The Premier Online Community for Real Estate Appraisers!
-
Welcome to AppraisersForum.com, the premier online
community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.
Falling Out - More Appraisers Quit
- Thread starter Terrel L. Shields
- Start date
- Status
Mike Kennedy
Elite Member
- Joined
- Sep 28, 2003
- Professional Status
- Certified Residential Appraiser
- State
- New York
DMZwerg
Senior Member
- Joined
- Mar 25, 2009
- Professional Status
- Certified Residential Appraiser
- State
- Wisconsin
Auch! 
Terrel L. Shields
Elite Member
- Joined
- May 2, 2002
- Professional Status
- Certified General Appraiser
- State
- Arkansas
Mike, you depress me...but everyone needs to read that link.
Trice is *(&&^%ing scary....
The appraisal process isn't the problem. It's the piffle surrounding it. Trice's solution is, in a nutshell, to let the lender, builder, and agent determine the price, then the appraiser to rubber stamp their results and warranty the value. Under her system, the builder will provide the cost, the developer the land value, and some outside energy expert will value the cost of the energy upgrades and then we sum it all up and call it "market value"...something we call "assemblege or summation". They forgot a little something called depreciation and obsolescence...and want to, because their system does not "work" without ignoring it. Of course, she tried to soften the criticism of appraisers by two suggestions I agree on.. 1 standard only, less reliance upon the point value and more on range of value.
Certainly I am no pioneer in suggesting that USPAP can be simplified and steamlined with more flexibility. To me in a nutshell - the issue is about precision. For sport a friend and I used to shoot black powder rifles at the edge of an axe and try to split the lead ball into two parts... a precise process. You can't do that with a handgrenade even though you certainly have lead on both sides of the axe.
There is a limit to our precision in this business. We cannot estimate the value to within a $1. I see folks estimate it within $100 sometimes...but I doubt if our accuracy justifies that state of precision. You shoot a fort with a cannon. You dont' try to kill individual soldiers with it. You can fire a rifle at the fort and never miss...but you are not going to do any damage.
Therefore, I think the processes required by fannie mae and FHA, etc.. which burden USPAP as "supplemental standards" which we now call "scope of work"..but it is the same thing, are precieved to be more precise than they can be.
Why isn't the lender given the authority to make a loan even if the appraisal falls short a mere 1 or 2 %? We ain't that good for all especially in a turbulent market with few sales. I visited a small county yesterday and visiting with a Realtor he remarked that 5 years ago his office sold over $15 million (just him and his 80 yr old dad). This year so far there have only been 54 sales totalling less than $10 million to divvy between the several real estate offices in town for the entire county.
A tornado destroyed a boat factory (50 jobs), a processing plant closed due to bankruptcy (200 jobs) and another plant moved to Mexico (50 jobs.) Nothing is moving except estates and the desperate. How precise can you get?
By dealing with endless changes that to the best of my reckoning have basically changed nothing. Tell me one instance where reporting the 3 year history of a property improved the accuracy of the appraised value. Where notifying the client that I appraised that very same property three years ago...for me that is 99% of the time the very REASON they called me to do it in the first place. I have a mineral estate to update from 2009. I have to notify them that I appraised it previously...like they didn't know it??? com'n. Absurdity.
Last edited:
George Hatch
Elite Member
- Joined
- Jan 15, 2002
- Professional Status
- Certified General Appraiser
- State
- California
I repeat - you should sit down and do the better job. You just want to hope that nobody like you gets ahold of it after you're done. 'Cause at that point I can guarantee you that no matter how you handled something someone just like you is going to find fault with it and say you should have handled it the other way.
smackodu
Senior Member
- Joined
- Aug 5, 2008
- Professional Status
- Certified Residential Appraiser
- State
- Maryland
How does she get away with telling everyone she is an appraiser when she is no longer licensed?...Why do I feel ill whe says we as in we appraisers?
Blueprint
Senior Member
- Joined
- Aug 25, 2005
- Professional Status
- Certified Residential Appraiser
- State
- Oregon
Agreed beyond 100%. I used to pump out reports for my mentor in (4 in 24 style fashion). I am blessed to have come in at the peak. I have learned so much and am really proud of the extreme detail I insist upon as an appraiser today.
