What Appraisers Keep Getting Wrong

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What Appraisers Keep Doing Wrong
(According to Fannie Mae)
By Richard Hagar, SRA

Another phase of Fannie Mae’s Collateral Underwriter (CU) is scheduled to be implemented shortly. This will place additional pressures on appraisers to “get it right.” There still appears to be confusion on the part of many appraisers regarding several aspects of the appraisal analysis and reporting process. Let’s clear up the confusion with some information.

Lenders and AMC are telling me about their frustration with appraisers who “still don’t get it” and are not adapting to the new appraisal protocols. We are seeing similar problems in our appraisal reviews, so this isn’t just an AMC problem.

What are the new appraisal protocols? Here are some examples of problem areas:

• Relative Comparison vs. Fixed Definitions
• Quality vs. Condition Ratings
• Condition vs. Updates
• Quality vs. Updates
• Actual Age vs. Effective Age
• Location Adjustments vs. Site Adjustments
• Support for Adjustments
• Use of MLS Photographs
• Comparable vs. Sales

USPAP vs. Fannie Mae Guidelines
For the most part, Fannie Mae guidelines are not in conflict with the Uniform Standards of Professional Appraisal Practice (USPAP). While USPAP allows appraisers wide latitude on how we appraise and report findings, Fannie Mae and Freddie Mac (GSEs) are more demanding in how information is reported on their forms. If appraisers are creating reports that might be used by the GSEs, then supplying what the GSEs need is vital to the appraiser expecting to stay in business, and earn a Tier 1 Rating and the associated higher fees. Remember it’s their forms, their requirements and their world. If you choose not to fulfill this expectation, then expect to fail in this business segment. Remember the “Golden Rule”- he who has the gold, makes the rules. The GSEs are in charge of the gold so appraisers need to live by their rules (and USPAP).

Many of the issues we are seeing are related to appraisers not adapting to new requirements. I hear appraisers say “This new Q and C rating system is stupid and I disagree with it.” OK, disagree. However, we should all remember that the prior appraisal system failed. Fannie Mae and Freddie Mac’s new Appraisal Quality Monitoring initiative (AQM), the Collateral Underwriter (CU), and the new Quality and Condition ratings are all a response to a failed system. And it’s not just the GSEs that are demanding higher quality work. Most properly-run lenders are seeking out superior appraisers and creating new appraisal review systems; the GSE system is one among many. These new systems are designed to eliminate bad appraisers and improve the quality of future appraisals. This will benefit everyone by increased fees for the appraisers who survive the change.

So let’s look at a few of the stubborn relics that appraisers need to work on.

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Relative vs. Fixed Definitions
In the past, appraisers used the same term to describe an “average” quality home built on stilts in the swamps of Louisiana and an “average,” but much different quality home, constructed of concrete and steel in Santa Barbara. This outdated protocol would classify the mega-expensive home of Bill Gates, which is located in an area of other mega-homes, as being an “average” home because it was similar to other homes in the neighborhood. Well, if the house was common, typical, average and like many others, isn’t that how appraisers should classify the home? That’s nuts! No one who’s interested in buying the Gates’ mansion would classify that home as “average.” A classification of “average” would be misleading to readers of the appraisal and insulting to buyers and sellers of similar homes. It’s inappropriate for appraisers to use this description.

Relative
In the past, appraisers would compare an “average” home, and describe a superior home as “good,” then make adjustments relative to the other property (how they compared to each other). The problem is that the term “average” was misleading and confusing. Was the other home really superior or were appraisers merely indicating it was, so they could make an adjustment? People on the street, reading our reports, wouldn’t understand the relative use of the terms “fair,” “average” or “good” and be confused.

Fixed Definition
With the GSEs’ creation of six quality definitions, appraisers can now determine which definition fits the subject and comparables best. Does the house fit the Q2 definition or not? Yes or no? This isn’t hard. Now which definition fits the comparable best – Q1, Q2 or Q3? I know many appraisers are shaking their heads and saying Nooooo! This system doesn’t work! And I say: stop being stubborn. Take a deep breath. This is a new appraisal world- adapt and properly classify the houses. This is no longer a simple description of how they compare or relate to each other. Today the appraiser determines which fixed definition best describes the home. Now for part two. The market can still decide that two homes with the same Q Rating have different values. Gasp! Heresy you say! No, not really, it’s called change, evolving into a new way of thinking and describing. Let go of the past.

