It may be trite, but truth tends to get repeated…

The acting of appraising, is one that is complex but simple, commonplace and quite rare. We as appraisers should take a moment to remember that our profession was borne out of a time mistrust and calamity. Actually it has been said, that the appraisal profession is the second oldest profession in the world… that is to say, somebody had to put a price on it… but I digress.

So often we can get sucked into the practice of trying to balance the guidelines, the time restrictions, the unreasonable client demands and (a little thing I like to call) life, that we can forget that ours is a noble profession. We are the ones that people turn to when they are seeking accuracy and reliability. They want to know that value they are placing on an item is one that others would also agree with or tend to accept.

The reasons for this need vary greatly, but the basic foundational premise is that we all need someone who we can trust to make sure our thoughts on a matter are reasonable or accurate.

Of course, you can put this in the context of real estate and mortgage lending, and greed and profit, and people pushing the limits just to close a deal and once you do place your mindset into their realm, then you run the danger of being sucked into the vortex of endless attempts to satisfy unreasonable demands using antiquated methods and approaches that were designed years ago by men who understood the need to place objectivity into the world of money. They wanted to make sure that the process of lending money was backed by solid reasoning unimpeded by greed or corruption. At least that is the “truth” I choose to believe. It helps me sleep at night to believe there are still a few good men and women out there who are not only interested in lining their pockets at whatever cost necessary.

To all who continue to treat appraisal as a profession, I tip my hat.

See you around the water cooler!

UncleZev

Advertisements

Customary and Reasonable?

What if the custom has become beyond a point of reason. The change that appraisers have been asked to make is their new operating budget because their fees for one assignment is about the same amount you collect in one machine at a laundromat in the middle of the week.

Customary and Reasonable? For whom?? The consumer, unfortunately has certainly grow accustomed to paying higher appraisal fees, the management companies are certainly having no issue in taking half of the fee. Lenders certainly have not issue in charging the borrowers for the increased appraisal fees.

Yet appraisers continue to work for low fees, why? How is this reasonable? At what point was this considered customary?

I will admit that appraisers have done this to themselves. The refused to starve, refused to leave the business and refused to keep the fees in a level that would have been reasonable for their time and expertise. One you get one appraiser to lower their fees it does not take much time at all for the overall populace of appraisers to lower their fees to try to compete.

Today, the custom is no longer reasonable. The idea that appraisers bid for jobs in a matter of minutes, and the one with their finger on the chat feature of their smart phone gets the privilege of working at fees that are figuring at just above $15 per hour.

Each and every residential appraiser needs to really look into establishing a base of rental homes, where they have a passive income outside of appraisal. Then raise your fees. I remember when professionals billed their time based upon the complexity of the activity that they were asked to perform. For complex tasks the fee was higher, less time-consuming tasks rated a lower fee.

This will never change, until appraisers wise up and make the change. Create a passive income stream, hire a manager to keep that passive income active and profitable. Then appraise, because for the proud few it is in the blood, we will not ever retire, we will remeasure, rewrite and will never relent. Is anybody buying this????? Yeah, me either.

I guess I have dealt with customary and reasonable for so very long, that it felt good to be uncustomary and unreasonable even if for a few short seconds within the safety of my blog…

See you around the water cooler!

UncleZev

A world bereft of humor

A world bereft of humor is like a woman without sex. It may be full of wonder, or mystery, or agony and pain, but what’s the point really?

I have decided to take my daily rants and in express them here for all to see, appreciate, or disagree. My wife, family and close friends will no doubt be so pleased that they do not have to continually deal with my inner monologue as it spills back to the blog rather than being freely shared with anyone, in my community who will still listen.

In my position as a review appraiser I speak to appraisers across the country and have recently had the unique opportunity to speak to several “second generation” appraisers like myself. This has been refreshing and left me with a sense of hope and a new-found appreciation for the profession. Of course, for those who know me, I will never really lose my sardonic or sarcastic  approach towards this profession, but it has been refreshing to have a bit of life brought back into my inner monologue.

For instance, I was recently asked to mediate several situations where the client, who will always and forever remain nameless in my rants, believed the report appraiser to be uncooperative and almost incompetent in their presentation of their reports. The appraiser on the other hand was never really privy to the lender‘s attitude but was forced to try to understand the continual barrage of questions that would be brought to them daily, in some instances.

At first blush, I received the request from my manager to mediate this with a degree of frustration to think “What has happened to professional trust?” and “Why, the incredibility rude word starting with the sixth letter of the alphabet, am I even still working for this company that would ask to me mediate in situations like these?” Then I had an epiphany, which for a good Jewish boy is a bit odd to start with, but it was indeed a sudden realization that over took my thinking without reasonable proof, thus I don’t know what else to call it, but I digress. I realized that my current boss was the very reason that I even entertained working for the company that I choose. This man is also a second generation appraiser who very much understands the whole equation. He had selected me to mediate this dispute because he was looking for me to be prompt, professional, and objective. Not allowing either side to debase their arguments with petty dogma that has found its way into the lending community with regard to real estate appraisers.

