Mike Kennedy
Elite Member
- Joined
- Sep 28, 2003
- Professional Status
- Certified Residential Appraiser
- State
- New York
http://www.gpo.gov/fdsys/pkg/CHRG-112hhrg76111/html/CHRG-112hhrg76111.htm
"Mr. Sherman, from California, is recognized for 5 minutes.
Mr. Sherman. Thank you, Madam Chairwoman.
Mr. Gregoire, the GSEs have created this new uniform
appraisal database, the UAD, which is used on all GSE
appraisals, also for the FHA. How is it all working out?
Mr. Gregoire. Fortunately, because of the work that I do, I
have not had to complete one of those reports. However, I have
heard from dozens if not hundreds of appraisers about their
experience, and also from consumers. The UAD method of
reporting was not implemented to enhance the quality or the
credibility of an appraisal report. What it does enhance is
data-gathering.
It does not improve an appraiser's performance or ability
to accurately or credibly estimate an opinion of value. And in
fact, I believe that it makes the appraisal report more
confusing and less useful to the consumer.
Granted, the consumer is not an intended user of an
appraisal that is completed for mortgage finance transaction.
However, the wording in the form clearly anticipates that the
borrower will be placing some credence in that, and the report,
according to Federal law, is required to be provided to the
borrower prior to the closing of the transaction.
That UAD does not improve the usefulness of that report to
the consumer.
Mr. Sherman. So at a very minimum, we need to change how it
is presented so that the consumer can understand it?
Mr. Gregoire. I believe that the reporting format that is
instituted by the GSEs is not designed to result in a more
accurate estimate of value; it is designed for the convenience
of the GSEs. And things that make things more useful to
consumers are very often excluded from the report due to the
manner in which the report is delivered to the GSEs.
And there are also privacy concerns. The GSEs are now
insisting on a whole slew of interior photographs and the
borrower and the seller and the lender don't control the
distribution of that appraisal report, and a lot of our members
are very concerned about privacy.
Mr. Sherman. The only thing I have been told about real
estate is that it has something to do with location, and
location, and location. What can we do to make sure that the
appraisers actually understand the neighborhoods that they are
appraising, Mr. Gregoire?
Mr. Gregoire. Thank you, again. Unlike some of the
discussion here concerning geographic competency, I don't
believe that geographic competency is determined solely by the
appraiser's proximity to the property that is being appraised.
Geographic competency is determined by the appraiser's
knowledge of a particular market or knowledge of a particular
neighborhood or of a particular location. It is also determined
by the appraiser's knowledge of a particular property type.
And competency can be--it is not absolutely, positively
necessary at the time the appraiser accepts the assignment as
long as the appraiser takes the steps necessary to acquire the
competency. But you don't acquire competency in a manner of
minutes or hours, and I believe that appraisers are fully
capable of gaining the necessary competence if they are given
the appropriate and the necessary time to spend in a market,
interview the folks necessary to gather market information, and
given the time necessary to appropriately complete the
appraisal report.
Mr. Sherman. But even a very competent appraiser who is
given just one job in some community he doesn't know, he is
only paid a few hundred dollars so he can't spend hours and
hours studying everything. That competent appraiser, if he is
only going to do one appraisal in that neighborhood is probably
going to miss some things.
Mr. Gregoire. I agree, and I think that the Uniform
Standards for Professional Appraisal Practice provides the
appraiser guidance as what to do in such a circumstance, and
that is to decline the assignment. And I believe that we have
to hold appraisers to that standard. They have to know when it
is appropriate for them to accept an assignment and when it is
appropriate for them to decline the assignment.
Mr. Sherman. If I can squeeze in one more question, how are
appraisals and valuations affecting the housing recovery, or
what we hope to be a housing recovery?
Mr. Gregoire. That is a pretty broad question, but I
believe the concern of the National Association of REALTORS is
that there is interference in an appraiser's independence to
call things the way they see it. I have plenty of anecdotal
evidence of appraisers--and I work and appraise in Pinellas
County, Florida. It is a county which is not monolithic. There
are areas that are improving--some dramatically, some not so
much--and areas that are stable. There are appraisers who have
identified improving areas, and as a result of their data and
analysis in reaching an opinion that an area is improving have
reported that to their clients, and they have made the
appropriate positive adjustments to comparable sales to make
sure that those comparable sales are adjusted to reflect what
they would have sold for on the effective date of the
appraisal. The result that has been reported is that you better
rethink those date-of-sale time adjustments. That is
interference with an appraiser's independence and it results in
a misleading appraisal report and an appraisal report that does
not reflect a current and an improving market in a specific
area."
