Response to ROV's . . . Appraisal SOW or a Business Decision ?

[ZZGAMAZZ]

I would be the first one to admit that a fee increase would be appropriate for an ROV or tidewater. I feel your pain. It adds hours sometimes to the completion of assignment. Sometimes it adds many hours.


You need to address it for your client regardless. It's not an if, and or but? You need to do it.

If it is garbage, just tell you client it is garbage and why.


What really kills you and makes you laugh is when client sends data that indicates a lower value than you reconciled. That is funny.

The point of my post, although I forgot to include it, was that I wanted to address potential ROV's in the printed SOW, with an aside advising clients that a reconsideration that if based upon pertinent data that I might have overlooked could result in a new report with a lower Opinion of Value.

 

[George Hatch]

Don't bury your explanation in the back of your report; incorporate it into the main body so a reader cannot miss it. You want a reader to understand your rationale. That means conveying it in a structured and logical order and runs in a cohesive train of thought from beginning to end, not broken into 5 different disjointed pieces which are scattered in different sections of the report.

 

[J Grant]

The point of my post, although I forgot to include it, was that I wanted to address potential ROV's in the printed SOW, with an aside advising clients that a reconsideration that if based upon pertinent data that I might have overlooked could result in a new report with a lower Opinion of Value.

Please don't do that . You want to tell folks you overlooked pertinent data that could lower the value ? Begging for a board complaint much?

Imo not possible to head off an ROV by preemptive addressing it. An upset borrower or RE agent will demand it / or if from Fannie CU it is coming your way. However, it is a good idea to make a preemptive statement wrt comp choices. (or parameters used )

Here is a sample statement ( adapt for each assignment ) I write ( when I remember to lol )

" In addition to the comps on the grid in the appraisal, a number of additional area sales were considered and reviewed. The appraiser recognizes that there are other sales in the area of homes both lower and higher in price. They were not used as comps, because majority of lower price homes are smaller and less upgraded , and the higher price sales are substantially larger or have pools or water views."

This statement accomplishes several things : It puts reader on notice you already considered additional sales, and it explains why both lower or higher sales they might pull up were not included in appraisal. While this kind of statement can not stop every ROV it can prevent some of them, or make it easier to deal with if you do get one.

 

[ZZGAMAZZ]

Don't bury your explanation in the back of your report; incorporate it into the main body so a reader cannot miss it. You want a reader to understand your rationale. That means conveying it in a structured and logical order and runs in a cohesive train of thought from beginning to end, not broken into 5 different disjointed pieces which are scattered in different sections of the report.

Although that makes all of the sense in the world, and although my comment might sound silly, I don't know where "the main body" of the report exists. I desire a section in which the type of assignment, a summary of the local market, a description of the subject site and improvements, and a commentary regarding potential extraordinary challenges including EA's and HC's would exist in a single section that would be somewhat-standardized throughout all of my reports. However, I've never come to grips with the best location in the report, or whether I'm simply describing a routine "Scope of Work" of an assignment. (D. Wiley once implied that forms initiative will include a section of that sort.)

 

[George Hatch]

Now you're commenting on the limitations of the form itself. There's nothing anyone can do about that.

If you have an explanation that doesn't fit on the front page then a recap of the high points (significant facts and conclusions) along with your "see addendum" will work. Doing the "see addendum" and nothing else in each of those fields on pg 1 - which is what a lot of appraisers do - is just being lazy. Anything that's significant to the valuation deserves prominent mention on the front page of the report. That way the casual reader is clued in to situations where they do or don't need to read up on the more detailed explanation prior to going on to the SC grid.

These report forms are not intended to be used as the cover page for a narrative. We need to keep in mind that we are writing these reports for our users, so user-accessibility is a prominent consideration.

 

[ZZGAMAZZ]

Now you're commenting on the limitations of the form itself. There's nothing anyone can do about that.

If you have an explanation that doesn't fit on the front page then a recap of the high points (significant facts and conclusions) along with your "see addendum" will work. Doing the "see addendum" and nothing else in each of those fields on pg 1 - which is what a lot of appraisers do - is just being lazy. Anything that's significant to the valuation deserves prominent mention on the front page of the report. That way the casual reader is clued in to situations where they do or don't need to read up on the more detailed explanation prior to going on to the SC grid.

These report forms are not intended to be used as the cover page for a narrative. We need to keep in mind that we are writing these reports for our users, so user-accessibility is a prominent consideration.