Classifying a home is one thing, adjusting is another. Two homes that fit a certain Q rating can be perceived by buyers as having the same or different value. One home can be at the upper end of Q2 while the home next door can be at the bottom end of a Q2 rating definition. The appraiser’s job is to analyze the market and answer these questions: A) Does the market adjust for differences between the two homes? B) If buyers are adjusting, what is the adjustment? If there is a measurable difference in the marketplace, then make the adjustment on the grid and explain what the difference is between the two homes. It’s not rocket science but it is change and appraisers must learn to adapt.

Two different homes can have the same Q rating and still have market adjustments. Two different homes can have different Q ratings and there are no measurable market adjustments. Classifying is one thing, adjustments are another. Even though they are on the same line, they’re separate boxes. For lender/GSE work, Good, Average, Fair are dead; long live the Q and C.

Q1 or C1?
Not every market will have homes that fit every definition. Some markets may not have a Q1 while others might not have a Q6. The best house in an area does not automatically become a Q1. The worst house does not automatically become a Q6. Q and C definitions are fixed. The appraiser must classify the house under the definition that best describes the property (fixed definition vs. relative comparison).

Adjustments: List vs. Opinion vs. Facts
In the old days, during training, many appraisers were given “adjustment sheets.” These sheets listed the theoretical adjustments that new appraisers were to use. These were “training wheels” designed to get appraisers started, never intended to replace analysis and facts. The problem is, many appraisers never “graduated” to using proper methodologies. The figures on these worthless scraps of paper cannot be applicable to both a farm home on twenty acres in Minnesota and a waterfront home on a 5,000 square foot lot in Florida. If appraisers are using these sheets, stop it! The usage of these sheets are archaic. Reliance on a document like this is misleading and indicates a lack of understanding and competency (Tier 1 vs Tier 2 appraiser).

Other appraisers were told to use their “opinion of what an adjustment should be.” This is equally inappropriate, outdated, and downright wrong. By law, adjustments must be based upon market data… facts, not opinion. In the past it was difficult for adjustments to be challenged by lenders and review appraisers. More than likely they had less information than the original appraiser or didn’t have the time to determine the appropriately-supported adjustment. As a result adjustments were rarely challenged by lenders. In legal settings and state disciplinary actions, appraisal adjustments were challenged but rarely for lending work. Many appraisers became form fillers, tossing their opinions around as if they were fact. Those opinions and adjustments are not facts. They are unchallenged opinions. Those days are gone. Welcome to the age of “big data.”

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The Change
Today, lenders and the GSEs have access to massive amounts of data. For the most part, it’s the same data that appraisers access. The GSEs, via information providers like CoreLogic, have access to every recorded sale in most of the 3,143 counties across the United States. Within minutes they can cross check appraisal adjustments against the sales prices and metrics of approximately five million home sales that occur each year. New wiz-bang computer algorithms can spot opinion-based adjustments in a nanosecond. Computers “hard stop” appraisals and reviewers challenge or blacklist appraisers. Old habits die hard. Appraisers must support every adjustment, especially if you want to stay in business. Data crunching computers will become more powerful and analyze every corner of every appraisal.

This is a sampling of adjustment codes utilized just by the GSEs:

606 – GLA Adjustment is larger than the model;
607 – GLA Adjustment is smaller than the model;
610 – The appraiser’s wide range of adjusted values indicates potentially inadequate adjustments;
611 – The lot size adjustment is materially different from the model;

And these new codes will be implemented shortly, by the GSEs:

621 (GLA), 623 (Condition), 624 (Quality), 625 (View), and 626 (Location). Each of the new codes will address adjustments in the wrong direction for a specific property attribute. Message Code 632 will address the absence of time adjustments for increasing or declining market conditions that appear to be warranted.

There are more than 22 codes that apply to adjustments and the number of adjustments that they analyze is growing.

Solution
In this new world, appraisers must have support, proof and evidence for every adjustment. There are more than 25 different methods that can be implemented to determine adjustments. Not every method works every time or in every market but the appraiser must understand and use these different methods. Since the GSE computers use various algorithms and forms of liner regression, understanding these basic methods is vital. If appraisers don’t understand the various methods, get educated and do it fast! Archaic, stubborn appraisers will exit the business by choice or by force. This will leave room for higher paid appraisers who use facts instead of opinion.


