The National Association of Home Builders (NAHB) released a white paper on Wednesday calling for an overhaul of the system by which residential appraisals are determined. The group made a number of recommendations, some of which members of the National Association of REALTORS® have supported in the past, including the implementation of licensing and certification standards as well as minimum education requirements. However, another in their list of recommendations could have serious consequences for the role of the multiple listing service (MLS) in home sales.
A section of the white paper focused on data technology criticizes local MLSs for becoming “less reliable” in recent years. The solution to this, and the more general problem of a lack of data standards that apply across the country, is what NAHB refers to as “the development of a real estate superhighway.” The group proposed creating this in four sections:
- Terra.gov – NAHB proposed “a national real property registry… with access by all stakeholders.” They named this as the site of an “official record of the factual details of both the structure and the regulatory constraints on the land.” Some of the specific items mentioned as included in such a database were time stamped photographs, satellite images, and floor plans. As of Friday afternoon, the Terra.gov domain name remained unregistered according to WhoIs.com. Continue reading »
In response to the increased use of broker price opinions and other types of valuation methods other than appraisals, NAR has come out with what it calls its Responsible Valuation Policy statement.
It’s intended to provide a framework for the association’s volunteers, so when they need to make valuation-related policy that involves more than appraisals, they can do so in a more holistic way. Prior to the release of the statement and some internal structural committee changes, policies were looked at based on the type of valuation method.
If you’re interested in valuation policy issues, you might find this 4-minute video of interest. It’s intended to help explain how this internal revamping works.
The policy statement itself doesn’t weigh in on valuation methods. Rather, it says, in effect, whatever valuation method the situation calls for, there are minimum standards that have to be met: no conflict of interest, that they be done in accordance with NAR’s Code of Ethics, and so on.
In a nutshell, it’s a big-picture statement about meeting minimum standards regardless of what valuation method the situation calls for.
Access the Responsible Valuation Policy statement.
Watch video.
More from NAR’s Appraisal Insight blog.
We know you’re having a hard time with appraisals today. We hear from sales associates and brokers regularly that they’re seeing transactions collapse because the appraisal comes in well below the price agreed to by the buyer and the seller.
Having a value come in at something other than what was hoped for is one thing, but that’s not what practitioners say is the problem. The problem is that valuations are systemically coming in at questionable values because so many appraisers lack experience and famliarity with the market and they’re overly hurried to meet required turn-around times set by the lender or appraisal managememt company (AMC).
Anna Ruotolo
On top of that, many appraisers insist the practitioner can’t provide them information or even talk to them about the property.
Much of what’s happening with appraisals can be traced back to the controversial and all-too-familiar Home Valuation Code of Conduct (HVCC), which is no longer around but whose main intent was made part of the big Wall Street reform law that was enacted close to two years ago.
Although the history of this problem is familiar, how to deal with it remains a thorn in the side of the industry. What do you do when you have a problematic appraisal?
To provide some help with this question, we’re hosting a webinar in a few weeks with Anna Ruotolo of RPM Mortgage in Walnut Creek, Calif., who’s given this subject a lot of thought and has well-grounded advice on how to work with appraisers. She’s going to use the webinar to expand on ideas about meeting with appraisers when they arrive at the property, providing them information they might not know about, and documenting dscrepencies with the assessor’s valuation.
She’s also going to talk about questions you should ask appraisers before they get to work, like, “How far is your office from here?” “Do you have access to local MLS data?” “Are you familiar with the area?” “How frequently are you in the area?”
There’s also the matter of what to do if you genuinely believe the appraisal is off the mark. Who’s the best person to call?
The webinar lasts an hour and is free. It takes place Thursday, Jan. 12, at 3 p.m. Eastern Time. If you register but can’t make it, you can watch it when you have time. We’ll be sending you a link with the archived version after the live webinar concludes, so whenever you have time you can click on the link and watch it.
Here’s a link to learn more and register: Productive Engagement with Appraisers
No, but you can take a few steps to make them less likely
Appraisers lacking experience or familiarity with an area continue to be a major problem for home sales, but you can minimize the chances of a bad appraisal killing your transaction by helping to ensure the appraiser knows what you know about the property, valuation pros say.
