UAD Q1 and Q2

[Metamorphic]

Has anybody developed a successful strategy for "talking down" and appraiser that's convinced they're dealing with a Q2 or (yeah right) a Q1. I have several appraisers on the panel that I review for that will throw a Q2 at anything that a architect drew that has granite counters, and will go Q1 if there's a Roman column next to an archway somewhere. Generally they attach themselves to the "custom designed for construction on an individual property owner's site" part of the Q2 definition and don't find the "also found in high-quality tract developments" part of the definition compelling. m2: "Yeah, I know you saw the residence and I did not, but if this is really a Q2 you did a **** poor job of photographing and explaining what's so wonderful about it."

Also, do you feel its unreasonable as a matter of policy, to require an appraiser that uses one of the unusual UAD categories (Q1, Q2, Q6, C2, C5, and C6) to provide a fairly exhaustive justification?

 

[hastalavista]

If they've done the cost approach, then their RCN should be consistent with the quality rating. Just as a quick mental exercise, it would seem to me that if they were incorrect in their grading (rated the property too high), and if they used the higher quality cost in the RCN, there is going to be some significant functional obsolescence (assuming they got the site value right) because since
Value = Cost - Depreciation
if the cost is overstated, the depreciation is also going to have to be overstated.

I don't think it is unreasonable to expect a more comprehensive explanation when a home is rated Q2.
I think if a property is rated Q1, the descriptions and support for that rating should be persuasive.

Edit to add: I'm assuming they are not bumping up the quality rating in order to comp the subject to higher-value homes. I'm assuming they are comping the subject to similar homes, but are mis-grading the quality of the subject (and, probably, the quality of the comps as well).

 

[Metamorphic]

Good stuff Denis. And "no", the RCN does not say Q2. Its comfortably within the Q3 range.

Further thought question: If the appraiser can present a "model match" that sold within the last 3 months can it be Q2? The Q1 definition would seem to effectively preclude the existence of a model match; the Q2 definition comes real close to it.

It would be interesting to try to put together a dichotomous key for the UAD definitions.

 

[J Grant]

With an over supply of appraisers in California, why are these dummies being given work?

Assuming your employers or you still want to use them, send a memo to the dopes to READ the UAD addendum they add to their reports carefully.
It explains quality, tell them to attend some builder models and open houses of houses in different price ranges to start recognizing quality in different price points of homes.

I believe the more extreme ends of UAD deserve pertinent commentary that clearly explains what is there beyond photos . I don't think the commentary has to be "exhaustive", but it should convey why the rating was given and what is present in materials, construction and condition/repair/age etc that determined the rating.

 

[J Grant]

If these appraisers are as bad as you say they are at gauging quality, re, they repeat the same mistakes over and over and over, report to report, eventually, someone at Fannie may notice. Fannie is using UAD to monitor appraisers. Nobody can get it right 100% of the time, but it should be right most of the time. If it's wrong most of the time, that appraiser might at some point get called on it from Fannie, even if everyone else is tolerant of it.

 

[Noreen]

Good stuff Denis. And "no", the RCN does not say Q2. Its comfortably within the Q3 range.

Further thought question: If the appraiser can present a "model match" that sold within the last 3 months can it be Q2? The Q1 definition would seem to effectively preclude the existence of a model match; the Q2 definition comes real close to it.

It would be interesting to try to put together a dichotomous key for the UAD definitions.

I think eFainnie has an updated Q/C ratings sheets where they are adding "notes" under each level of grading and they are obviously running into this and trying to quantify what perimeters are appropriate at each level. I am fairly sure it was from one of the most resent postings. I printed it out and looked quickly for it but I can tell you it's not the March 11 posting. I can tell you that it's my understanding that the "true" Q1 rating is to be considered under the "mansion" category.

 

[Metamorphic]

Noreen, I searched for additional guidance from FNMA on the ratings but did not find anything.

However, there are some nice blogs out there written by appraisers that seem very reasonable. After reviewing a few I have pretty much decided that a real Q1 has a snow balls chance in hell of ever being appraised on a UAD form or being mentioned on one as a comparable. Further, outside of uber high end enclaves in places like Martha's Vineyard, New York, San Francisco, Beverly Hills., etc you'll only find a handful of Q1 if any.

As far as Q2s go its basically a Jeff Foxworthy skit.

If you got this job through an AMC, its probably not a Q2.
If the owner doesn't clear in a week what you make in a month, its probably not a Q2.
If you got the job because you offered the lowest fee and shortest turn time, its probably not a Q2.

 

[Metamorphic]

If these appraisers are as bad as you say they are at gauging quality, re, they repeat the same mistakes over and over and over, report to report, eventually, someone at Fannie may notice. Fannie is using UAD to monitor appraisers. Nobody can get it right 100% of the time, but it should be right most of the time. If it's wrong most of the time, that appraiser might at some point get called on it from Fannie, even if everyone else is tolerant of it.

That's part of the problem. They're really not bad appraisers. These guys generally give good value. They just have a tendency to push the limits on the UAD definitions. And I can see that. It kind of sucks for appraisers that where we used to have a lot of freedom in using the quality and condition description fields to express ourselves and make our observations clear to the IUs, we're now stuck with 2 bins that hold 95% of the properties we see. And really, you can throw down a 3 or a 4 almost interchangeably and it would take a court of law and a jury to prove you wrong. But the 1's and 2's and the 5's and 6's are so rare as to be almost useless. The UAD Q and C program has made job easier because you really don't have to think much, but harder at the same time because if you need to make a quality or condition point you have to go bury it in an addendum somewhere.

I'd really like to see a histogram dump from the UDCP of quality and condition ratings. I'd bet 3's and 4's are 99.9% of the numbers that get laid down. It would not surprise me if FNMA actually regrets the way this has been set up as the lack of granularity and distribution doesn't provide much opportunity for meaningful analysis.

One thing that helps me keep calibrated on Quality is this Photography for Real Estate Flicker Blog. https://www.flickr.com/groups/photographyforrealestate/

Flipping through the pictures there you get to see some pretty nice stuff. Helps keep you from getting wow'd by the latest TuscanOrgy McMansion.

 

[J Grant]

UAD is not going to make a bad appraiser into a good appraiser or vice versa. Some appraisers understood construction and upgrade and quality key differences prior to UAD, and some did not. That has not changed. Some appraisers fudged condition or quality to push values prior to UAD and some did not.

Imo, UAD does expose when appraisers lack experience/judgment about construction/quality, or are trying to push values via those categories. Denis made a good observation regarding cost approach. If a UAD category Q rating is a mismatch in cost, or photo evidence, it's going to be obvious. It it's glaringly obvious report after report on different properties, seems indicative of a problem.

 

[Renee Healion]

>>>I'd really like to see a histogram dump from the UDCP of quality and condition ratings. I'd bet 3's and 4's are 99.9% of the numbers that get laid down. It would not surprise me if FNMA actually regrets the way this has been set up as the lack of granularity and distribution doesn't provide much opportunity for meaningful analysis.<<<

Be nice if they opened the data hoard. And why shouldn't they make it available?