Persistent Problems Webinar
Dates:
October 15th and 22nd
Identifying & Correcting Persistent Appraisal Failures: Quality, Condition, & CU
by: Richard Hagar, SRA

CU Version 3.0 is coming this September, promising “improvements” and enhancements that will undoubtedly affect how appraisers interact with their lender and AMC clients going forward. Be prepared! CU continues to flag appraisers for unsupported adjustments and erroneous Q&C ratings. In this upcoming two-part webinar, Richard Hagar, SRA shows appraisers, step by step, how to avoid the most common appraisal failures and “get it right” with Q&C ratings. Sign Up Now!

 

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Comments (40)

  1. As always blaming appraisers for everything! Just keep piling on with this nonsense and you’ll have even more appraisers heading for the exits. My small office we recently had three leave the profession (one retired, two stated tired of the BS) and haven’t had a a trainee in over three years. The day a computer generated appraisal is used is the day the economy will implode like we never seen before.

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  2. “I’m with the government. I’m here to help. You can trust me. Believe in the computer results. Pay no attention to the Corelogic man behind the curtain.” As if the very mention of Corelogic does not bring with it a mountain of conflict of interest issues…. Things end where they begin, and if Corelogic has anything to do with it, things won’t end well for any of the regular folk. Since when did foreigners become the authority in this country?

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  3. by NinaC@frodingham.net

    I have lost all respect for Mr. Hagar after this article.
    After reading this I now have many doubts.
    Mr. Gillespie, you too, are trying to get too scientific.
    I’ll show you a town that has 38 houses which have railroad tracks
    in the owner’s back yards. you’d be highly surprised at the DOMs.
    Why? Because these buyers were raised here and are immuned to the railroad!
    Time you get back to the basics. When Lombardi took over the Packers in ’58, at his first meeting he said “men we are going back to fundamentals…..this is a football”.
    The rest is history.

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  4. Richard,

    One more thing. Adjustment of the sales price of other properties in order to bring them into parity with the subject seems to be based on the assumption that features of real property are fungible, which most of know is completely untrue. Therefore, every “matched pair” adjustment grid based sales approach should, according to USPAP, contain a prominent notice that it employs a hypothetical condition. We are just making it up that if the subject had what the comp had, or vice versa, that the sales price or the probable price (er…that is value, right?) would be different.
    But then, as you say, Fannie has the gold, and as everyone knows is also the 800# gorilla. Who among us would venture to tell the emperor he has no clothes or, heaven forbid, take control of what we do and at least tell it like it really is?

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  5. Richard,
    Mostly good job, but, please, tell me the “law” that requires appraisers to make adjustments based on market data. I did not know there was one and I need to look it up. Where is it and what is it called?

    I would agree that guidelines, best practices and possibly USPAP might all advise appraisers to base their opinions on factual support, but adjustments are still, as you say, opinions. But none of those are “law.”

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  6. by lane Godshall, MAI

    It is amazing. Appraisers are the lowest paid and least respected of the professionals, if they warrant that title. Appraisers are required to be market analysts, demographers, mathematicians, surveyors, English professors, quality analysts while wading through your dictionary of how to and what not to do.

    The residential appraisers have to put up with this BS, because they must make a living. You know you can keep squeezing and there is nothing they can do about.

    It is easy to sit up in your ivory towers and bark orders and demand compliance. Why don’t you residential reviewers get your assess out in the field for a while. As a matter of fact it should be a requirement that you spend a few months in the field under the onerous rules that allow little room for opinion.

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    • Very much in agreement that reviewers should do work in the field too, if nothing more than to see what field appraisers face on a daily basis.

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    • Lane, if you are building your complaint on the appraisal industry being a profession, you are starting in the wrong place and going the wrong direction. Appraising is not and never has been a profession, and, what is even more troubling, does not seem to be headed toward becoming a profession.
      Appraisers must put up with this imposed BS, because they are improperly educated and have no cohesive ability to define what it is that they do.

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    • by Mike Ford, CA AG, SCREA, AGA, GAA, RAA

      FINISHED!