J Grant
Elite Member
- Joined
- Dec 9, 2003
- Professional Status
- Certified Residential Appraiser
- State
- Florida
Trice's article was funny...sales going back 24 months? A range of values ? A task force is needed? Okay....look where it was published, a builder journal...
Anyway, Terrel has the right idea that a lender should have a small range that they could have the flexibility to loan on, say 1% or 2% plus or minus from the appraised value, and they can decide that based on market conditions, financing terms, or whatever internal guidelines they want to apply.
I don't think susbsituting a range of values is an answer. While we may not be that good, or precise, something, someone, has to draw a line in the sand and provide a figure of value. In appraisal review, lenders tolerate a small amount of forgiveness if the original appraisal proves to be "off" value ...5-10% (some a generous 20%, which is absurd). Appraisers mistakenly think their value has to be "precise", because it is a point value, but the standard in the definition is "probable value", which in itself allows a small range of error around it...arriving at a most probable value is a different standard than a precise value (though of course he language surrounding it is contradictory, asking for the value to be "accurate", as if it were a math problem, which it is not.
There is far too great a difference from the way appraisers arrive at developing the report and that to me is scary...(and not the appraiser's fault, given the Haiku like, cryptic guidance of USPAP, which for all its gazillion pages, seems to say mainly two things "Thou shalt not be misleading", and "Thou shalt fulfill the scope of work". )
Some appraisers approach developing value as if it were a math problem. Do enough math, and show the client enough math, and surely, that will make the value opinion more accurate...because a bunch of charts and graphs and statistics prove it. The problem is, all the charts and graphs and statistics prove is a mathematical conclusion that may be correct within their model, but still be quite "off" in fulfilling the purpose of the appraisal, aka a value that truly reflects market conditions and trends and buyer preferences...these things can not be quantified as "math", though but must be observed through interacting with the market.
Some appraisers claim that applying proper appraisal procedures can substitute for market experience, but I don't think it can.
If you had to drive down an icy road in a storm and you knew you were going to skid, who would you rather be with ...a driver who has driven that road for twenty years through storms and safely navigated through many skids, or a driver that has never been on that road, in fact, drives infrequently and never in strorms, but has studied skid conditions and can quote charts of yee and yaw and has run statistics on the outcome of skidding?
I think most of us would want to be with the proven driver, who can actually perform in the required conditions. That is the issue with residential appraising , it is really about market experience and how keen an observer of market trends an appraiser is. Though numbers are involved, it is not a "math" problem. Commercial, with leases and income streams can justifiably be more math based,assuming a buyer wants the most return on their investment on the one hand simplifies the problem though of course the data collection to solve that problem, is a far more complex and lenghty process,
I find that doing small income properties in that sense are "easier", though data is sometimes scarcer, or more needs effort to be collected, re rent rolls, the assumption that a buyer of a duplex wants return on investment simplifies the problem, at least.
The URAR forms are full of verbiage and time wasting fields that contribute nothing to the report. Did the subject sell three years ago? What difference does that make to today's value? Is there an alley behind the subject? Really? Who cares? What flood zone is it in...why does that need to be in the appraisal? The lender orders a flood survey anyway, put the the results of that elsewhere. Is it owner occupied? Why is that the appraiser's problem to find out? Let the lender get a notarized statement from the borrower whether they occupy it or not. And so on, the form is filled with fields that take up valuable time and have nothing to do with value.
Much more time should be spent on listing activity and market conditions. Many lenders now ask for one or two listings. What does that prove? Not much, an appraiser can put down any old listing . What they need in the report is all the listings of similar homes in the subdivision or similar area, the days on market, and which, if any are in contract pending or contingent contract, and at what price...that would truly frame and test the "most probable price".
The definition of market value is also a mess. Typically motivated buyer...what does that mean? Typical according to who, and what? Undue stimulus...what does that relate to? At what point does stimulus become "undue"? Most sellers have some stiumuls to sell, selling is stressful and that means they have to undertake the expense and risk of buying or renting another home, plus the angst of moving...few sell with no stimulus, so at what point is it "undue"? That judgement is left up to the appraiser, as is the judgement of if an institutional lender as owner automatically has "undue stimulus" to sell, or is their stimulus is now typical of the market, and so on. The meaning and application of these termswithin market value definition need to be expanded upon and clarified.
