I’m not an Appraiser, You just think I’m one

Ever see the AT&T commercial where the surgeon walks in and he says ” I Just got reinstated, Nervous? Thats ok so am I “. If not see here: https://youtu.be/1YT3erQZoq4

Or the late 1986 commercial with Peter Bergman that states ” I’m not really a doctor but I play one on TV”. If not see here https://youtu.be/ts0XG6qDIco

Well get ready Consumers because the person that is about to visit your home IS NOT an appraiser or just pretends to play one without the proper training.

See, Fannie Mae and the Appraisal Management Companies (AMCs) are ready to send appraiser imposters to conduct appraisal inspections on our homes.  These same AMCs were created to manage appraisal processes for lenders, but without laws, standards or accountability, their self-defined charters have morphed into other functions.

They sell their services as being the only way for a lender to procure the best “Qualified” appraiser for a particular assignment.  In fact, they will shop around until they find the cheapest appraiser.  Hey, we all like cheap, right??  We routinely shop for bargain prices on all kinds of things, but honestly, would you settle for the cheapest mechanic trusting he’ll keep your car safe, hire the cheapest plumber for you home’s systems, or seek out the cheapest lawyer to safeguard your interests??

We want the best car repair service, the one with the best reviews. We research the best qualified plumber to reduce the risk of more costly household issues later. And when we face a lawsuit, or have to sue to retain our rights, we pretty much want the best legal representation available, right? So why would we settle for low/no standards when it comes to our homes, the most valuable single asset most of us will ever own? 

That’s essentially what’s happening when an AMC sends a “non-appraiser” to photograph, measure, sketch, and observe a property, it’s quality, condition, and surroundings instead of using a qualified appraiser. That’s the AMCs’ bifurcated appraisal where the observation function is totally isolated from the valuation.

Don’t we have a right to expect that someone coming into our home, to develop an opinion of its value, is specifically qualified to do so? Aren’t we trusting that person to gather the information necessary to develop an accurate valuation of our real estate? And yet, are we willing to allow an AMC to instead send an appraiser imposter, someone who has little/no training, to perform the observations that will be the foundation for the value opinion of our home? 

As a consumer, ask yourself those questions another way: Am I really okay with someone coming into my home, expressly to determine its value, who has zero appraisal training, zero knowledge of what is significant to observe, zero valuation experience, and not insignificantly, zero liability? That party’s only accountability is to hand over their gathered info to an experienced appraiser who will then do their best, under severely limited circumstances, to come up with the value of your home.

Why not just have a real appraiser do it? The fully qualified, certified, bound to standards of ethics and competency, continually educated appraiser? Good question

Ask yourself that again… Are you ok with someone coming to your home that has 0 training, 0 knowledge as to what to look for and 0 experience only to hand that info over to an appraiser who may or may not be experienced to come up with the value of your home? Why not just have the appraiser who has all these qualifications already do it? Good question right?

Lenders and Fannie Mae along with the their Appraisal management companies have decided that to speed up the process, its better to have unqualified people go out and obtain the information on a property and submit that info to an appraiser to do a valuation. Read that again. “Lenders and Fannie Mae along with the their Appraisal management companies have decided that to speed up the process, its better to have unqualified people go out and obtain the information on a property and submit that info to an appraiser to do a valuation.” This is like me an appraiser coming to your house to tell you how to run your electric lines on your new addition. I have 0 clue but hey I’ve seen 1000’s of homes and should have some ideas right?

Their reasons? 

1) To speed up the process, in theory. The reality is that the AMCs are spending days and weeks shopping for the cheapest and fastest appraisers before an appraisal assignment even makes it to an appraiser’s desk. 

2) To make it cheaper. For a bifurcated appraisal, they’ll pay an unqualified person $25-75 to observe the property, and then have an appraiser do the rest at $50-150, all while charging the consumer far more so that the AMC can pocket the substantial difference. 

3) To take advantage of the available technology. They’re enamored with “Big Data” and are pushing appraisal waivers in lieu of appraisals. They think technology is great with all the appraisal data they’ve compiled over the years. However, look at Zillow and her sister sites where the estimates are based on broad algorithms and not property-specific. 

Frankly, if I had to guess, I’d say 90% of their valuations are over-inflated. Does it make any sense at all to depend on such a product? Is it worth saving a couple hundred dollars when the value of such an important asset—our real estate—is at stake?