      Tired of Unreasonably low fees? Then please click the link below. A draft proposal for supportable, national MINIMUM appraisal fees is outlined.

      Fellow appraisers, please visit http://mfford.com/html/c___r_fees.htm

      Apologies for using my personal site but logistical and time constraints made it necessary.

      It is to read a draft proposal for minimum national appraiser fees. I appreciate some believe no one other than themselves should set fees, and I concur. Except, in the real world of today where someone (lenders and AMCs) are ALREADY SETTING your fees. If not directly, then through ruinous less than customary OR reasonable fee competition.

      Im interested in your meaningful, constructive feedback as well as comment & discussion here.

      For those that insist ONLY regional fees are practical, this same system works for the lowest to highest regions of America. Subtract 13% for low cost areas; add up to 9%+- for higher cost areas.

      Operating premises were:

      1. AMCs are here to stay. Liked or hated, they are part of the chain now.
      2. LENDERS want AMCs to offer one size fits all pricing. This MAY come close to doing so baring complex assignments. Even there, an inferred hourly equivalent is suggested.
      3. If WE don’t set “reasonable” minimums for ourselves, then others will do it for us (or to us).
      4. Framework allows for and includes inducements for trainees or less than certified appraisers-who have been largely excluded or ignored by AMCs in recent years.

      In addition to posting here, PLEASE also email comments to JanBellas@appraisersguild.org

      We are going to start reaching out to state coalitions and other appraiser peers groups. We hope to incorporate helpful comments or views in that effort. In the meantime our parent union is already being contacted to see how we can best proceed.

      If you concur with the proposal then please forward this link to all other appraisers you know. Thank you.

      Thank you for taking the time to read and respond. Mike Ford, AGA; OPEIU/AFL-CIO

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  7. Final note: To say or infer that data derived from CoreLogics database is more accurate than adjustment date derived by an appraiser from asking area agents what the market perception is, is also wrong! ALL pubic records data in California includes transactions that are reported as “sales” via grant deeds when they are not in fact sales at all, but title vesting adjustments or modifications. Some are deeds in lieu of foreclosure. Some are non arms length transactions, and quite frankly some are nothing more than erroneous data entries by people that translate documentary transfer stamps without knowing that different cities within the County ALSO charge a transfer fee using either $1.10 per thousand or even a $1.10 per $500 of transfer value. “Blind” data without knowing what kind of anomalies it includes, is worthless data. An assumption that the larger body of data is “more valid” than another method because the impact of anomalies is diminished is not valid without knowing how the client then used that body of data. Did they distill it down to census tracts (like FNMA does) in which case it is likely LESS valid than agents empirically based opinions are. Is it city based? Zip code based? Anything less than city based is LIKELY to be skewed.

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  8. Setting aside the prior system failed issue, the GSE move toward standardized definitions of condition and quality are positive developments. The implementation process has been handled well, small increments, easy to adapt to, much better than previous heavy handed changes such as HVCC. Big Data represents opportunities for appraisers to develop into true “local market experts” rather than giving lip service to the label. The GSE decision to refuse appraisers access to the GSE data base can be a positive; first by demonstrating that appraisers individual data is no longer private, second by allowing the market to provide ways for that same data to be aggregated and accessed by appraiser participants, ensuring greater credibility for their conclusions.

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  9. Mr. Hagar has long been a respected instructor on how FNMA wants their forms filled out; and a host of other topics. That does NOT mean his opinions on FNMAs recent complaints and the ‘solutions’ are the correct ones; or even the best ones.

    Lets start with his perception that the existing appraisal reporting ‘system’ failed. It did not. There is not one iota of evidence to demonstrate failure of that system, so he is starting off with an erroneous premise. FNMAs ABILITY to understand and properly analyze loans they purchased failed. Not the ‘appraisal system’. FNMAs failure to adequately monitor loan quality by performing or requiring FIELD REVIEWS allowed faulty appraisals to routinely slip through. Had only 10% of the quarter million Countrywide / WAMU appraisals that FDIC found to be egregiously deficient been field reviewed, an argument could be made that the economic collapse might never have been able to occur in the first place. If prior faults are the only excuse for continued support of the ALREADY FAILED UAD system, then lets at least place the fault where it lies.