Of course there are certain levels of detail that would be inappropriate to be revealed in this particular forum, but suffice it to say, at the end of the day, both the lender and the appraisers found a mutual respect for one another and the appraisal reports were accepted and funded without further hassle to the report appraiser.

I believe that many “old timers” like myself have to a very significant degree have lost sight of the actual reasons they choose this particular profession, or rather they found themselves “drafted” into the profession. The underlying reason is a drive to present a fair, balanced, opinion without favor or bias to any side of the transaction. Whether it is a legal, financial, or civil matter every transaction needs those who can separate themselves from each side and remain objective and present an impartial opinion that is based upon an analysis of the marketplace itself.

Lenders are not maniacal institutions that are hell-bent on the destruction of the “American Way”, for the most part. In turn real estate appraisers are not individuals who failed at every other attempt to make money so they settled for “pulling tape”, “crunching numbers”, and killing every possible deal so that lenders will not be saddled with collateral that the borrow can not afford.

The truth is that both, real estate appraisers and mortgage lenders, serve a much-needed role;  when they operate in a manner that is consistent with their design and function. When they do not operate in this way, it is at that time that mediators like myself and my boss are very much-needed to try to help each side “play fair”.

I want to encourage anyone still reading my blog, to “fight the good fight” there are literally millions of consumers who really do not understand the dynamics of what I have just said. It is for them “the public” that we continue to hold steadfast to our ethics and beliefs that have shaped the larger whole of the appraisal profession.

Hope to see you around the water cooler!

Uncle Zev

Taking the Lead

As of late, there has been much chatter on the Internet about appraiser Independence, Customary and Reasonable Fees and Appraiser Designations. The main thrust of the conversations has been a flurry of concern expressed by appraisers that they have lost their ability to negotiate fees thereby limiting their independence and many can see no reason to keep up their professional designations since, “All licensed appraiser are equally accepted by the State” and “All certified appraisers are equally experienced”.

In short, these statements are made by appraisers out of an extreme degree of frustration and realization that the majority of residential mortgage related clients making these decisions are wanting to safeguard the interests of the lender, but the specific interests that are being safeguarded are the bottom line, “How much will it cost?”, “How long will it take?”, “Can I sell this loan package in the Capital Markets?” But the answer to these questions does not address whether or not the appraisal will accurately reflect the subject and how it relates to its marketplace.

I recently received a phone call from an appraisal management company who could not understand how I could show a market area was stable, when the press has explicitly stated that values are continuing to decline. The fact that I had conducted a “subdivision by subdivision” analysis for all home sales within 20% of the size of the subject and extended this analysis to include the previous four-years and presented this data in a tabular and graphical format would not appease the “lord of review”. “The press stated that prices are declining, and this knowledge is common so it must be addressed”, … okay.

Professional appraisers must continually exercise their independence and use technologies at our disposal to consistently present our findings in a way that is easily understood and relevant to the subject at hand. It is us, who lead the charge and shape the expectations of the marketplace. If we simply give into the silly questions and placate reviewers, then we will not improve this industry. As for me personally, I have given much of my life to this industry and asked for very little in return.

Customary and Reasonable? From my perspective what has become customary is no longer reasonable. So we can either have fees that the AMCs will pay (which they want to believe is Customary) or we can charge the public what is reasonable for the degree of expertise, knowledge and effort that we put into the production of an appraisal report. An appraisal office is not unlike any other business we have fixed costs, variable cost and a point at which we are able to break even. This point has broken the majority of independent appraisal offices and forced us to relegate ourselves to working as one man shops in small offices or out of our homes. Is this what Customary and Reasonable means to the current administration? Somehow I want to believe that was never the intent, but it sure has become the effect.

With regard to appraisal designations, I believe that lenders should use anyone who elects to educate him or herself in their chosen field and pursues an organization that governs itself and imposes a degree of professional ethics. The rub is that professional designations are only as good as the individual appraiser who has the letters behind his or her name. There are many professional appraisers who are very good at what they do who have never had a designation. There are others who have elected to drop their designations because they saw no benefit in maintaining the additional costs. And yes, there are some appraisers who obtained designations that are now serving time.

I would like to believe that “time wounds all heals”, and that the “bad guys” will eventually be caught and removed from the game. But as a realist, I am forced to believe that the only way to deal with the appraisal industry is to increase State budgets for investigation and prosecution when it is appropriate.

Conditional Property Conditions??

Recently I was requested to alter the property description in an appraisal report to show that the property was in average condition. “After all the unfinished drywall, lack of flooring, and stained carpets were all cosmetic and did not affect the structural integrity of this $190,000 home”. How many of us have had these conversations?

Remember the condition ratings in an appraisal is a rating, not a description. In other words average condition does not mean that the property does or does not have need or repair. It does mean that the subject’s condition is typical of its market area. In the case of my subject property above the “typical” property for this sub-market had been cosmetically updated and or renovated. The trend was towards being in good overall condition. Thus an average property would have been updated. The subject being less than what was typical was presented as in fair condition.

Of course the appraiser’s responsibility does not end with simply rating the condition as it relates to its immediate marketplace, the appraiser is mandated to present a report that is not misleading thus the appraisal report must also detail the degree of maintenance, or lack thereof, that was noted as of the date of inspection.