Evaluations

[Zoe]

In the Memphis area which was one of foreclosure capitols of USA, FNMA would order BPO and appraisal on the same property. The agent doing the BPO would be the agent selling the property.

The appraiser doing the appraisal would have no interest in selling the property. I knew all the agents that were selling them and doing bpos and talked with them on every property when I was doing an appraisal on the subject.

Memphis was also one of mortgage fraud capitols of USA.

 

[Zoe]

Every federal regulator including FBI camped out in Memphis for a little bit due to mortgage fraud.

 

[Terrel L. Shields]

What is the typical fee for an evaluation of a noncomplex residential property? $50? $100?

Locally the last time I checked with a loan officer that used to order appraisals as a loan assistant before her promotion, the fees were about $300 and the were charging the customer $600 for a full-blown appraisal (the customer had the option and almost always takes the evaluation.) This bank subbed out a lot of their internal auditing and appraisal - evaluation ordering thru a third party of ex-bank examiners who added a sort of AMC function in the process. They basically have employees in Tulsa, OK who do the evaluations while the loan officers are actually doing the inspection and photographs. I found this common. My last loan (which was only $15k on farm equipment back 15 years ago) was 'evaluated" and the loan officer was the one who drove by and took the picture. The valuator was a divinity student with a couple of Kaplan RE courses to his name. The report consisted of a simple letter and about 8 MLS sheets where the actual subscriber to the MLS's name was carefully scrubbed from the sheets.

Evaluations were initially intended to be used as an "Abundance of Caution" situation

Remember in 1992 the de minimus was $50,000...so you only did an evaluation on those low loan amounts. Everything else required an appraisal. So, if the loan amount now is $400,000 or less an evaluation can be done. $500,000 for commercial. In flyover America, $400,000 covers 90% or more of housing in a given town. Only lakeside or large estates would be required to use an evaluation.

 

[Dale Floyd]

That was mainly done for licensed appraisers that were also licensed real estate agents.

Not really. Actually Lt Gov Wilder made sure that language was in TCA so that his loan officers at his bank in Macon County could continue to do collateral estimates without any legal issues. Don’t forget, there was no de minimus at the time. It was well written regardless.

 

[Dale Floyd]

Remember in 1992 the de minimus was $50,000...so you only did an evaluation on those low loan amounts. Everything else required an appraisal. So, if the loan amount now is $400,000 or less an evaluation can be done. $500,000 for commercial. In flyover America, $400,000 covers 90% or more of housing in a given town. Only lakeside or large estates would be required to use an evaluation.

Oh yes. Initially there wasn’t one, then it was $50,000 and has increased ever since. The NAIFA nearly went bankrupt fighting that battle against those who were supposed to be fighting for us.

You and I had better be careful, as we’ll start sounding very old to everybody else out here.

 

[Terrel L. Shields]

The NAIFA nearly went bankrupt fighting that battle against those who were supposed to be fighting for us.

Yes, it went from owning a building in St. Louis without mortgage to borrowing everything against it and losing it all before merging.

 

[Surf Cat]

In Arkansas, you have to drop your appraisal license to do evaluations without conforming to USPAP. I know several people who did that. One does commercial evaluations for $500 each.

For banks, the issue can be that if you are holding collateral with evaluations and the bank gets in a tight spot, the examiners can require you to revalue all property with a bona fide appraisal. I and my assistant kept busy in 2008-10 revaluing existing loans for 2 banks on the FDIC's naughty list. I had some commercial property valued at $100,000 by the in-house evaluator that I appraised for less than $30,000. I saw banks talk someone into taking over a failing poultry farm at 100% LTV only to see farm values fall and the bank have to repo them even though the borrowers had never missed a payment. It was a bloodbath for both banks. One bank was literally at the point of failure when another bank bought them and the other had an associated separately chartered bank in Oklahoma which raised investor money and merged the two banks. The board of directors of the bank in trouble were forced to resign and banned from banking for life. Another loan officer was banned for life and fined $5000 for making a loan that he was forced to make by the board. The property involved was a huge poultry egg complex of some 10 barns. The guy was failing largely due to back injury but they extended a loan beyond the value of the properties so he could process eggs as well as run the layer operation. This worked for a while until the egg prices dropped, and he folded up. He lost his farms, and they sold for about 15 cents on the dollar. A couple of the farms never returned to production and serve only as hay barns.

Dang..... I got the bird flu just reading that...

 

[BRCJR]

In Tennessee, appraisers can perform evaluations without complying with USPAP by law. Trying to sign as something other, conflicts with the law allowing us to do them in the first place.

The TN Real Estate Appraiser Commission says our license can be put in our reports reflecting that we are indeed appraisers as well.

So, you are an appraiser, indeed. You are not signing the report as an appraiser, are you? Why muddy the water?

 

[Zoe]

A State govt literally has control over anybody doing business within their borders.

 

[Dale Floyd]

So, you are an appraiser, indeed. You are not signing the report as an appraiser, are you? Why muddy the water?

There is really no water to muddy. My signature is simply who I am, including the titles and qualifications that are associated with me individually. An appraiser is allowed to use his/her experience in completing evaluations in Tennessee. Why hide it? Why should an appraiser pretend he/she isn't one by leaving out that piece of information in the report? In truth, is there anybody else in reality who would be more qualified to do a very limited collateral evaluation than an appraiser? I don't believe there would be any need to legally say "appraisers can do evaluations" in the law, and then force appraisers to hide their licenses when doing them. There would be no need for the law to specify evaluations not to be appraisals, if evaluations had to comply with the same standards as appraisals either.

I don't recall any Certified Public Accountants hiding their CPA credentials when doing a stranger's taxes, even if they didn't do any of the accounting.

I don't remember any attorney hiding their law license when drafting exclusions to a legal description given to them without a survey.

Can there ever be a lawsuit? I suppose. I know evaluations have been used in court for support purposes, just like tax assessments and insurance documents, but the evaluations that come out of our offices would do very well under court scrutiny even though they are clearly not appraisals.

I understand what you are saying, and I've had this discussion so many times over the years. I do truly appreciate your professional tone in talking about it and asking questions. Some can be so legalistic in mindset, that logic gets lost somewhere. There's so much of that in the appraisal world from the top to the bottom in my view.