    FNMA flat out lied about creating an appraisal reporting system that was clearer and more understandable to the layperson. UAD is not. If it were, it would not require a two page addendum to explain terms no one outside of FNMA programmers ever heard of before.

    It is more compatible with a large bureaucratic entities desire to quantify huge amounts of data, but UAD does not produce a clearer or more easily understood appraisal report.

    Mr. Hagar also makes an erroneous assumption about relative and absolute differences. Read any respected real estate appraisal text and it/they will state specifically that the comparisons are relative to the competitive properties analyzed.

    The use of the Bill Gates analogy is a sophists argument. Let’s take Beverly Hills instead. Pick ANY street. The comparisons made in the market place are RELATIVE; NOT absolute. “Average” quality FOR THE AREA is the norm. Few are less than average quality. Some are above average some are far above average quality. Quality perceptions are usually more subjective than condition. Is a 1929 built Spanish Stucco with a grouted clay tile roof and 18 to 24 inch thick walls (cooler inside) superior quality to a 2010 built modern “Pseudo Mediterranean” with 4 to 6 inch walls? The latter having been built with all around shear panels? FNMAs ‘quality ratings’ are easy enough to follow once one reads the ratings explanation addendum on separate pages, but they have no relationship to what is typically found in the marketplace. IF adjustment is made, it is for RELATIVE perceptual differences rather than absolutes.

    Condition is the same in terms of perception. The market doesn’t care if its a mix of a partially updated kitchen and or bath; good care and maintenance overall, fresh paint, trimmed landscaping and custom fenestration which all lend to a perception of better than “average” condition and “curb appeal”. Cross over among these categories is common. FNMAs belief that they can always be segregated into absolutes of design appeal; quality or condition is just another example of how little they understand about the appraisal process.

    Last item (due to space) is CU. FNMA FREELY ADMITS that for years that appraisers following their adjustment percentage guidelines have been appraising to the guidelines rather than to the market. Yet they feel that the database that THEY created based on all the years of erroneous data is now somehow suitable for developing a “model” for use in CU?

    Mr. Hagar, you are right about the Golden Rule. IF we do work intended for FNMA or another GSE using the asinine UAD format we have to do it their way…ON THE GRID. MY comparisons for adjustment purposes will continue to be based on RELATIVE comparisons as explained in the text comments!

    There is nothing complicated about following FNMAs idiotic UAD system. It merely takes longer to properly complete and report an appraisal because of it. On the surface, the grid will often BE misleading in the marketplace for those that do not bother to read text addenda comments.

    If FNMA is unhappy about how appraisers complete the UAD format, then they should look to the inadequacy of THEIR system, rather than whining that appraisers are not following it. In fact, until they are prepared to make CU available to appraisers BEFORE they ever schedule the appraisal appointment, they should just assume ANY appraisal compliance issue most likely originates with THEIR systemic inadequacies!

    Mike Ford, National Appraiser Peer Review Committee Chairman, AGA, OPEIU/AFL-CIO. (714) 366 9404

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  10. Bottom line..I challenge anyone, in any other field of work, to try and solve a math problem that has no constant value to build from. This is the biggest appraisal challenge. Lenders and Fannie Mae continue to push for greater detail, when this actually can be less effective than actually simplification. What’s the use of having 2 properties with a Q3 rating, then still having to extract an adjustment? It’s impossible to pull these adjustments unless you are in a cookie cutter neighborhood. How about regulating a stronger rule for the GLA adjustment to start with a more solid constant, then limit the amount of other adjustments to usable lot, view, quality, and condition. The other adjustments are pretty tough to extract in the timeframe we have to complete a report. We have to return back to the understanding that appraisals are just a broad value opinion. Keep it simple and broad..maybe allow a small range opinion. The more “details” expected just leads to less time an appraiser can focus on the important broad comparable data. Just my opinion. Lenders can simply add a 10% error pad if they like, etc. Time to simplify and not get tunnel vision on valuation.

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  11. Appraisals are opinions based on facts. The appraisal synthesizes factual data and the adjustments made are opinions based on the support that is derived from the market. I do not believe that adjustments are “factual” and in that manner, think this article is not correct related to these points.

