Trainee Residential Real Property Appraisers in Minnesota.

Just a quick heads up to Trainee appraisers in Minnesota.  If you do not have a supervisor lined up, you will want to find one as quickly as possible.  Prior to 2008, you could obtain a Trainee Residential Real Property Appraiser license without having a supervisor.  That changed in 2008 when Minnesota changed to a model similar to that used for Real Estate agents.  Trainees must register themselves with a supervisory appraiser that holds a Certified Residential or General license.  This is like real estate agents that must associate themselves with a broker in order to obtain a license.

The Trainee can have as many supervisors as they like.  However, supervisors may only have three Trainees at a time.    

The $200,000 word.

What is the difference between "either" and "both?"  Its about $200,000.  I recently performed a valuation where the owner created an easement agreement with a neighboring property owner.  They wished to build a common entry between their buildings which straddled the common property line.  In crafting the agreement, however, they worded the termination clause to allow "either" party to cancel the agreement.  Normally, such easement agreements require mutual agreement to cancel.  Since either party could cancel the easement on a whim, the beautiful $200,000 entry way had no contributory value.

USPAP Nerd!

Go ahead, call me a nerd.  I accept it.  Teaching USPAP courses is among my favorite activities.

I am finishing up a USPAP power weekend by teaching the 7 Hr Update course on Friday and the 15 Hr course on Monday and Tuesday.

Thanks to all that came out to Kaplan and made the classes so much fun.

Poetic Justice

As an appraisal instructor, I often hear complaints by appraisers about having no mechanism in place to halt the unsavory practices they see everyday in the mortgage lending world. 

In an article published by Appraiser News Online, a staff appraiser for Countrywide lost his job in 2009 for airing concerns about deceptive practices that were inflating appraised values.  Normally, the appraiser losing their job and never being heard from again would be the end of the story.

Not this time! 

The appraiser, Mr. Kyle Lagow, filed a whistle blower lawsuit and, as part of the $26 billion mortgage settlement, was awarded $14.5 million.  Provisions of the U.S. False Claims Act allow private parties to sue organizations involved in illegal activity on behalf of the government and then share in the settlement.

Nothing makes me happier than hearing about an appraiser being rewarded (rather than punished, which occurs all too often) for doing the right thing.

Way to go Kyle!

Welcome to 2012 (USPAP)

An even numbered new year means a new edition of USPAP.  I know every appraiser sleeps with a copy of USPAP under their pillow and has read the 2012-2013 edition so many times their copy is already worn out.  Even so,  I thought I would bullet point the major changes:

• Revised definitions: Client, Extraordinary Assumption, Hypothetical Condition.  The definition of Exposure Time was moved from Statement 6 into the Definition Sections.
• A new rule: Record Keeping is now a full blown Rule
• Exposure Time (associated with market value) must now be reported.
• Revised disclosure requirement:  Disclose whether you have or have not performed any services with regard to the subject property within the 3 years proceeding the effective date.
• Standards for Personal Property Appraisal (Standards 7 & 8) have been significantly updated.
• Advisory Opinion 21 USPAP Compliance has been revised to help us understand when USPAP does and does not apply.

See you in the 7 hour USPAP update class!

Appraiser - Friend or Foe

Are you of the opinion that appraisers are killing deals and keeping the housing market in the dumps?

Many real estate agents, builders and lenders seem to think this.  This belief betrays a misunderstanding about what appraisers do.  Does the appraiser determine the value of the property?

If you said "yes" then you are among the misinformed.  It is the market that determines the value.  Appraisers simply report what the market has already decided.  If you disagree with a value conclusion and wish to dispute it, remember one simple thing.

Data is King!

The value is coming in low because that is what the data supports.  If you feel the value is unjustifiably low, provide the appraiser relevant, meaningful data that suggests otherwise.  Many real estate professionals have the belief they are not allowed to interact with the appraiser.  This is false.  You can be involved in the appraisal process as a data source.  Appraisers welcome any and all useful information you can provide.  

Treat the appraiser as an ally rather than an adversary and I guarantee you will see positive results.

Something other than bank clients.

Looking for something other than bank work?  Give your local real estate attorney a call.  Litigation assignments are often much more interesting and challenging...and not to mention they pay much better.

Recognize that big pay checks come with expectations.  Yes, the opposing attorney will try to make you look like a fool, but when the data is on your side, it's an easy argument.  The data speaks for itself.

What is the difference in fees you ask?  I'm happy to share.

I recently worked on a single-family residential property that, for mortgage lending purposes, would have commanded a fee of around $400.  However, for the condemnation intended use, the fee was over $9,000.  Not only was the client happy to pay the fee, I got a hug from the property owner for my efforts.

Home Loan Modifications Are Causing Foreclosures

Though the intent of home loan modifications is honorable, it is clear the system is broken.  Obama's making home affordable program was intended to help homeowner's avoid foreclosure. You can read about how the program was intended to work at makinghomeaffordable.gov.

If you decide to go for a loan modification.  Here is one piece of advice:  Somewhere along the process the lender will allow you to make a lower monthly payment while your application is being processed.  DON'T DO IT!  Keep paying your original amount unit you are actually approved.   Why you ask?  Isn't a lower payment the whole point?

Here is the reality,  it is highly unlikely you will get approved.  As many sources have pointed out, very few homeowner's are getting approval.  Like I said the system is broken.  So here is what is happening to many people attempting loan modification.  

They make application.  They are told they can make a lower payment while their application is being processed.  The lenders will take several months processing the application.  The lender will likely have a never ending list of needed paper work, that they will say they never received.  The lender will then deny the application on the grounds the homeowner never provided the needed paperwork in spite of the homeowner sending in the documentation two, three or even four times.

And guess what, since the application was denied, the difference between the original mortgage payment and the lower payment the lender told you to make while your application was in process is now treated as LATE PAYMENTS.  Since your application took 6 months to process (and be denied), you are now 6 months behind on your mortgage payment.   So if you can not come up with the cash to get current on your mortage (and chances are you don't since that is why you were applying for the modification in the first place) the lender now starts foreclosure proceedings.

So the program that was intended to help keep your home is actually causing you to lose it.

The New Interagency Appraisal & Evaluation Guidelines

On December 2nd, the final Interagency Appraisal & Evaluation Guidelines were published.  These represent the basic appraisal requirements when working for a federally regulated lending institution.  The last set of guidelines were published in 1992 and only a few pages addressed appraisal requirements.  This time around the guidelines are 70 pages and address everything from maintaining appraiser independence, appraiser selection, use of AVMs and BPO as well as requirements for reviewers.

A couple things of interest from the new guidelines:

BPOs can not be used as the primary basis for making a lending decision.
AVMs can not be used as the primary basis for making a lending decision.
Reviewers are expected to have sufficient eduction, experience and knowledge about appraisal methodology.
The appraiser independence requirements found in the HVCC are now part of the new guidelines.
Restricted use reports are generally not sufficient for supporting a lending decision.

The new guidelines can be found on the FDIC website at http://www.fdic.gov/news/news/press/2010/pr10261a.pdf

What makes you an appraiser?

The most common answer is holding a license or certification, but that would be the wrong answer.  Notice that USPAP says nothing about licensing. 

The main reason for being licensed is so that you can work for banks.  Granted banks are a large client base, but they are just a part of the appraisal universe, and frankly as far as clients go, they typically do not pay very well.

Believe me when I say there are clients that will pay 5 and 6 digits for your work, but it is not your license or certification they care about.  It is your knowledge and skills they pay for.   So what it is that makes you an appraiser?

Knowing the answer to this question will help you understand the opportunities that few appraisers realize.