Let’s be honest here. AMCs bring nothing valuable to the valuation process. They were put in place after the housing crash to serve as a middle man between the appraiser and the lender. However, they haven’t been regulated, and their main lobbyist group, REVAA (Real Estate Valuation Advocacy Association), seems to think they have some sort of power, now that they are creating products that ONLY benefit AMCs and not consumers. 

Want an example? Coester VMS, an AMC who has gone out of business, owes millions in fees to appraisers for jobs completed. REVAA allowed this company to be a part of their network, to be represented by REVAA, even knowing that Coester VMS had a poor history as a company. REVAA’s panel includes some of the most notorious, low-paying AMC firms, and those that have decided to be more than a middle-man and take advantage of the consumer. 

Don’t believe me? Here is another example.

Clear Capital. An AMC out of California that has a product called a ClearVal. I won’t belabor the description of this product as it has already proven to be not only deceptive but completely inaccurate. There are many articles written about this product and how the company uses out of state appraisers to perform the analysis.  So now adding unqualified inspectors to the mix, with the out of state appraisers performing the analysis….. What could go wrong???   

Think about this…. We will go out there and find the best TV to buy and pay for it. We will go out there and find the best lawnmower and pay for it. Why? Because we want the best so we don’t have to deal with potential issues down the road. But when it comes to valuing our home, does it make any sense at all to allow someone, with literally zero clue about appraisal, to be the individual making the observations that will inform the appraisal? 

Makes no sense to me…especially when that 50″ TV is sitting in the pawn shop or on eBay because I decided to allow Johnny-No-Knowledge to collect the data for my home for $50.00 and then expected an appraiser, who consequently had zero clue about my home and its surroundings, complete a valuation with uninformed secondhand data.

It amazes me how many people complain about the tax assessor increasing taxes based on incorrect info, and then they’ll carefully seek out someone experienced to solve that problem, typically an independent local appraiser with the training and experience to provide accurate market-reflective data. If we can be that outraged by the county assessor, then how can we NOT be outraged by the ill-advised shortcuts, the untrained individuals, and the non-experts doing our home inspections to value our homes?

I will end with this. When we choose to use these cheap and fast products and untrained people, we have no one else to blame when things go south, and they will. It’s exactly the same dilemma as buying a car without the due-diligence research or buying a home and skipping the home inspection. Those choices come with consequences, all of which rest on the shoulders of the consumer and nowhere else. Think About It!!!

AGA Is On Your Side

We have all seen the the commercials for Nationwide Insurance and that they are on your side. As real estate appraisers do we know who is really on our side?

There are so many organizations that represent appraisers. Many claim to help appraisers, many do help appraisers, many are out there to fight for appraisers, many offer education and many just want us to join them in their own agenda journey made up of false narrative and false promises. I’m not here to force you to join anything. I support the state coalitions and I also support the organizations that are willing to help appraisers even if I’m not a member. But there is one organization that puts YOU, the appraiser, at the front of the line every time. That organization is the American Guild of Appraisers or the AGA.

First lets get this out of the way. The AGA as many think is a Union. Well that’s not true. The true Fact is that the AGA is a Guild with Union affiliations. These affiliations allow the AGA to offer benefits, tools and resources to help support the appraiser and as the Guild grows so do the benefits of those union affiliations. Many big organizations that represent appraisers have the funds to do things the AGA cannot at this point in time. However the AGA does one thing most other organizations don’t and that is work for their appraiser members on a one on one basis and help them with issues such as: blacklists, getting paid, & state board complaints. Yes. All of these. The AGA works hard for YOU, the Appraiser. They don’t stop there. They even work on national issues in support of or not in support of issues pertaining to the Real Estate Appraisal Profession with other organizations to make a change.

To clarify more I personally say the AGA is like car insurance. Kinda like your E&O insurance but better. You pay car insurance just in case something happens for the year. If nothing happens you are at a piece of mind knowing you had it. But what happens when you get into an accident? The insurance company is there to help cover you. Well the AGA is the same way. You pay a fee for the year and if you get in trouble with a complaint, a blacklist, not getting paid etc, you now have the AGA there to work hard for you to help resolve this. Don’t believe me? Here is one member that was kind enough to write a review on the AGA:

Being a real estate appraiser can be challenging.  We don’t advocate for our “clients” which could be a bank, a homeowner or a potential buyer.  We advocate for public trust.  Yeah, try explaining that to most people who engage you for your services.  There are often times when an appraiser performs his or her job correctly that one party may be negatively affected by the outcome.  Of course, this is no new story to any of us.   Every appraiser has that little voice in the back of their head saying, “it’s not if, it’s when.”  When will that certified letter show up for your state board?  That’s right, somebody filed a formal complaint on you as an appraiser.  Of course, this type of thing can happen for many reasons, some of which are warranted, some of which are not.  Good news, you don’t have to be alone.