    Appraisers do very much need to support what they do, but as soon as we start to be driven by numbers that are found in some algorithm that may or may not be correct (and we won’t see), we are going to be replaced. Appraisers simply need to do the analysis and summarize it. Big data is not the answer. It may help the underwriter and/or reviewer, but it should not replace the local market expert. On the other hand, the local market expert should be able to support their analysis. This can be done many ways, from using depreciated cost figures, to using grouped data, paired sales, regression, and good old fashioned common sense of ranking and a solid, solid, solid reconciliation.

    This article has good merit related to parts, such as the relative versus absolute, but it fell apart for me when it stated that adjustments are factual.

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    • My appraiser completed a report on a new construction sale. He gets a call from a reviewer saying that FNMA Collateral underwriter is saying he is TOO HIGH. So he talks with the reviewer explains and supports his value, etc. Two days later he gets a call from a different reviewer on the same file from the same client saying he is TOO LOW. He tells the reviewer how he just got a call from them saying he was too high! The guy says “I see that here, but why didn’t you use these sales…”etc, etc.

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    • Most accurate assessment Rachel. Kudos again.
      I usually admire what Richard has to say and the way he says it, but he must have had\s a really hard night before he wrote this one.

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  12. “This will leave room for higher paid appraisers who use facts instead of opinion.” Facts instead of opinions. This implies that the buyer use facts instead of opinions. Do you think they get all the sale data, do regression analysis, and based there offer on that? No, they fall in love with a house. They don’t care if the comp around the corner has an extra bath (even if some buyers do), they don’t care if they have a smaller site because their site is gorgeously landscaped (should we have landscaping adjustments now?). Sorry for the rants here, but this article is an attack on all appraisers who have done damn good jobs for decades using their best judgement.

    In the world of Mr. Hagar, SRA, an appraiser with two years of experience using regression analysis will do a better job than an appraiser with 30 years of experience doing it the old way. BALONEY.

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  13. So 10 appraiser’s provide an estimate of market value for homeowners who wants to list their house. Nine out of the 10 appraiser’s do it the old-fashioned way – using their own judgement and using terms such as Average and Good. The 10th appraiser is Mr. Hagar, SRA, who places the data in a regression analysis program, justifies every adjustment including the difference between a 200sf patio and a 400sf patio, and the difference between 4.0 bathrooms and 4.5 bathrooms. His report is by far the best looking of the bunch.

    And you know what? I would not bet a nickle that his value is closer to the eventual sale price than that of any of the other appraisers.

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    • How about if you use 10 different regression or value “Models”

      Your indicated adjustments and value will vary to ridiculous extremes! If these computer methods were so accurate, then EVERY sincel regression and CU type program should come up within the EXACT SAME VALUE.

      And yet . . . they don’t even come close.

      S’plain that Lucy!

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  14. “Today, lenders and the GSEs have access to massive amounts of data. For the most part, it’s the same data that appraisers access. ”

    This could not be further from the truth. The GSE’s are saving all the appraisal report data submitted to them and using this data in their analysis, appraisal reviews and to flag issues with submitted appraisal reports and appraisers. The Appraisers do not have access to the GSE data. Appraisers have requested access to the GSE’s appraisal data and the GSE’s have refused.

    The GSE’s want the Appraiser to be consistent with the GSE’s accumulated appraisal data, yet the GSE’s refuse to make their data available to the Appraiser. Appears the GSE’s are more interested in setting a trap for the Appraiser rather than improving the appraisal report.

    As long as the GSE’s hoarde their appraisal report data, the Appraiser will lose. The GSE’s appraisal report data must be made available to the Appraiser.

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    • The people that ‘use’ CU as per FNMA webinar instructions, are NOT QUALIFIED to be using it! It would be an outstanding system for appraisers pre screening potential comparable sales before an appraiser ever goes into the field; or even sets up the appointment. It would eliminate all the silliness about “up to 20 alternative” comparables, because we’d already have seen those and explained their exclusion (or inclusion). The CU mapping system alone would graphically prove to appraisers that may be ‘tempted’ to shop high (or low) comps why THAT is a foolish proposition (aside from the ethics); because it stands out like a sore thumb on the map!

