Thoughts of R Scott Pierce Real Estate Appraiser

Here is the link to the FHA Roster Appraisers Homepage:

http://portal.hud.gov/hudportal/HUD?src=/groups/appraisers

All FHA appraisers should put this page under their favorites.  It's a quick and easy way to keep up with numerous FHA appraisal requirements including Mortgagee Letters, Handbooks, FAQ's and now their newsletter.

Here is the link to the Winter 2011 Newsletter: http://www.hud.gov/offices/hsg/sfh/appr/newsletter01_13_2011.pdf

Soure: ICAP eMail

FAQ – FHA 1004D Appraisal Update Completion Report

A BLOG for and to my many Realtor friends. 

More and more appraisers are starting to utilize foreclosed sales in appraisals.  It is not true that foreclosed sales should never be used in a appraisal report.  Appraisers, mortgage lenders, and realtors that state this have no clue what they are talking about.  Realtors should make sure these sales are adequately described in the listing and sold data.   Do not just put the foreclosed property in the local MLS and state it was a foreclosure.  THIS IS USELSS.  Decribe in detail the condition of the home, appliances that were missing, mechanical problems, any needed repairs, concessions that were made, repair money refunded, who foreclosed on the home, if the lender made repairs, and what marketing time the REO APPRAISAL was subject to. Be truthful and many times these sales can be eliminated for use in an appraisal report, or at least give the appraiser some data in which to make an adjustment to the sale on the grid. 

It is a myth that the appraiser is ask to value the home at a reduced market value just because it is a foreclosure.  However, the requested lower Marketing Time by the lender usually always reflects a value well below the so called going market. Most lenders that order an appraisal on a foreclosure, request what marketing time the value should reflect.  This is an important part of the puzzle that tells a knowledgeable appraiser if the property should or should not be utilized as a comparable.  So Realtors ask yourself these questions when placing a sold foreclosure in the MLS.  Did the lender do any work to the home?  Was the foreclosure appraisal done as is?  What value was put on the REO ADDENDUM of the appraisal if work was completed? What marketing time was requested on the appraisal?   Any and all information you can get on the foreclosure property would be helpful.  I promise if this data is truthfully obtained and placed on the sold listing, the appraiser will be able to explain to a lender why the comparable was or was not utilized in a report.  Todays technology allows lenders to know whats happening in almost every neighborhood.  So give the foreclosure sale more time than the normal listings and we will make it out of this foreclosure nightmare.  If you need help with this, contact me at (601) 268-0900, or email me at rscottpierce@comcast.net  I look forward to any comments.

New Rural Property Underwriting has me thinking twice about completing any more rural property appraisals.  Last week the underwriter ask me to count the head of cattle on the property, and place a comment in the report that no money is being made from farming the land.  Before that report, an underwriter ask me to place a comment in the addendum certifying that the property is not on a reservation.  And last but not least wanted me to find comps within a mile of our subject.  Hey Mr. underwriter!...there are no houses within a mile of the subject period.  Who are these people that demand all these ridiculous comments?  The dummies surely are not from Mississippi or from any rural area in the U.S.  My belief is that they barely have a brain.  Maybe they should look up sometimes from there guidelines so they will stop running into walls. 

The next big issue is having a rural property reviewed by an in-house appraiser.  You know ...the guy that got his license last month and still has no clue as to the real world rural appraisal dilemmas.  If the company depends on his review to grade you, it always gonna come up short compared to appraisers that only except "cookie cutter" reports. Those reports that have three very similar comps within a month old, with a minimum of adjustments. 

So in light of my experience of these issues, I have decided that no more rural properties are coming from this office.  I would rather do less work and have the dummies thinking they are getting good work than work my butt off and have them thinking my report is below par. Good riddance. 

Fannie Mae has issued the following Notice:

Appraisers  . . . please read a letter written by Jeff Schurman, Executive Director of TAVMA - Title/Appraisal Vendor Management Association to the Board of Governors of the Federal Reserve System urging them to delay implementation of the appraisal fee provision in Title XIV of the Dodd-Frank Act. 

Download your free copy of the Appraisal Fee Reference here.

The Good, The Bad, And The Ugly

This article refers to several charts that were originally printed in the paper version of Appraisal Press. Since these charts are too large to view alongside the article, we've included them in a PDF, Download the PDF here.

While county-level analysis may seem to be the most relevant to the fees you charge on a day to day basis, there’s no denying the fact that your business doesn’t operate in a vacuum. Statewide, regional, and even national statistics have a direct and measurable gravitational effect on you too. So, moving past the micro county level and looking at the macro, find yourself in the map below.