Although this comment should go in the Technology section of the AF, I wish the ACI "See Addendum" comment would be more specific to the section, e.g., "See Site Analysis" addendum, "or see "Condition of the Property" addendum. That type of referencecan be built into one's template but I think it should be the default verbiage so the Intended User can find what they're looking for.

 

[George Hatch]

I hate the "see addendum" triggers because they usually move the entire comment into the addenda.

To repeat, if the entire explanation won't fit then at least the conclusions should be loaded into pg 1.

Think about it: Let's say you have some weird appraisal problem that's going to compel you to expand your search for comps. If so, you want to build that theme early and often all through your report starting with your neighborhood composition and trends, and on to the site and improvements sections as applicable. That way you have set the stage to comment on how this is an atypical property for the neighborhood or is part of a thinly traded market segment in that last field on pg 1.

Having read that in your report the reader isn't then shocked to go to your comp selection and see the war crimes you had to commit in order to assemble and analyze your comp selection. The worst thing you can do in an appraisal report is to spring a funky comp selection scenario on your reader at the last second on pg 2. You gots to ease them into it before you get to that point. That means that using "see addendum" with no other heads-up in these comment fields is working directly against what you're trying to do.

 

[ZZGAMAZZ]

I hate the "see addendum" triggers because they usually move the entire comment into the addenda.

To repeat, if the entire explanation won't fit then at least the conclusions should be loaded into pg 1.

Think about it: Let's say you have some weird appraisal problem that's going to compel you to expand your search for comps. If so, you want to build that theme early and often all through your report starting with your neighborhood composition and trends, and on to the site and improvements sections as applicable. That way you have set the stage to comment on how this is an atypical property for the neighborhood or is part of a thinly traded market segment in that last field on pg 1.

Having read that in your report the reader isn't then shocked to go to your comp selection and see the war crimes you had to commit in order to assemble and analyze your comp selection. The worst thing you can do in an appraisal report is to spring a funky comp selection scenario on your reader at the last second on pg 2. You gots to ease them into it before you get to that point. That means that using "see addendum" with no other heads-up in these comment fields is working directly against what you're trying to do.

THANKS FOR YOUR INSIGHT, AS ALWAYS. (A DESCRIPTION OF THE LOCAL "HOUSING STOCK' IN THE NEIGHBORHOOD DESCRIPTION IS OFTEN HELPFUL ALTHOUGH THE DATA ISN'T ALWAYS AVAILABLE ON THE CITY WEBSITES.)

 

[Mike Kennedy]

Please don't do that . You want to tell folks you overlooked pertinent data that could lower the value ? Begging for a board complaint much?

Imo not possible to head off an ROV by preemptive addressing it. An upset borrower or RE agent will demand it / or if from Fannie CU it is coming your way. However, it is a good idea to make a preemptive statement wrt comp choices. (or parameters used )

Here is a sample statement ( adapt for each assignment ) I write ( when I remember to lol )

" In addition to the comps on the grid in the appraisal, a number of additional area sales were considered and reviewed. The appraiser recognizes that there are other sales in the area of homes both lower and higher in price. They were not used as comps, because majority of lower price homes are smaller and less upgraded , and the higher price sales are substantially larger or have pools or water views."

This statement accomplishes several things : It puts reader on notice you already considered additional sales, and it explains why both lower or higher sales they might pull up were not included in appraisal. While this kind of statement can not stop every ROV it can prevent some of them, or make it easier to deal with if you do get one.

Seconded - enuff said. I call it "Head em off at the pass".

 

[George Hatch]

THANKS FOR YOUR INSIGHT, AS ALWAYS. (A DESCRIPTION OF THE LOCAL "HOUSING STOCK' IN THE NEIGHBORHOOD DESCRIPTION IS OFTEN HELPFUL ALTHOUGH THE DATA ISN'T ALWAYS AVAILABLE ON THE CITY WEBSITES.)

You don't need a statistical breakdown, just a comment about what you're seeing.

One method I often use is to bring the area up in the MLS, draw my boundaries in and query for all sales ever sold. Go to the 1-liners, and "sort" for year built and sizes. It's not census-accurate, but its more than sufficient for the purposes of describing a neighborhood in an appraisal report.

I use those same boundaries to run a 5-yr analysis on the sales activity for all 1-unit properties sold in that area. Low-Median-High for unit sizes and sale prices. That gives you the context to rank your subject's attributes in with the rest of the neighborhood.