In mid-2018 I had one of these certified letters show up for the first time in my career.  My immediate reaction was stomach sickness, literally.  After the initial shock and review of the complaint, I took a breath and started tapping my resources on the best way to handle the situation.  I reached out to a few of my peers for guidance and was reminded that I was an active American Guild of Appraisers member, the AGA.  Once I contacted Jan Bellas, she very professionally ran me through the motions of what the AGA was going to do for me and how WE were going to handle the complaint.  This initial phone conversation was probably the most reassuring thing I have EVER heard in my appraisal career.  

Once I accepted the help from the AGA I was instructed to send the same information to her (Jan) that the state was requesting.  Within a few days the head appraiser of the review committee, Mike Ford, responded with a VERY detailed peer review letter of my appraisal, work file, and complaint associated.  I think the best part of working with Mike on my complaint was his brutally honest and matter-of-fact approach.  Some of you may know Mike, and if you do, you know what I am talking about.  I’m very confident if I were to have been I the wrong, he would have told me.  However, he STILL would have been in my corner to help me through my predicament; even if it meant telling me things I didn’t want to hear.  The good news for me was that I wasn’t in the wrong.  After only 2 months of the pending complaint being opened, the state notified me that no action against me was going to take place.  Those of you that have been through this know what kind of relief comes over one’s body when receiving this letter.

Ladies and gentlemen, I am not here to sell you on anything.  This organization does that on its own.  I am merely here to tell my story and how much the AGA made a difference for me.  If you have ever been in this situation you may know how alone and stranded you feel.  The AGA is not only fighting for the appraiser, they CARE about the appraiser and the appraisal industry. The process of working through my complaint with the AGA was invaluable, educational and REAL.  If you are looking to be a part of an organization that has your back or, if you make honest human errors that will work to mitigate ‘damage’ I highly recommend talking to an AGA representative.

(from *.K., TX)

This is only one example of many that illustrates the impact of the AGA.

I also was turned into the state board for a complaint that was dismissed due to the help of the AGA and while I was panicking and worried, I felt very good knowing that the AGA and the Peer review committee were up for the task. They exceeded my expectations and I was even given some pointers on my work by Mike Ford to help me going forward.

I really hope this blog explains the AGA more and that you will consider looking into becoming a member not just for you but to also be a part of an organization that will continue to fight for the real estate appraiser profession. For the cost of 1 appraisal per year you can know that the AGA is really on your side and working hard for you.

Change is only made if YOU and others want to make it. The AGA wants to make that change. Do you?

PRESSURE: MY STORY

In just 16 years as an appraiser, I’ve seen and heard many things. Some, I just want to forget and some I wish I never heard.

Appraiser pressures aren’t normal everyday life pressures, they’re different.Typically, when business is good, it’s for reasons like doing a great job and providing a great service. Or, it could be because one aims to keep the client happy by hitting value, which is not exactly a good thing. If business is slow it could be because the market slowed, the quality of service is poor, not providing obscure requests for updates, or maybe they removed you from their list of approved appraisers. Hell, we all know it could also be because your fees are reasonable but considered unreasonable to the AMC and they continue to shop for the cheapest. Truly sad days in this respect.

We became appraisers to do the best jobs possible for our customers, abide by laws and regulations, and uphold the public trust.

Today, too many AMCs are controlled by lender demands and if they can’t make the lender or client happy they risk losing the account. To leverage themselves, they’ve negotiated my time, my expertise, and my contribution to the process on my behalf and unfortunately, they’ve done a very poor job negotiating and it’s starting to show.

In this example of client pressure, a subject property appraised for $180k; the contract was for $225k. Five comparables were provided on the subject street including one across the street. All five were renovated like the subject and the sale across the street was an almost perfect match to the subject; it sold for $180k a month prior. Three others on the same street sold between $175 and $180, within 3 months of the appraisal. They were the same style of home and similar size, too. The last one was around the corner and sold for $195k and a little larger in size.

When I submitted the appraisal, I was BOMBARDED with requests to consider other sales that were larger, sold several months back, and one had a basement. After I addressed as to why they weren’t used, I resubmitted the report. They sent it back again with two more sales to consider that were also less relevant than the comparables provided. In total, this happened three times. So basically, what they were saying is that all of research and verification of recent sales on the same street were insufficient compared to cherry picked sales from around the market area. This is what value pressure looks like. Pressure to change the value to meet everyone’s expectations to make the deal work, not what is right or correct to protect the public trust.

