Josh – Page 5 – Active Appraiser

Why Attorneys Order Appraisals for Residential Properties- Western Colorado

by Joshua Walitt

I would say that a good percentage of my business is related to families buying or refinancing homes. Maybe it’s a first time purchase for a young family just starting out or an existing family refinancing their home for improvements or sending one of their kids to college. In these cases I deal primarily with the lenders, appraisal management companies, and real estate agents. What people don’t realize is that a fair amount of my business comes from attorneys needing property valuations for a variety of legal matters. Sometimes it’s still family related such as divorce, personal bankruptcy, or clearing up an estate issue.

Times When an Attorney Will Need a Residential Property Appraisal

Divorcee:

When two parties decide to end a marriage they are going to need a valuation of properties jointly owned. In Colorado, a current valuation on all marital real estate holdings will likely be required by the attorneys or the judge. Appraisals will definitely be required if there is any dispute between the parties for settlement purposes. Since disputes often occur over the perceived values of marital properties during a divorce this is the most common reason for a lawyer needing to hire a real estate appraiser. Often I can suggest the most effective scope of work for precise documents to be utilized in court for my attorney clients.

Bankruptcy:

If you own a home and decide to declare bankruptcy the court is going to require a current property valuation. At this time your bankruptcy attorney is going to have to call a residential real estate appraiser to satisfy the court’s valuation requirements.

Bail Bonds:

When an attorney’s client is arrested often the court will set bail and the defendant will post bond. These bail bonds are usually secured against real estate property. Because of this, the bail bond company may require a property valuation to make sure there is enough equity in the home to secure the bail bond. These types of property valuations are often satisfied with what is known as a “Desktop” appraisal.

Estate Planning/Wills/Probate:

Here in western Colorado I’ve seen several instance of what can happen regarding real property when it comes to estate planning and probate. The executor of a trust needs strong numbers to satisfy IRS and various state and county agencies. Now for tax planning reasons a trust or tax attorney will call a real estate appraiser to value a property prior to it be entered into the trust. An executor settling a will might need an appraisal to determine Market Value of the property at the time of fatality. And unfortunately if estate planning didn’t occur and a property goes into probate, a real estate appraiser may be called in by an attorney to provide a value.

Property Tax Assessment Appeal:

If you live in Garfield, Delta, Montrose, or Mesa county in Colorado and believe you’re overpaying on property taxes; you’ll need to go and dispute your property tax bill at the county assessor’s office. If you are working with an attorney specializing in property tax law they will need to order an appraisal to determine whether the property’s value is less than what is on the county tax rolls to apply for a reduction. Attorneys need to be confident that they are working with a real estate appraiser who provides iron clad property valuations that will stand up to county scrutiny and help win the property tax reduction. I myself have value dispute experience with the county.

These are just a few of the situations why an attorney would order an appraisal for residential properties. I know from personal experience that an expert appraiser can provide key and instrumental evidence with a quality appraisal.

The above statements are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. The opinions expressed at or through this article are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

WATCH Related Tutorial Video: Why Real Estate Agents Order Appraisals VIDEO

Making First Contact

As I talk with appraisers across the country, I’ve heard there is a slow-down in some areas now (although others report they are as busy as ever). We can choose to think negatively about a slow time, or we can see the slow time as an opportunity to market, market, market.

Many times, we’re tempted to sit back and wait for the next assignment, taking for granted that business will simply come through the door on its own. But we can’t always assume business will come our way – sometimes we need to drive business to us! What are you doing to actively promote and expand your business in Appraisal Services in Colorado? Let me share a few ideas related to marketing, which can be useful in the short-term and long-term.

Visit realtor groups and speak on a variety of topics: de-coding appraisals, market analysis, inspection items, appraisal methods 101, etc..
Send postcards to agents with listings that have been on the market longer than typical. Or email them. Do they need a second opinion?
Drop in to attorneys’ and accountants’ offices and leave a resume. Follow up with a phone call.
Be sure that your current clients know the full extent of your various services. Would a friendly email remind them that you also perform appraisal reviews?
Go to local networking events, like those put on by chambers of commerce.
Send follow-up cards or emails to new contacts.
Meet with local bankers and give them a market overview, demonstrate the technology you use, and have a question-and-answer session.
Provide a free email newsletter that contacts can opt to receive.
Start or update your social sites, like a blog, website, facebook, linkedin, youtube. Network and introduce yourself to second-degree contacts.
Join online discussion groups and present yourself in a professional manner.
Meet realtors one-on-one and offer to measure a house for them. They may be a homeowner’s contact in estate, trust, divorce or other life change situations.
Work with a county’s appeal board for property value disputes.
Volunteer for state and local boards. Write a column for your local newspaper.
Contact and update your current clients regarding your updated resume, license expiration date, new services, etc.. Are there new contacts at their company?
…the list could go on and on…

