Communication

The first and foremost responsibility of an appraisal is to accurately communicate the results, findings, analysis and conclusions of the appraisal process to the intended user in a manner that is not misleading.

This responsibility is often overlooked by many, as they rely upon the forms that were generated by Fannie Mae to guide the information that is “required for a client (in this case a lender) to understand the appraisal”.

To compound the issue many appraisers are following the lead of the clients who are shaping the scope of work!

Real Estate Appraisers beware, the law requires that the appraiser, not the client, must determine the scope of work.

This means that simply reporting what is requested, or only providing the forms as designed by Fannie Mae, does not necessarily meet the appraiser’s responsibility to shape the scope of work, or properly report the findings of the development of the appraisal.

I am almost confident, at this point, if any one is still reading this rant – most are thinking “well since he put it that way… what does he mean?”

 Simply put, take time to understand the purpose of the appraisal, the intended use and intended users. Make sure the development of the appraisal will in fact answer the questions of the client and provide all the information that the intended user will need when the final report is written and presented to your client.

In the world of AMC’s for mortgage lending remember the AMC is not the intended user they are like a highly paid mailman. I promise you, back in the bad old days no one gave a second thought to what the mailman wanted when they crafted a report for delivery to the intended user.

Reviewers can be very, very helpful in helping an appraiser from checking the wrong box or making an illogical adjustment, but they cannot safe guard the intended user of the appraisal report that is the appraisers job.

It is imperative that the appraiser have a solid working knowledge, if not an expert level of knowledge for the rules and regulations for the industry that to serve. If it is FHA then know their guidelines as well as the FHA the same is true for all the alphabet soup, VA, FNMA, USDA, FREDDIE.

In addition remember every single state has set of laws that govern real estate in their State. For Example in Texas you have the Texas property code which is written into the State Constitution yet shockingly very few appraiser are aware of this, have read it, or will take the time to explore it and understand it even after their discovery.

I will share a small example why it matters. Solar panels. Today if a mortgage loan is made on a house in Texas that has solar panels then there are four options as how to analyze and report the solar panels.

This is because many solar panel sellers where from out of state and if the contract violates state law in terms of repossession in the case of default then the mortgage lien holder could be damaged in the event of a personal property repo of the panels.

This issue has been tried in the courts and today FNMA enforces an option requiring the finance agreement to meet the state requirements for the state the panels are sold in.

The issue was originally brought to light by an appraiser who pointed out that The Texas property code treats the affixture of the panel as tea property unless the seller presents the property trade fixture contracts at the time of sale.

Whatever you speciality develop a subject matter expertise that will make you indispensable the long you work in your field.

Professional real estate appraisers can enable sound decisions for all types of appraisal problems. Unprofessional practitioners cause much more harm than the vast majority realize.

Work to make your development of the report transparent and easy for the intended user to understand and then when you present your conclusions there will much less push back on your work.

Shalom y”all

See you around the water cooler!