I did not succumb to the pressure and for that, my assignments went from several to zero.

In another example, a subject appraised for $370k, the contract was for $385k, the list price was $400k (this is important). I used sales in the immediate subdivision, three of which had finished basements, that ranged from $350k to $385k. Once the report was submitted, I was immediately contacted by the selling agent claiming I failed to do my job and failed to consider chandeliers and drapes and two Tupperware containers that were claimed to be rain collection systems (I’m not joking). I was then supplied with two new sales to use; both from other subdivisions down the road. I was also provided a prior appraisal that was completed three weeks earlier. Upon review, I see this is not an appraisal report at all, it was a desktop report and the appraiser picked the top 3 sales from other areas instead of using the comparables in the immediate neighborhood. The desktop value of $400k is the (same as the list price). An interior inspection was not completed and relevant adjustments for differences in basement area and finishes weren’t considered. I received three messages from the agent threatening to turn me into the state. The lender asked to reconsider value three times.

I did not fall for this pressure and continue to uphold the public trust to do what is right for everyone, not my wallet.

THIS IS WHAT PRESSURE is like for appraisers. Hit value, get paid. Don’t hit value, get fired or quit.

I work hard and do the best I can possibly do, yet some who have never understood appraising, have the education or credentials to appraise, are suddenly somehow now the experts.

Bill Black describes it perfectly as the Gresham’s Dynamic in valuation which simply means that bad ethics and practices push good ethics and practices out of business. No one cares until it’s too late and THEN want to cry wolf.

I am sounding the alarm for consumers, if you really want to know your net worth, hire an independent and trustworthy credentialed appraiser to serve YOUR best interest. This is about your home and the well-being of your family. I am the appraiser who does not fall for control fraud and neither should you.

ROUND AND ROUND

I’m a 43-year-old guy and I grew up in the 80’s when music was odd and fun. I had some favorite bands like Def Leppard, Guns N Roses, Bon Jovi (hello I’m from NJ) and Ratt. Yes, Ratt and one of my all-time favorite songs is Round and Round. Here’s the throwback: https://youtu.be0u8teXR8VE4

Funny, it’s relevant to me today in the valuation, regulatory and real estate appraisal sectors. One specific lyric offers so much insight into the Lender/ Real Estate Appraisal world…

“Round and Round

What comes around goes around

I’ll tell you why”

Here is where I tell you why

The real estate crash 10 years ago was due to lender pressure on consumers to buy property they could not afford and appraisers to inflate values. If appraisers didn’t fall in line and file to meet those inflated values, they were blacklisted or told you would get no more work. Lenders all over the US were pressuring appraisers to “make value” so that they could lend money; it was never about your biggest family investment as a consumer. Appraisers were giving their unbiased professional opinions of value only to have the lenders strike back with unreasonable demands and some going as far as blacklisting them. Many appraisers did not give into these pressures and eventually wouldn’t see any work. The appraiser was doing his or her job correctly and protecting the public trust only to have the lenders ultimately have the final say.

Round and Round, what comes around goes around and 10 years later it’s happening again.

Appraisers are once again vocalizing about the pressures of lenders and AMCS to make values, do what they say or suffer the consequences. Those consequences are once again blacklisting, removal from appraisal panels, limited work or nonpayment for their services. Isn’t the whole idea to have an appraisal to assist the lender to lend money or not? Assist in the risk? Seems like we are back to 2008 again when the warning shots were being fired but the regulators and public ignored those warnings. The question is, will they ignore them once again?

You don’t believe me, do you? Well here is a recent example from an appraiser this past year and the messages from the lender (shown in 1st pic below). The appraiser did a report, but the lender wasn’t happy with the results. So, they hired another appraiser who appraised it for a higher amount to make the deal work. As you can see the first appraiser was pressured and then removed from getting work. But it doesn’t stop there. In the second picture the lender basically told the appraiser that he knew this wasn’t going to go well and that he (the appraiser) should have said something if it wasn’t going to come in close to the Sales Price (SP) to stay in the GOOD GRACES of the lender. What??? So, I guess that means they would find someone out there to make the deal happen?

Round and round as we are now back to pre-crash pressures and taxpayers may get taken for another ride. To me it sounds like the lenders only care about making a deal work for them while the honest, unbiased appraisers are once again being forced to the side, being strong armed and the consumers are paying the price.

as the song says ” you put an arrow through my heart”.