Appraisal House Blog

My 1999 Ford Expedition recently turned over 200,000 miles, and I am very proud.  I've never owned a car that lasted more than 120,000, so this is a definite milestone.  It runs great (knock on wood), is still in great shape, and has had only some minor repairs over the years.  I bought it in 2001 with 33,000 miles on it, so that averages out to about 24,000 miles a year.  And best of all, it's been paid off for a while.  I didn't like $4/gallon gas, but it was still cheaper than a new Prius!

I've received a lot of calls and emails from my last post, so I want to thank all of those appraisers out there who (a) still believe our industry shouldn't be given away to the management companies, and (b) think that the current HVCC is a bad thing for our industry and needs to be revised or killed. 

I remain hopeful that it will not go into effect anywhere near it's current incarnation.  Personally, I don’t understand how it COULD pass – I can’t imagine there wouldn’t be tons of lawsuits against Fannie and Freddie, since they (and the NY SAG) are essentially telling customers I’ve had for years that they can no longer choose to do business with me.  (What would happen if you told realtors that from now on every prospective buyer had to sign in to a government web site, and they would be assigned the next available realtor regardless of reputation or knowledge?) 

What this agreement is essentially saying is that, as a professional residential appraiser who has worked for years providing quality appraisals for use in mortgage lending, I no longer have any right to perform that action unless specifically asked to do so by a third party.  I cannot prospect for business in this category (aside from "signing up" with the AMC's), and I cannot get referral business from people that appreciate my professionalism, speed, and work quality.  So the entrepreneurship is taken away.  My job would consist of sitting by the phone, hoping it rings, and then making sure the assignment makes value so it will ring again. 

By the way, I am aware that the above is a drastic over-simplification, but if that has historically been your business then that is a fairly accurate description.  Yes, you can find new clients that are correspondent lenders, or find local banks the do construction loans, or get divorce work from appraisers, but the bottom line is that the HVCC has just taken away the business you have built and run and made successful.

I'd be interested to hear from appraisers that do a lot of work for AMC's about what percentage of the time they bust values.  Does anyone bust values regularly and still get the same amount of work?  I don't see how the HVCC does anything but pass the pressure up the line.  Sure, there is no pressure from the lender on the appraiser anymore, but the lender is still going to pressure the AMC (hello eAppraiseIt and Wamu!).  And the AMC is now going to pressure the appraiser (or stop using them and find another one who will get the job done.   

Tell me if I'm wrong on this...

(borrowed from www.thejokeshop.org)

An appraiser is one who compiles and analyzes voluminous data of problematical accuracy from sources of dubious veracity and derives therefrom a numerical quantification of unquestionable necessity, analogous to a nebulous and euphemistic concept representational of value commensurate with ambient configurations of the open market and promulgates thereby a precise written declamation which delineates his observation, deliberations and conclusions all done while he feigns absolute ignorance of the avaricious machinations of Buyers, Sellers, Brokers and Lenders, compensated only by that penurious stipend known as the professional fee.

Top 10 Reason to Become An Appraiser

1. Dazzle your friends with your knowledge of external obsolescence.
2. The wonderful world of rats, bats, and spiders.
3. Be a part of the profession blamed for the collapse of the savings and loan industry and the recent credit crisis and/or sub-prime meltdown.
4. See places in people’s houses that usually require a search warrant to access.
5. Arouse the suspicion of an entire neighborhood when inspecting comparable sales.
6. Chance to really irritate annoying real estate salespeople.
7. Walk around holding a clipboard just like “Skip” down at the Jiffy Lube.
8. Spend hours writing volumes of supporting documentation to justify the market value of a property you already decided on when you pulled into the driveway - and that no one will ever read anyway.
9. See that some people really do hang those black velveteen pictures of Elvis on their living room walls
10. Be one of a handful of people who know that USPAP is not a medical term.

I'm annoyed today.  I received two conflicting pieces of information on what has been going on with the HVCC.  The first came from an appraiser friend in Maryland, who received an email from their state board representative who was at a national meeting of the appraisal foundation.  That email said:

I know you are all concerned about the HVCC that resulted from the FannieMae/FreddieMac agreement with the State of New York.