The bottom line is to be the local expert (and be sure you can deliver). Some argue that it doesn’t really matter nowadays if you know a local bank officer or a realtor. But in my experience, these folks invariably know people who need appraisals. And nothing in USPAP or appraisal independence rules bar us from marketing ourselves – we are running a business.

As with any marketing endeavor, you’ll get a lot of “no”s before you get a “yes”. That’s okay. First Contact is nerve-racking and scary. But making contact with new (and don’t forget the existing) clients means you’ve reminded them of your name, voice, face, and services.

Back in 2006, I visited a small local lender, via an “in” from a loan officer I had known for several years. I met the manager and she told me they already had a small list of appraisers they used, but she took my letter and card. In 2008, long after our meeting had been pushed to the back of my memory, she called and explained that an appraiser was retiring, and they wanted to add me to the list. It works – sometimes later than sooner!

What have you done lately to market your business? I’d love to hear your ideas!

This article was first published from here.

How to create an Appraisal Report: Following Instructions

I normally get very few revision requests, and usually for minor items. I’m not saying this to pat myself on the back, but to explain how surprised I was a few weeks ago when I received two revision requests in the same week. And they weren’t just any type of revision request: they were the dreaded “instruction” from an underwriter.

“Appraiser to include a second sale whose unadjusted sale price supports the opinion of value, and resubmit report.”

“Appraiser to remove the time adjustment from comp #3, and resubmit report. Our investor does not allow time adjustments.”

A few months back, I got another memorable instruction: “Appraiser cannot include any comps that exceed per-line, net or gross adjustment percentages of 10%, 15%, 25%. Appraiser to include different sales that do not exceed these requirements.”

I won’t go into details related to these reports, because I want to focus instead on how we can respond to these types of instructions from lenders and AMCs. (And, no, I am not a regulatory expert. I recommend taking a class or webinar on appraisal-related regulations.)

The issue at hand is that TILA, many states’ AMC rules, HUD, Interagency Guidelines, and other entities restrict this type of instruction from lenders and their agents (AMCs) because such conditions may lead to reports that are not based on the appraiser’s independent judgement (or even sound valuation principles). For example, the first request above turns the appraisal process on its head. Normally, the appraiser chooses comps based on similarities to the subject, then develops an opinion of value. Instead, the appraiser is being instructed to develop an opinion of value, then choose comp/s based on that value opinion. In the second, the appraiser is being instructed to ignore or remove a necessary adjustment. Remember learning, in your first-ever appraisal class, that you must adjust for market conditions? (By the way, in this situation, the client agreed with my data and analysis – that the market had increased – but simply didn’t “allow” adjusting an older transaction.)

So, how can we handle these instructions?

First, be polite. Don’t make insulting, belittling or threatening remarks. Simply state facts: facts related to the subject property, the comps, the market, and acceptable appraisal methodology. Consider this an opportunity to teach; whether they learn or not is in their control. If you respond negatively, don’t expect a positive outcome. Show your willingness to work through the situation compliantly and professionally.

Put it in writing. Submit your information in writing (email, fax, online messaging system), and specifically request a response in kind. This way, you can fall back on exactly what was communicated. And be sure to ask yourself how your message would look if (hypothetically) published in the newspaper or read by a regulator, a colleague or your mother?

Ask for the individual’s name and title who is making the instruction. I’m not suggesting we burn bridges by making it personal. But if they believe they are right in instructing you, let them identify themselves and be accountable. “Please provide the name and title of the individual requesting this, so I have it for my workfile” is simple and to-the-point; in the same message, let them know what action you are taking in the meantime.