Anna Ruotolo
Ever since New York entered into an agreement with secondary mortgage market companies Fannie Mae and Freddie Mac in the wake of the mortgage crisis several years ago the industry has been plagued by what practitioners say are inexperienced and geographically incompetent appraisers. That agreement, called the Home Valuation Code of Conduct (HVCC), has since been replaced with provisions in last year’s Dodd-Frank Wall Street reform act. The new law aims to curb bad appraisals by regulating how appraisers are chosen. Although the use of third-party appraisal management companies (AMCs) isn’t mandated under the rules, many lenders comply with the law by contracting with or operating their own AMC. Practitioners say many of these AMCs are undermining appraisal quality by hiring inexperienced appraisers who are willing to work for less money and comply with what many appraisers say are unrealistic time frames for turning around valuations.
Working with Appraisers PowerPoint Slides
Whatever the experience level or geographic competency of the appraiser who’s been assigned to conduct a valuation of the house you’re listing or selling, you want to minimize the possibility of an inaccurate appraisal by doing four things, says Anna Ruotolo of RPM Mortgage, Inc., in Walnut Creek, Calif.
1. Meet appraisers when they arrive at the house. Offer to show them around just as you would if they were home buyers. That way there’s a better chance they’ll see the unique features of the house the same way the buyers do. And don’t let the appraisers tell you they can’t talk to you. They can. The law prohibits agents and others from pressuring them to arrive at a certain value, but there’s nothing in the law that prohibits the two of you talking and sharing information. “You can talk to them about anything,” she said.
2. Provide them with comparables that you think are appropriate. They might or might not use them but at least you’ve made them available.
3. Provide a sheet of predominant features. These can be anything that sets the house apart from others.
4. Document any discrepancies with the assessor’s data. It’s not uncommon for there to be inaccuracies, so you want to make sure the appraiser knows if something’s not right. Sometimes the inaccuracies are as obvious as a misstatement of the number of bedrooms.
You also want to ask questions of the appraisers, Ruotolo says. That way you can determine their level of experience and geographic competency. The fact is, there are rules for establishing geographic competency, and if they don’t meet those rules, you can raise the point with the AMC or lender. Among the questions you want to ask:
1. How far is their office from the property?
2. Do they have access to the local MLS data? They can’t know all the facts of the listing if they don’t have that.
3. Are they familiar with the area?
4. How frequently are they in the area? When was the last time they were there?
If you suspect the appraiser lacks geographic competency, raise the issue with the AMC. You might also raise the issue with the agency in your state that regulates appraisers, but you don’t want to file a complaint if it’s just a value dispute.
“You have the right to insist on the competence of the appraiser on behalf of your clients,” said Frank Gregoire, an appraiser in St. Petersburg, Fla., and a past chair of NAR’s Appraisal Committee.
To provide help with these appraisal issues, REALTOR Magazine is hosting a webinar in a few weeks with Ruotolo. She’s going to use the webinar to expand on ideas about meeting with appraisers when they arrive at the property, providing them information they might not know about, and documenting dscrepencies with the assessor’s valuation.
She’s also going to talk about questions you should ask appraisers before they get to work, like, “How far is your office from here?” “Do you have access to local MLS data?” “Are you familiar with the area?” “How frequently are you in the area?”
There’s also the matter of what to do if you genuinely believe the appraisal is off the mark. Who’s the best person to call?
The webinar lasts an hour and is free. It takes place Thursday, Jan. 12, at 3 p.m. Eastern Time. If you register but can’t make it, you can watch it when you have time. We’ll be sending you a link with the archived version after the live webinar concludes, so whenever you have time you can click on the link and watch it.
Here’s a link to learn more and register: Productive Engagement with Appraisers
By Robert Freedman, senior editor, REALTOR® Magazine
Are you still seeing valuations that don’t reflect your view of market value? Are appraisers still hesitant to take information from you or even answer your calls? Are the appraisers who set value still coming in from outside your geographic area? Are most appraisers getting their jobs from appraisal management companies (AMCs), whose fees, many appraisers say, cut too deeply into the appraiser’s bread and butter?