"Mr. Sherman, from California, is recognized for 5 minutes.
Mr. Sherman. Thank you, Madam Chairwoman.
Mr. Gregoire, the GSEs have created this new uniform
appraisal database, the UAD, which is used on all GSE
appraisals, also for the FHA. How is it all working out?
Mr. Gregoire. Fortunately, because of the work that I do, I
have not had to complete one of those reports. However, I have
heard from dozens if not hundreds of appraisers about their
experience, and also from consumers. The UAD method of
reporting was not implemented to enhance the quality or the
credibility of an appraisal report. What it does enhance is
data-gathering.
It does not improve an appraiser's performance or ability
to accurately or credibly estimate an opinion of value. And in
fact, I believe that it makes the appraisal report more
confusing and less useful to the consumer.
Granted, the consumer is not an intended user of an
appraisal that is completed for mortgage finance transaction.
However, the wording in the form clearly anticipates that the
borrower will be placing some credence in that, and the report,
according to Federal law, is required to be provided to the
borrower prior to the closing of the transaction.
That UAD does not improve the usefulness of that report to
the consumer.
Mr. Sherman. So at a very minimum, we need to change how it
is presented so that the consumer can understand it?
Mr. Gregoire. I believe that the reporting format that is
instituted by the GSEs is not designed to result in a more
accurate estimate of value; it is designed for the convenience
of the GSEs. And things that make things more useful to
consumers are very often excluded from the report due to the
manner in which the report is delivered to the GSEs.
And there are also privacy concerns. The GSEs are now
insisting on a whole slew of interior photographs and the
borrower and the seller and the lender don't control the
distribution of that appraisal report, and a lot of our members
are very concerned about privacy.
Mr. Sherman. The only thing I have been told about real
estate is that it has something to do with location, and
location, and location. What can we do to make sure that the
appraisers actually understand the neighborhoods that they are
appraising, Mr. Gregoire?
Mr. Gregoire. Thank you, again. Unlike some of the
discussion here concerning geographic competency, I don't
believe that geographic competency is determined solely by the
appraiser's proximity to the property that is being appraised.
Geographic competency is determined by the appraiser's
knowledge of a particular market or knowledge of a particular
neighborhood or of a particular location. It is also determined
by the appraiser's knowledge of a particular property type.
And competency can be--it is not absolutely, positively
necessary at the time the appraiser accepts the assignment as
long as the appraiser takes the steps necessary to acquire the
competency. But you don't acquire competency in a manner of
minutes or hours, and I believe that appraisers are fully
capable of gaining the necessary competence if they are given
the appropriate and the necessary time to spend in a market,
interview the folks necessary to gather market information, and
given the time necessary to appropriately complete the
appraisal report.
Mr. Sherman. But even a very competent appraiser who is
given just one job in some community he doesn't know, he is
only paid a few hundred dollars so he can't spend hours and
hours studying everything. That competent appraiser, if he is
only going to do one appraisal in that neighborhood is probably
going to miss some things.
Mr. Gregoire. I agree, and I think that the Uniform
Standards for Professional Appraisal Practice provides the
appraiser guidance as what to do in such a circumstance, and
that is to decline the assignment. And I believe that we have
to hold appraisers to that standard. They have to know when it
is appropriate for them to accept an assignment and when it is
appropriate for them to decline the assignment.
Mr. Sherman. If I can squeeze in one more question, how are
appraisals and valuations affecting the housing recovery, or
what we hope to be a housing recovery?
Mr. Gregoire. That is a pretty broad question, but I
believe the concern of the National Association of REALTORS is
that there is interference in an appraiser's independence to
call things the way they see it. I have plenty of anecdotal
evidence of appraisers--and I work and appraise in Pinellas
County, Florida. It is a county which is not monolithic. There
are areas that are improving--some dramatically, some not so
much--and areas that are stable. There are appraisers who have
identified improving areas, and as a result of their data and
analysis in reaching an opinion that an area is improving have
reported that to their clients, and they have made the
appropriate positive adjustments to comparable sales to make
sure that those comparable sales are adjusted to reflect what
they would have sold for on the effective date of the
appraisal. The result that has been reported is that you better
rethink those date-of-sale time adjustments. That is
interference with an appraiser's independence and it results in
a misleading appraisal report and an appraisal report that does
not reflect a current and an improving market in a specific
area."
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