Don’t be pig-headed. Are they asking you to fix a Mountain photo that you’ve labeled “Interior” instead of “View”? Is that worth arguing over? Be gracious and fix it. But on the other hand, if they are saying “Please change the label from ‘Barn’ to ‘Outbuilding’; we do not allow barns”, then that alteration could be misleading.

Keep your license. Ultimately no one other than you truly cares about your license. If a loan goes south in a few years and the a lender is examining the file, they won’t care who instructed you to do what – but they’ll surely see a misleading report, improper methodology, incorrect information, or other violations. And whose signature will be on that report?

Finally, be certain. Don’t make it up. If you’re not exactly sure of methodology, State interpretation, USPAP, TILA, etc. on a specific issue, then go to those sources before you start “quoting” incorrectly. Call your state’s division of real estate, re-read sections of USPAP, read through the applicable sections of TILA, even look at the FNMA Selling Guide. Don’t make it about how YOU appraise, make it about what is correct, reliable and credible for appraisal work.

Have you received any troublesome instructions from clients?

This article was first published in Appraisal Buzz – click here.

Exterior-only Appraisal: Thinking Outside the House

I do pre-foreclosure and home equity work for several clients, and their assignments include some Exterior-From-Street appraisals. Insurance companies and agents request this type of report as well. Recently, I heard from an appraiser who doesn’t do “drive-by” Exterior-Only assignments. I understand, as part of managing businesses appraisers make different business decisions related to the nature of the work they will and will not accept. And I’m never about to tell another appraiser what work to accept and what work to avoid. (I enjoy a good Full interior-and-exterior inspection and I often hear from homeowners they are impressed that I spent more than 15 minutes at their house – so, I’m not advocating eliminating Full inspections!) But it’s the reasoning I’ve heard over the years, for not performing Exterior assignments, that I don’t always agree with…

“How can I appraise it? I don’t even know what’s inside!”

That’s exactly why extraordinary assumptions are used. The Exterior-Only appraisal scope is specifically based on NOT knowing 100% about the property – that’s the point.

“I’ll do the sales comparison approach, but not the cost approach – after all, I don’t know the quality or condition!”

My next question is always, “Then how are you developing a sales comparison approach without knowing the quality or condition?” The extraordinary assumption enables you to “know” subject characteristics for purposes of the appraisal.

“How can I make an extraordinary assumption? I don’t know what’s in the property!”

Right. That’s what an extraordinary assumption is.

“But it’s a manufactured house and the form needs the HUD tag for me to appraise it!”

A lender might need the HUD information for lending policies, but certainly an appraiser can opine value without knowing that HUD information. And since when is a form in charge of the appraisal process?

Now, I know that there are sometimes good reasons for NOT performing an Exterior-Only, and we need to consider the availability of information, the intended use, the complexity of a property, conflicting available information, etc.. For example, I was recently asked to appraise a property from the exterior for a refinance, but county records indicated it had two single-family detached houses and a detached garage with what appeared to be sq.ft. above it. In this situation, I messaged the lender that I believed the appropriate scope of work for this assignment would be an interior-and-exterior Full inspection of the property and I insisted on an “upgrade” to that scope of work. After I quoted my fee and turn-time, they agreed, and I’m going next week.

On the other hand, an agent recently talked to me about her current listing which has had few showings and no “bites”. She has a prior appraisal (sketch, etc.), a virtual tour and MLS information and photos, and of course these sources are available to me. For this listing-related assignment, it may be possible to have a desktop scope, using data from the county, the sketch, the tour, the MLS and other sources to establish the characteristics of the subject through extraordinary assumptions, for the intended use of this assignment.

When an appraiser automatically refuses to do any Exterior-Only work, I sometimes ask, “So, does the property not have a value if you can’t see inside?” I realize they’re not really claiming that (and my response is a bit tongue-in-cheek), but for partially- or fully-destroyed properties, hostile occupants, pre-foreclosure, portfolio or retrospective work, it may not even be possible to gain access. So I maintain my point does stand: the property still has a value even if you can’t get inside, and a client may need an opinion of that value.

The question is, Can you develop a credible report by making reasonable extraordinary assumptions for the intended use of the appraisal?

WATCH Property Inspection Video

Originally printed in Appraisal Buzz. Click here .

Paired Sales Are a Joke …

“Paired Sales are a joke” …So some folks say.

Okay, I agree that paired sales are not the be-all and end-all of adjustments, and that there are other methods for supporting adjustments, but the paired sales method really can be valuable.

