Appraiser Independence

As we are all no doubt aware the HVCC, which (in my opinion) was simply an expedient way to force all small business owners to funnel their working relationships through newly formed appraisal management companies, has been done away with.  Its replacement Dodd-Frank Wall Street Reform and Consumer Protection Act, Enacted into Law on July 21, 2010 was put in place “as an early warning system identifying risks in firms and market activities, to enhance oversight…”

A current example of this wondrous legislation that has been put in place to save us from corruption is as follows.

I was recently requested to conduct a retrospective forensic review for an appraisal of a residential property in NE Texas. The appraisal was 3 or 4 years old, and I was instructed by the appraisal management company (a relatively new kid on the block from the North Eastern States) to make sure that I made the basic assumption that all the information about the subject’s condition was accurately reported as of the date of value since there was no way for anyone to find what may or may not have been in place 3 or 4 years ago.  My field inspection revealed the property was vacant and being managed by a company for REO purposes. So I proceeded with inspection and gained entry into the home. What I found was a home of average condition that had an addition to the rear of the property. The addition was clearly designated on the sketch of the origination appraisal and the reported described the property as containing 3 bedrooms and 2 full baths.

The report did not provide interior photos of the alleged second bathroom. A casual inspection of the home revealed the following. The original home was built on a 12-inch slab, the addition was a 4-inch slab which had not been tied to the main foundation. The roof line of the addition did match the original home, but the interior showed evidence of much structural movement. Much of the work for the addition was found to be unfinished, electrical was not to code, and the “bathroom” was not finished. There was a concrete slab with plumbing stub ins and nothing more.

A trip to the city building inspection department revealed that permits were pulled for this addition, but no inspections were made by the city and no final approval was ever issued for this addition. This unpermitted addition was addressed in the review. It was documented that the appraisal report stated one thing, and an inspection of the property revealed another, etc.

The punch line is that the management company had a “fit” because I did not simply assume the appraisal was correct and because I had made a full inspection of the property. Fortunately for the client, after several days of discussions, the management company relented and turned in the review as it was presented. The client was not harmed and no one was mislead in the process; however, the concern is that appraisers now have a whole new dimension of training that we must conduct to do our jobs.

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Grab a mop

—-As noted in this well written and informative article, the back lash of the “FUBAR” which many call our secondary mortgage market today is only beginning. The degree of bad choices or improper decisions has gone far beyond poor training or  ineffective policies or procedures. The real concern was the regularity that these types of bad loans were generated.

This means a lot of clean up work for those of us who are willing to roll up our sleeves and begin the arduous process draining, mopping up and repairing the damage  all the overflow from the flood gates of greed.

Of course these efforts will be in vain, unless the flow of “water” is not channeled appropriately. This of course is what our beloved administration is trying to do, and hopefully through the normal process of trial and error they will not create yet another system that is labeled “FUBAR” by the next generation of appraisers and litigators.

Fraud or Frivolous?

Today – the media is on full alert for instance of mortgage fraud and many real estate professionals are looking over their shoulders and peeking into shadows to try to avoid any allegations of wrong doing.

This of course is good to help the public wake up, but any of use who have been around long enough to remember why President Carter was bad for the economy can appreciate that none of these so-called fraud schemes are new. Due diligence by a real estate professional has always been required. Appraisers who investigate the market, without bias, who report their analysis without an agenda, and who draw conclusions based upon the preponderance of market evidence have always been backbone of sound financial decisions.

The real concern should be who has taught the last several decades of people who market themselves as real estate appraisers. I can no longer count the number of people I have come across during my career who sincerely did not know that we appraise real estate, not real property. That we are to act in manner that is independent, impartial and objective, not as an advocate to any party of a transaction.

The attempt to regulate appraisers is not a bad idea, but the people that are in charge are not the answer.

I would be curious to know who among us, believe that the appraisal profession has improved since the implementation of USPAP and if any one believes that USPAP was radical new concept in the world of appraisal when it was released.

WELCOME

This forum is a place to come in, relax let your hair down, unless you are like me (without) and just not worry about the nonsense of the outside world.

There will hopefully be some insights to be gained from us all as we take a look at this profession that we have all found ourselves in.

The forum is for new and “used” appraisers alike. So don’t be shy and I will try to be as entertaining as possible.

Welcome – UncleZev