Imo, a range of values is not the answer.
Instead, perhaps a report can offer several values, and the lender, or user of the appraisal, can pick the value they most want to rely on. The cost approach can be made more extensive and accurate (which would add a lot to the fee), but then users could decide to rely on that as an option. Imo, the cost approach is a poor short term benchmark of value, but perhaps a good long term one. There could be a market value opinion based on effective date, and then a forecast one, such as ERC apprasials provide. There could be a market opinion on estimated "typical" marketing times, and then one in a shortened marketing time, say 90 days, such as now done on the REO appraisal.
Personally, I think more res properties would benefit from the income approach, as if they were rented out, what rental rate would they command (would have to be based on actual verifried rents, not asking rents), minus expenses and carrying costs. That actually provides a very realistic bracket for the MVO, because many owners would actually like to hang on to their property, if they could rent them out and break even. In most cases that is not possible and the carrying costs so outweigh the rent that the owner has to sell, and sells at a loss or walks away from the house. Hmmm. if a rental income and expense sheet had been included in the report when they bought 5 yeas ago, they could have at least seen it coming.
At the end of the day, the value of any report lies in the intersection of ethics and experience. An appraiser may be highly experienced, and also have excellent quantative skills. But if they use these skills for the wrong purposes, their report can be harmful or misleading. If they set out to gather rent rolls or income, and only choose to use rents on the high side and not include in the report more probable lower rents, and the true vacancy rate, they can really skew report results, and nobody will know at closing (the owner sure will know six months later, if they try to rent the place and can't get anywhere near the pie in the sky rents the report indicated).
Fees for appraisal are a huge problem and the prevailing high volume, tight turn time, and low fee environment is antithetical to producing well supported and researched reports.
Anyway, Terrel has the right idea that a lender should have a small range that they could have the flexibility to loan on, say 1% or 2% plus or minus from the appraised value, and they can decide that based on market conditions, financing terms, or whatever internal guidelines they want to apply.
I don't think susbsituting a range of values is an answer. While we may not be that good, or precise, something, someone, has to draw a line in the sand and provide a figure of value. In appraisal review, lenders tolerate a small amount of forgiveness if the original appraisal proves to be "off" value ...5-10% (some a generous 20%, which is absurd). Appraisers mistakenly think their value has to be "precise", because it is a point value, but the standard in the definition is "probable value", which in itself allows a small range of error around it...arriving at a most probable value is a different standard than a precise value (though of course he language surrounding it is contradictory, asking for the value to be "accurate", as if it were a math problem, which it is not.
There is far too great a difference from the way appraisers arrive at developing the report and that to me is scary...(and not the appraiser's fault, given the Haiku like, cryptic guidance of USPAP, which for all its gazillion pages, seems to say mainly two things "Thou shalt not be misleading", and "Thou shalt fulfill the scope of work". )
Some appraisers approach developing value as if it were a math problem. Do enough math, and show the client enough math, and surely, that will make the value opinion more accurate...because a bunch of charts and graphs and statistics prove it. The problem is, all the charts and graphs and statistics prove is a mathematical conclusion that may be correct within their model, but still be quite "off" in fulfilling the purpose of the appraisal, aka a value that truly reflects market conditions and trends and buyer preferences...these things can not be quantified as "math", though but must be observed through interacting with the market.
Some appraisers claim that applying proper appraisal procedures can substitute for market experience, but I don't think it can.
If you had to drive down an icy road in a storm and you knew you were going to skid, who would you rather be with ...a driver who has driven that road for twenty years through storms and safely navigated through many skids, or a driver that has never been on that road, in fact, drives infrequently and never in strorms, but has studied skid conditions and can quote charts of yee and yaw and has run statistics on the outcome of skidding?
I think most of us would want to be with the proven driver, who can actually perform in the required conditions. That is the issue with residential appraising , it is really about market experience and how keen an observer of market trends an appraiser is. Though numbers are involved, it is not a "math" problem. Commercial, with leases and income streams can justifiably be more math based,assuming a buyer wants the most return on their investment on the one hand simplifies the problem though of course the data collection to solve that problem, is a far more complex and lenghty process,
I find that doing small income properties in that sense are "easier", though data is sometimes scarcer, or more needs effort to be collected, re rent rolls, the assumption that a buyer of a duplex wants return on investment simplifies the problem, at least.