Yes, paired sales are much more accurate in a textbook or in a state board’s newsletter than in an actual real-world environment. It’s wonderful if you can say “these two properties are exactly alike, except this one has a three-car garage, and that one has a two-car garage – so that means a third bay is worth $10,000”. The drawback, of course, is that it’s often difficult to find two properties similar enough (let alone, exact!) to even begin to isolate just one single characteristic for establishing adjustments. So, should we just give up on paired sales?

I think there are a few misunderstandings surrounding paired sales. Paired sales are not designed to arrive at an exact rate of adjustment to be used for each and every property you come across in each and every assignment. Simply because you calculate a $43.7982 per sq.ft. adjustment rate based on two sales doesn’t mean you’re going to use that exact rate for every assignment. Perhaps that support is only valid in a certain subdivision, or to new construction, or in a certain market area, or for certain age properties. If you determine a third garage bay is worth $15,000 for a certain segment of properties, will it also be worth $15,000 in so-called higher-end houses? Maybe, maybe not. Perhaps the $15,000 represents a percentage, not a flat dollar amount. Just like anything else, paired sales require analysis, not just calculations.

And we won’t ever find the perfect textbook example of identical-except-for-one-characteristic paired sales. But is this reason to abandon the process? Paired sales will undoubtedly require adjustments in order to isolate a single characteristic. For example, maybe one is on a larger site, but you can reasonably adjust for site size differences, and then isolate the sq.ft. rate. Or, perhaps one property has slightly different GLA, so you qualitatively know that the difference in sale prices isn’t entirely attributed to the two-versus-three bay garages, but you can still draw a conclusion regarding if and how much value a third garage bay adds still taking into account that their GLA vary slightly.

Additionally, one paired sale is not the end of the process. Over time, we should be collecting, analyzing and storing the studies so that we can develop ranges of market-supported adjustments. Maybe our data indicates a garage bay is worth between 5% and 15% of the value for a particular property type in a particular area. So, where in that range does the appropriate adjustment fall for a specific assignment? …You are the human market expert qualified to develop the reasoning to support the specific adjustment you use in a report, which will most likely be based on the range your research indicates.

Paired sales will not show an exact number or percentage. So, what do they do? What use are they? First, they establish that there is (or is not) a value contribution associated with a specific characteristic. Second, they provide a basis for the adjustments that we end up making. A basis does not mean “a number to blindly follow without thinking about it”! A basis means our adjustments are logically grounded in real analysis, and not simply pulled out of thin air.

Of course, there are other methods of supporting adjustments: regression, market interviews and similar, which can be especially helpful in rural and non-homogeneous markets. Yes, only in textbooks are paired sales perfect. But to simply write them off because they are imperfect in the real world ignores the real evidence and support they can provide.

– Let me know what your experience is!

This article was first published from here.

As I talk with appraisers across the country, I’ve heard there is a slow-down in some areas now (although others report they are as busy as ever). We can choose to think negatively about a slow time, or we can see the slow time as an opportunity to market, market, market.

Visit realtor groups and speak on a variety of topics: de-coding appraisals, market analysis, inspection items, appraisal methods 101, etc..

Send postcards to agents with listings that have been on the market longer than typical. Or email them. Do they need a second opinion?

Drop in to attorneys’ and accountants’ offices and leave a resume. Follow up with a phone call.

Be sure that your current clients know the full extent of your various services. Would a friendly email remind them that you also perform appraisal reviews?

Go to local networking events, like those put on by chambers of commerce.

Send follow-up cards or emails to new contacts.

Meet with local bankers and give them a market overview, demonstrate the technology you use, and have a question-and-answer session.

Provide a free email newsletter that contacts can opt to receive.

Start or update your social sites, like a blog, website, facebook, linkedin, youtube. Network and introduce yourself to second-degree contacts.

Join online discussion groups and present yourself in a professional manner.

Meet realtors one-on-one and offer to measure a house for them. They may be a homeowner’s contact in estate, trust, divorce or other life change situations.

Work with a county’s appeal board for property value disputes.

Volunteer for state and local boards. Write a column for your local newspaper.

Contact and update your current clients regarding your updated resume, license expiration date, new services, etc.. Are there new contacts at their company?

…the list could go on and on…