From what I could learn at The Appraisal Foundation’s Board of Trustees meeting, it is highly unlikely that the HVCC will go into effect on January 1 of next year. We know that Fannie and Freddie have a new Federal oversight manager, which will certainly want to review all their policies and procedures and is unlikely to simply tell them to keep doing everything they have been doing – especially since the head of one of the Federal Financial Regulatory Agencies, the Comptroller of the Currency, sent a comment letter saying the agreement exceeded their authority because it allowed one state to set policy for banks throughout the country. Furthermore, mortgage legislation passed in the house that affected appraisals had not yet gotten through the Senate when the current financial crisis hit big time and pushed everything else onto the back burner. It is not likely to be taken up until Congress resumes after the holidays. When it is revisited, it is highly likely that the HVCC will turn out to be much different than originally drafted, if it survives at all.

As of a few days ago, Fannie Mae and Freddie Mac were still waiting to hear from the Federal Housing Finance Agency if there will be a revised Home Valuation Code of Conduct released and if so, what the time for implementation will be. The last public comment made by FHFA Director James Lockhart – that indicated FHFA was planning to release a revised HVCC sometime in October – is the last thing the GSEs have heard, according to agency representatives.

So, good news for us all, right?  But later that day I got an email from a loan officer that sent me a message she got from Wells Fargo, essentially stating that if she wanted to send loans to Wells Fargo, she had to use an AMC.

As our industry evolves and new requirements unfold, Wells Fargo Wholesale Lending is committed to working with our clients to institute necessary changes that will restore confidence, maintain integrity, ensure fair and responsible lending and help sustain the mortgage lending business long term.
As we look ahead, one such potential change stems from the Home Value Protection Code, regarding procurement of appraisals. There is uncertainty around timing and the ultimate requirements that may result from the code, and we are diligently working to clarify those issues. Preparing now will help ensure a smooth transition for all of us later.
In anticipation of these changes, the preferred process we are establishing allows you to request appraisals through RESdirectSM who will order appraisals from one of four approved Appraisal Management Companies (AMC) that you select: Rels Valuation, LSI®, MDA Lending SolutionsSM or Fiserv®. To use this process, you must have an account with RESdirect and your selected AMC(s).

It also goes on to say that you can use your own appraiser, BUT:

I was appraising a house a few days ago that was on several acres.  A very nice house in a suburban area, with all the requisite toys - greta pool with water slide, a separate pool house with wet bar, firepit/conversation area, large playscape, detached studio, etc.  I noticed that there was a large stone fence across the back yard that separated the house and maybe an acre of land from the rest of the property.  I saw that the was a barn down there, and so went through the gate to go measure it.  There were a few mid sized lawn tractors and a 4-wheeler in the barn, and I figured that the purpose was just to house this equipment.  As I was measuring the barn (roughly 15' x 35'), I turned a corner and came face to face with a small donkey.  I'm not sure which of us was more startled!  He jumped a little and then moved off the other way, and I went back to my measuring thinking that maybe there were a few other donkeys around, and to watch where I was stepping.

As I finished the measurement, I was taking a few notes and something made me look up.  In front of me about 10 yards away was a full sized llama.  Now, I have a friend that owns a few, but I have no real knowledge of them, and certainly no idea how to interact with them.  I figured he would just move away like the donkey had done.  So I was therefore a little distressed to see him start moving towards me at a pretty good pace.  As he came closer and closer without slowing down, my train of thoughts ran something like this:

1. Is it going to try and kick or bite me?  I can't tell if it looks angry, but it sure is coming at me pretty fast!
2. Can I just push it away?  No, it's too big and coming too fast.  Maybe I could punch it to slow it down?  Could I wrestle it?
3. The owners are not going to be happy if I hurt their llama.  Okay, brace yourself and be prepared to get medical attention.

This llama just came right at me, never slowing down.  It's head came up and was right in front of my face, and then at the side of my head.  "Is it going to try and bite my ear?  What kind of attack is that?  Has it been watching reruns of Mike Tyson fights?"

But that was it.  It kind of sniffed me a bit, I pet it on it's neck for a minute, and then it turned and walked away, followed by the donkey.

