.

But for me, I just don't like RELS and have heard too many war stories from appraisers here, appraisers personally I know and homeowners who have had their house appraised by appraisers coming from RELS/WF. I've yet to hear a raving report - I'm all ears and waiting for that day

 

[hastalavista]

I know many appraisers who feel the same way you do about RELS.
I know a few who consider them a decent client (I know more who don't! ).

The problem that RELS and some other AMCs have is the relationship between them and the appraisers is so antagonistic, that even when they try, with the right intent, to communicate information that otherwise would be helpful and meaningful, it is received as another PIA requirement.

It is not healthy nor sustainable to work with clients that one viscerally dislikes. It isn't good for the client or appraiser.