These are some of the questions we hope to get answered in a webinar we’re hosting next week with Mark Johnson, head of the country’s largest AMC, LSI, Inc., and other presenters.
It was roughly one year ago that the Home Valuation Code of Conduct (HVCC) took effect. The product of an agreement on appraiser selection between the state of New York and the two secondary mortgage market companies, Fannie Mae and Freddie Mac, the agreement had the force of national policy because Fannie and Freddie, with the OK of their regulator, applied it to all of the mortgages they handle.
By Brian Summerfield, Online Editor, REALTOR® Magazine
Five down, five to go! In this installment of our top real estate developments of the decade, we examine an infamous issue for practitioners: Continue reading »
By Robert Freedman, senior editor, REALTOR® Magazine
The Home Valuation Code of Conduct is getting a bad rap for causing what real estate professionals say is a rise in inaccurate appraisals, Alfred Pollard told a packed room of REALTORS® Friday in a risk management-regulatory issues joint forum at the 2009 NAR Conference & Expo in San Diego.
Mark Johnson, chief operating officer of appraisal management company LSI.
Pollard, the general counsel for the Federal Housing Finance Agency (FHFA), said HVCC was released at a time when the economy was in a massive contraction—what he called a systemic event—and that this broader picture has to be taken into consideration when talking about valuation trends. “Concerns [over valuations] might not be 100-percent tied to this code,” he said.
FHFA oversees Fannie Mae and Freddie Mac, which earlier this year adopted HVCC and applied it nationwide in an agreement with the New York attorney general. HVCC expires in late 2010 but the two secondary mortgage market companies can retain all or parts of HVCC going forward.
Nor is it fair to rap all appraisal management companies (AMCs) for handing out valuation assignments to inexperienced or out-of-market appraisers who are willing to work for reduced fees, Mark Johnson, COO of LSI, a big AMC, said at the forum.
Any AMC that lets appraisers work outside their area of geographic competency is violating appraisal standards under USPAP and they should be reported, he said. “I do believe there have been some bad actors,” he said. Continue reading »
By Robert Freedman, Senior Editor, REALTOR® Magazine
“Nobody has asked to come in and look at our balance sheet, to go through our finances, which I’ve offered to everybody.”—FHA Commissioner David Stevens
News reports raising concerns that FHA might be the next major financial institution requiring a government infusion are based on misinformed comparisons with what happened in the subprime market, FHA Commissioner David Stevens said in an exclusive interview with REALTOR® Magazine this week.
At their peak, subprime lenders commanded 40 percent of the residential mortgage market by making low-downpayment, no-document, interest-only, and other types of exotic loans to high-risk borrowers, investors, and speculators, a market that FHA sat out entirely, says Stevens.
Today, it’s FHA that commands 40 percent of the market, but that’s where the comparison ends. The agency makes 30-year, fixed-rate, fully documented loans only for households buying their primary residence. For each loan, the agency maintains capital reserves for the full 30 years of the loan rather than for the 1-2 years required of banks.
Today, the agency has more than $30 billion in reserves, including a fully funded loan-loss reserve. All the talk in the media about reserves dipping below a 2-percent required threshold is about a secondary account that’s above and beyond the agency’s primary reserve. Those two accounts together represent more than 4 percent of assets, he says.
An actuarial audit of FHA finances due out in a few weeks from a non-governmental auditor is expected to find that FHA has sufficient capital to cover all forecasted losses, even assuming further delines in home prices, says Stevens.
“What concerns me, and I think should concern all REALTORS®, is . . . non-fact-based [criticism] from people who jump to conclusions without looking at data [and] create an environment where we’ll be forced to make corrections where they are not required and can hurt this housing recovery.”
Stevens sat down with the magazine for a 30-minute interview that covered the agency’s new appraisal policy and an upcoming mortgagee letter that’s expected to make condo financing more attractive as well as the agency’s credit health. He also talked about the improvements to the agency’s processing that makes it comparable to conventional lenders in terms of processing speed and paperwork requirements.
Listen to snippets of the conversation here: Continue reading »
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