So for all of you real estate professionals out there that may someday run into a llama unexpectedly, be aware that that is what they do.  I talked to the owner later who explained that llamas like to sniff at your ear, and they make a determination of whether they like you or not based on that.  If they like you, they will just walk away or let you pet them.  If they don't like you, they will move back a few inches and spit in your face.  You DO NOT want that to happen, for reasons beyond the general annoyance of being spat on.  The owner said that the spit is just chewed up grass that lingers in their throats, but it stinks to high heaven, and takes forever to wash out of your clothes and hair.         

So in the end I was pretty happy that I had not been spit on, and gained acceptance from the llama community, and not injured a homeowners pet.  A good day, all in all.

I recently had a question come up regarding an appraisal assignment that I was unsure about, and in trying to find the correct answer I got a lot of insight into why Fannie Mae has some of the problems it does. 

I got a request from a client to appraise a house on 5 acres of land.  However, the actual legal parcel is about 35 acres.  Now, I do these on somewhat regular basis, and I simply make them "subject to" receiving a copy of the new survey showing the 5 acres they have subdivided, and also note in the report that the value is based on the hypothetical condition that the property is legally able to be subdivided, blah,blah,blah. 

However, the subcontractor I was using for this assignment called and said he didn't think you were allowed to do that for Fannie Mae transactions.  Okay, no problem, let's get an answer to this question.  How difficult could it be?

Well, you would be surprised.  I spent 30 minutes on the main Fannie web site and also the efanniemae.com, and was only able to determine that they really don't have much information for appraisers on there. 

Okay, next step is to call.  Of course they will have support staff knowledgeable about exactly what they will and will not accept on an appraisal report, right? 

I called the main number, and was told to call their local Dallas office.  By the time I had a few minutes, they were closed for the day (it was after 5pm).  Well, if the Dallas office has people that know the answer, then it makes sense that the west coast office would have the same people, right?  Apparently not.  I called there, and the operator said EVERYONE was in a meeting.  The rest of the conversation went pretty much like this:

"Okay, how long will they be?" 
"Well, after the meeting is over they are leaving."
"Everyone?"
"Everyone."
"When is the meeting over?"
"Probably in about 20-30 minutes."
"So everyone is leaving your office at 3:45 for the rest of the day?"
"Yes."
"So there is no one there that would be able to answer a quick question about how Fannie requires an appraisal to be done?"
"Oh, if you have a question about appraisals you need to call the Dallas office, that is where all the real estate people are."

So that didn't go too well, and I was a little confused about what the regional offices do all day of no one knows anything about appraisals.  But at least I got some confirmation that Dallas was the right place to go to.  So the next morning I call Dallas. 

"I need to ask someone a question about how Fannie prefers that an appraisal be done.  Can you direct me to the right person?"
"What is your account number?"
"I don't have an account number.  I'm an appraiser, and trying to get a question answered about Fannies requirements for appraisals."
"You'll need to call your lender and have them ask us."
"Why?"
"Because they have an account number." (I loved that one!)
"Can I get an account number so I can ask a question?"
"Are you a lender?"
"No ma'am, I'm an appraiser."
"We can only assign account numbers to lenders."
"So just so that I am understanding this correctly, in order for me to get a question answered about how Fannie Mae requires appraisals to be done, I should not ask Fannie Mae directly, I should ask the loan officer, who will ask you, you get back to them, and they get back to me - as opposed to spending 60 seconds on the phone with me now?"
"Let me transfer you." (she had had enough of me, obviously)

Anyway, the upshot of it all was that despite talking to 4 different people within Fannie Mae and looking through their website, I could never get anyone to even tell me who to talk to (besides my lender), let alone actually answer the question.  I know this question is relevant (and unanswerable) when discussing any government agency, but how do you manage to operate on a daily basis when you can't get a simple question like that answered, or even find a person that is responsible for answering that question?  I don't know how they managed to buy so many loans; I can just picture the lenders calling. 