The URAR forms are full of verbiage and time wasting fields that contribute nothing to the report. Did the subject sell three years ago? What difference does that make to today's value? Is there an alley behind the subject? Really? Who cares? What flood zone is it in...why does that need to be in the appraisal? The lender orders a flood survey anyway, put the the results of that elsewhere. Is it owner occupied? Why is that the appraiser's problem to find out? Let the lender get a notarized statement from the borrower whether they occupy it or not. And so on, the form is filled with fields that take up valuable time and have nothing to do with value.
Much more time should be spent on listing activity and market conditions. Many lenders now ask for one or two listings. What does that prove? Not much, an appraiser can put down any old listing . What they need in the report is all the listings of similar homes in the subdivision or similar area, the days on market, and which, if any are in contract pending or contingent contract, and at what price...that would truly frame and test the "most probable price".
The definition of market value is also a mess. Typically motivated buyer...what does that mean? Typical according to who, and what? Undue stimulus...what does that relate to? At what point does stimulus become "undue"? Most sellers have some stiumuls to sell, selling is stressful and that means they have to undertake the expense and risk of buying or renting another home, plus the angst of moving...few sell with no stimulus, so at what point is it "undue"? That judgement is left up to the appraiser, as is the judgement of if an institutional lender as owner automatically has "undue stimulus" to sell, or is their stimulus is now typical of the market, and so on. The meaning and application of these termswithin market value definition need to be expanded upon and clarified.
Imo, a range of values is not the answer.
Instead, perhaps a report can offer several values, and the lender, or user of the appraisal, can pick the value they most want to rely on. The cost approach can be made more extensive and accurate (which would add a lot to the fee), but then users could decide to rely on that as an option. Imo, the cost approach is a poor short term benchmark of value, but perhaps a good long term one. There could be a market value opinion based on effective date, and then a forecast one, such as ERC apprasials provide. There could be a market opinion on estimated "typical" marketing times, and then one in a shortened marketing time, say 90 days, such as now done on the REO appraisal.
Personally, I think more res properties would benefit from the income approach, as if they were rented out, what rental rate would they command (would have to be based on actual verifried rents, not asking rents), minus expenses and carrying costs. That actually provides a very realistic bracket for the MVO, because many owners would actually like to hang on to their property, if they could rent them out and break even. In most cases that is not possible and the carrying costs so outweigh the rent that the owner has to sell, and sells at a loss or walks away from the house. Hmmm. if a rental income and expense sheet had been included in the report when they bought 5 yeas ago, they could have at least seen it coming.
At the end of the day, the value of any report lies in the intersection of ethics and experience. An appraiser may be highly experienced, and also have excellent quantative skills. But if they use these skills for the wrong purposes, their report can be harmful or misleading. If they set out to gather rent rolls or income, and only choose to use rents on the high side and not include in the report more probable lower rents, and the true vacancy rate, they can really skew report results, and nobody will know at closing (the owner sure will know six months later, if they try to rent the place and can't get anywhere near the pie in the sky rents the report indicated).
Fees for appraisal are a huge problem and the prevailing high volume, tight turn time, and low fee environment is antithetical to producing well supported and researched reports.
Last edited:
3 comps on a grid and matched pairs was kind of dumb when i started appraising in 1981. We live in a data rich world.
Lenders are asking you to manually type a bunch of comps on a grid. What if you could in an automated way have 300 sales to analyze. You need to look back at least 24 months to be able to trend sales.
No Fannie Mae guidelines needed. It would all be completely transparent.
DTB
Elite Member
- Joined
- Jun 11, 2004
- Professional Status
- Certified Residential Appraiser
- State
- Illinois
That's like saying 50 goal scorers in the NHL are making big money (shocking) and at the same time the pay for the majority of players has gone down.
Unsustainable to have an industry in that condition. The condition of the greatest number in the industry must be improving or the industry is not well.
In addition, when resi supply was down what happened? Fees didn't increase, supply was just flooded.
- Status