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  15. Mr Hagar is a very knowledgeable appraisers and many points in his commentary are correct however he made a gross misstatement early in the this article by assuming that all appraisers agree with the following quoted from his article, (we should all remember that the prior appraisal system failed). I was in Lending for over 25 years, some of that time I was the Senior Lender in charge of Lending for the Bank. It is my opinion that the Real Estate debacle was not the failure of the appraiser or the appraisal report. Uniformity in the appraisal reports is a good idea however this will not prevent a repeat of the real estate market crash. An appraisal report that is 35 to 45 pages will not make the payments on the mortgage, only the borrower will make the payments. Loan files are now 3 inches thick and nobody reads them, this is not going to improve the quality of the loan or reduce the chances that the loan will go into foreclosure.

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  16. So much as I enjoy Richard’s perspective, it doesn’t solve anything. There are too many bankers in government and too many in government beholding to bankers to be a good thing. The problem with the “golden rule”, the GSEs have led America down a dangerous and rocky road by catering to “conflicts of interest”. We could begin with the endless “revolving door” or dig even deeper to the core matters of fact. Without the repeal of GBL and the revival of Glass-Steagall, the GSEs are merely enablers of confusion. There is no code, algorithm, or massive data plan created to date that can cure the real ill. It will be the people and a real push for a Financial Services Conflict of Interest Act to get the job done and correctly; the rest are merely symptoms.

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  17. What a bunch of unadulterated BS.

    Let’s start with this totally outrageous comment: “However, we should all remember that the prior appraisal system failed.”

    No Mr. Hagar, SRA, the system did not fail because appraiser’s made adjustments based on relative ratings. Average v. Good was a common sense way to make an adjustment. And it didn’t matter if you described 250 Smith Street as good in one appraisal and average in another appraisal.

    The system failed for many reasons, including the rating agencies giving “A” ratings to junk mortgages. Another reason was that MORTGAGE BROKERS PUT GUNS TO THE HEAD OF APPRAISERS WHO HAD TO FEED THEIR FAMILIES. IT WASN’T BECAUSE THE APPRAISER CALLED A HOUSE AVERAGE INSTEAD OF “C4.”

    I don’t have the time to eviscerate everything this holier than thou, I’m better than you person wrote. The Big Man with the SRA designation. But let’s look at this one:

    “In this new world, appraisers must have support, proof and evidence for every adjustment.”

    Really? I’ve got three comps, and they average six adjustments (site, GLA, location, bathrooms, garage, and yes, PATIO/DECK. For you to say that there is some kind of science to this, and that a PATIO/DECK adjustment has to be proven using regression analysis or whatever convoluted method you can come up with, is beyond absurd.

    Appraisal is an art, not a science, no matter what this guy claims. I suggest that the GSE’s spend more time worrying about credit quality and and adequate down payment, rather than if there is proof for the $5,000 fireplace adjustment.

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  18. you can tell this article was written by a realtor, as it is very poor. The information in the article is outdated. remember any moron can become a realtor, but only a select few can be an appraiser.

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    • I am Realtor and Appraiser and I would challenge the “Moron” comment.
      As a Realtor , there are minimum requirements on education, I don’t have to follow hundreds of pages of guidelines, constant every day changes and barely have to answer to anyone while my paycheck based on the percentage of the sales price constantly rises.
      As an Appraiser, education requirement is quite extensive, I have to answer to every one ( if want to continue paying my bills), I have to keep up with any change and compliance written by any organization, while my pay check is constantly decreasing.

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    • Paul, You have got to be kidding.

      Moron? A select few? And Richard is a designated appraiser who is a prolific author regarding appraisal matters and he has much to offer to counter the rush to being the fastest and cheapest appraiser that seems to have infected a huge percentage of residential appraisers.

      I think you owe him an apology.

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      • I think Edd may have written the longest run-on sentence in the history of mankind! Long live FNMA my children. We call the shots! Don’t you forget it. Go AGGIES! Darren

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  19. by Henny@Youngman.com

    USPAP guarantees appraiser independence! What I see and my interpretation of it is my observance! Doctors routinely diagnose differently, prescribe different meds, tests and procedures and have varying opinions of what is wrong with a patient. Do we overhaul the medical system? In this desperate attempt to find “an end-all to beat all” nothing is better. It is all about taking the “art” out of appraising. I been doing this too long to bee fooled.

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