"Hello, is this Fannie Mae?"
"Who did you call?"
"Fannie Mae, is this Fannie Mae?"
"No one is here to answer that question right now.  You should try our Dallas office."
"Dallas office of what?  Do you mean the Dallas office of Fannie Mae?"
"You will have to ask them their name when you call.  I can't answer that question."
"Listen, I just want to sell a loan I have to Fannie Mae.  Can you direct me to the correct person?"
"They are all out to lunch.  And they won't be back today."

By the way, I asked my lender to check, and that was three days ago.  I wonder if he is having the same conversation...   

I've been reading the articles in the paper and watching the news for the past few days, and I just can't seem to come to terms with this.  My inner conspiracy theorist doesn't have a lot of faith that Hank Paulson is working in the best interests of the common man vs. his Wall Street friends.  This program came out of nowhere, and deliberately intrudes into (and saves) the arena that constantly calls out for less government intervention. 

Additionally, I would rather see how the market works itself out and see how things are in another month or two before adding this kind of debt to our already outrageous deficit.  A typical recession is 17 months, and this bailout could take decades to pay off.  I think that people in Washington have the mindset that "worst case, this breaks this down to only $3,500 per person, and we will sell it in the future and make a profit on it, so it really won't cost anything".  When does the government ever turn a profit?  Additionally, more government employees will be required to oversee and administer this mess, adding to the cost.

I love the provision for "steep taxes" against compensation over $500,000 to top executives of participating firms.   have great faith that the folks that managed to magically tranch risky sub-prime mortgages into AAA paper can come up with a workaround for that one. 

I'm fortunate to be in an area of the country that has not been as hard-hit from the economy as others, and also fortunate that I make a decent living and have some money in the bank.  But while I understand that if the government had not stepped in things could have gotten worse, I also wonder what would have happened if they had never even suggested this bailout.  Now everyone is counting on the government to bail them out instead of finding a solution.  95% of the banks in the country are in no danger of failing, so would they have stopped lending altogether?  Or would they have just stopped lending to those that were poor credit risks, bringing some reason and sanity back to the equation of lending? 

I've done a lot of cold-calling for business in the past 5 years in several different cities, and I've met people in the mortgage industry that should be selling used cars while wearing loud polyester suits or hawking junk on late-night infomercials, but not providing mortgage services.  There have been a lot of "band-waggoners" in the past few years trying to ride the real estate wave, and many of them need to scurry back down their holes, so I don't know that a mild recession is necessarily a bad thing from a long-term perspective.  For the record, there are a lot of appraisers out there as well who made a lot of money inflating values for sub-prime mortgages, and it would not hurt our profession much to lose those people. 

Anyway, it looks like it is going to happen, so it will be interesting to see whether the government just saved a lot of wealthy people from selling their ski lodges by using our money, or if things really open up again and people start buying houses.   I'm expecting the former, but ever hopeful for the latter.

First of all, understand that our job is to determine what the value of the house is "as empty", meaning that we don't particularly care how your furniture is arranged, or the quality of your artwork.  However, that being said, we are human and likely prone to making some subconscious interpretations about how well the house has been maintained.  I will see a neat and tidy house and on some level automatically assume that the owners care about the property and have done the necessary work to maintain it.  (This is not what I assume with a "flip" property, but more on that in another post.)  Conversely, when I see a house with an overgrown yard, or with trash in the yard, rooms and garages piled high with decades of misc "stuff", I have to assume that if it is too much trouble to trim the bushes annually it is probably too much trouble to deal with a dripping noise in a wall somewhere.  So the bottom line is, a cleaner, neater house will never hurt you. 

At the same time, don't go overboard getting ready for an appraisal inspection.  You don't need to put on a new roof, or paint the house, spend $10k on landscaping, or even steam the carpet because the appraiser is coming.

We will usually take photos of the front and back of the house, the kitchen, living areas, baths, and a representative bedroom or two.  So make the bed, put your more personal items away (the things people leave on bathroom counters and headboards when strangers are visiting never ceases to amaze me), shove misc clothes and boxes into the closet, and put the dishes and food away in the kitchen. 

Other things to do? 