If you’re in Census Division 3, East North Central (Illinois, Indiana, Michigan, Ohio, and Wisconsin), you’re ranked at the very bottom of the nine divisions nationally, with a median fee of $300.

If you’re in the Pacific area, Census Division 9 (with California, Washington, Oregon, Alaska, and Hawaii, plus we added Guam), then you’re in the highest median fee zone, at a very healthy $400.

Clearly, there’s a fundamental difference in the two areas. Note that the 50 most expensive locations were dominated by counties in Alaska, Hawaii, and Wyoming. And of the locations with the lowest fees, appraisers in Ohio were represented disproportionately, with 18 of the bottom 50 slots being taken by counties in the state. Four nearby states — Pennsylvania, Kentucky, Illinois, and Wisconsin — also had three to four counties each in the bottom 50.

Why Is The East North Central So Bad?
The fact that the entire region is so low would seem to indicate that cost of living or oversupply of appraisers is causing the problem. But that’s not borne out by the facts. Many areas with lower costs of living, notably in the South, enjoy higher fees, for example.

And when judging potential oversupply conditions, it is true that the counties in the East North Central division have an appraiser coverage count (the number of appraisers who indicate that they cover a given county) of 41, which is 15% above the national average coverage count of 35 per county. But, that doesn’t explain why, of the 50 best counties in terms of orders per appraiser, seven of them are in this region — and yet six of the seven with the highest number of orders per person are also significantly below the national median appraisal fee, and none are above. Two of the seven with the most orders per person actually rank among the 50 worst counties in the nation in terms of median fee. So, appraiser oversupply is obviously not the cause of low fees.

The AFR doesn’t have the data to say definitively, but it isn’t beyond speculation that — since it’s essentially the backyard of the “birthplace of AMCs” and the historical home of the software vendors who touted AMC connections as their raison d’être (ACI and the former Day One, now part of ACI) — it’s quite possible that appraisers in the area have simply come to accept low fees as a way of life. Fees may over time come in line with national norms now that it’s apparent that there’s a supply/demand anomaly there, if appraisers take action.

It’s also worth noting that, in Figure 2 (PDF), the relative standard deviation (RSD%) in the East North Central is the second lowest of all divisions. So the fees aren’t just low, they’re uniformly low. (High RSD% means high variation, and lower RSD% means consistency.)

Standard Deviation Ranges By State
Now look at Figure 3, (PDF) with average (not median) fees per state. Showing the average is necessary because, in Figure 4, (PDF) we add and subtract one standard deviation from the average in order to determine the likely range of the most common fees.

In Figure 4, the dividing line between the red and green bars is the same as the endpoint of the blue bars in Figure 3, meaning that the dividing line in Figure 4, is the average. The red and the green are one standard deviation below and above the average. So anything between the low and high range of the red and green bars is generally encountered about two thirds of the time.

You can instantly see that some states have a high range and some a very low range. New York stands out as a very “inconsistent” state. The urban versus rural dichotomy in New York doesn’t fully explain the variation, since similar urban/rural states like California have a variation approximately half as pronounced. So, in New York you can deviate pretty widely from the mean either way and not be out of the norm, whereas expectations would be narrower in California. And don’t even think about stepping out of line in Alaska.

In the end, it’s obvious that you need to understand your county, state, and region, so you know what latitude you have to push the boundaries of your fees — and what urgency you may have to do it.

Download your free copy of the Appraisal Fee Reference here.

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Frequently Asked Questions Regarding The Appraisal Fee Reference (AFR)

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How Much Are You Worth?

How Big Is The Appraisal Pie?

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How To Get Mercury Network Orders

Foreclosures causing Prices to Tumble in Mississippi Gulf Coast

I recently spoke to Homeownership Center to get a clarification on how they want cases handled when there are addendums to sales contracts after the appraisal has been completed.  Specifically when lenders ask to change the sales price to the appraised value. Which occurs when the home does not appraise at its sales price.  

FHA's stance is that it should be handled in underwriting and no changes made to the appraisal. It is their belief and arguable so that it would constitute a new appraisal if facts are changed and the only time they allow for the original appraisal to have any changes is for corrections of errors or omissions and cannot take into consideration any new information that was not known and available at the time of the appraisal.

I asked if that could be put in writing or sent out as a memo and they said if there were any questions  the underwriter can call there known HUD Rep., as it is an underwriting issue not an appraisal issue.

I have been handling this situation in an addendum.  Stating the parties have changed the sales price to ?    due to the appraisal.  And, per the underwriter I have included this change in this addendum, but have not changed the original appraisal or the original sales price.