• Make your attic accessible if at all possible.  Sometimes they are easy to get to (a pull-down staircase), and other times it is a scuttle hole in a tiny bedroom closet.  For many appraisals, we are required to at least get our head and shoulders into the attic to view it. 
• If you are on a pier & beam foundation, please remove the access panel (if there is one).  Similar to the attic, we need to get at least a peek under the house.
• Make sure that we can see ALL of the house while we are there.  If a door is shut and locked and your teenager/relative/guest is sleeping or has the key, we will have to come back, which means someone is going to incur an additional trip charge and delay the process.  We know it sounds stupid and it's just like all the other rooms, but occasionally it isn't, and we are not going to risk getting sued because we didn't take 10 seconds to look in the room.  As I mentioned above, if you have fashioned a Domination" room or have a stripper pole, all those items are considered "personal property" and don't count towards your value, so we don't care.  Most of us have already seen plenty of strange stuff, so unless you are doing something illegal, it is not going to phase us.
• Let us know if there are any easements or encroachments on your property.  Do you share a driveway?  Is the neighbors fence a foot onto your land?  We will find out eventually, so it speeds up the process to know in advance.
• Make a list of any improvements you have done in the past 2-3 years.  (See my other post concerning "Maintenance vs. Improvements"). 
• For large homes, a set of blueprints is always nice to have.  And it might get us out of your house a little faster!   

Well, we are coming up on the end of another summer of record high temperatures here in Austin, TX - I think a total of 44 days over 100?  I just don't know how appraisers in Phoenix do it (besides very early and very late in the day!)  September will probably add another 2-3 days of 100+ as well.  Of course, I love Texas and would take the heat over the cold and snow any day.  Snow is great to see when you're on vacation, not when you have three houses to measure...

I also got a call today from a homeowner doing a refinance who wanted to see if I would do an appraisal cheaper than what was being charged by his mortgage persons appraiser.  I appreciate the fact that he was bargain shopping and trying to negotiate a better deal, but what cracked me up about it was the fact that his mortgage broker is going to make about $2,500 off of him for probably 5-8 hours of work, while the appraiser is going to put in the same amount of time for $375.00.  I think he needs to try cutting costs on the people who can afford it, and the ones sitting in a nice air conditioned office all day! 

A safe and happy Labor Day weekend to all of us hard-working real estate professionals...

I've been getting email advertisements lately for a website that "allows" you to register as a "Reverse Mortgage Appraiser".  While I applaud the guy for creating a business, I cannot for the life of me figure out why anyone would pay $150 to "register" (for one county, $50 for additional counties) for this.  I'm not sure if the marketing point is to sucker in appraisers who think that you need some special education or license to do reverse mortgages, or that a lender who wants to do one will think that instead of calling their usual appraiser they need to find a "specialist" and so will just do a web search for one. 

Anyone that is FHA approved can do reverse mortgages, and it is fairly easy to find lenders/brokers who are doing them.  Personally I would rather pay a temp $150 to make phone calls and send emails for a day to every potential lender in my area. 

Oh, they have a "Code of Ethics".  Unfortunately I don't see anything different in there that I don't do now with all of my clients, regardless of age.  And how do they enforce this?  Is there a follow up call from RMA to the homeowner to make sure the appraiser was courteous? 

Don't get me wrong, I think it is a fine idea to make some extra money by creating a website and a database.  I wish them the best, and hope that they are successful.  However, this one is no different than every other site that wants you to pay a fee to register before they have even sent you an order, and won't guarantee any business.  If they were smart (and actually had the volume) they would display how many orders they processed (total and monthly) and break that down by state and county.  That way I could look at Travis County, TX and see that the five appraisers that are registered have received a total of (x) orders so far this year.  If I saw that they had split 200 orders so far, that would incent me to sign up. 

My bigger problem with this is that it is yet another AMC.  Maybe they do give you a full split and make their money on the county registration and possibly some advertising, and if so I applaud them for it.  Maybe I should start an AMC called "Travis County Appraisers" and charge appraisers to sign up for it, then market it as "THE place to go to find appraisers in Travis County!"

When I first got into this business I spent $100 for a "premium listing" with some web site directory, and never saw an order from them.  And they had the balls to call me back next year to renew!  Since then, my question to them has always been the same: Can I pay you from the proceeds of my first order?"  They have never taken this deal, and I doubt they ever will.