Tim Andersen, The Appraiser's Advocate Podcast

Random appraisal thoughts? So much is going on in AppraisalWorld right now, its time for some thinking. ANSI measurements standards are not the way we measure houses, etc. Desktop appraisals are here to stay, at least for Fannie Mae. The PAVE Task Force met and all bias and discrimination in mortgage lending is the appraiser’s fault. The Waters’ Hearing on the PAVE task force. Tate-Austin v. Miller wants to eliminate the sales comparison approach. Where do appraisers stand on this bias/discrimination thing? How about taking on trainees? There is a lot to think randomly about. Random appraisal thoughts? USPAP always come to mind when you think about real estate appraisal. Do desktop appraisals violate USPAP’s Confidentiality section of the Ethics Rule? What does USPAP say about ANSI? (FYI, it says nothing). Are desktop appraisals the future or real estate appraisal? For appraisals going to Fannie Mae, they are. Freddie Mac and the others (FHA, VA, etc.) have not weighed in yet. Who knows! But part of what I do is to keep you informed on all this stuff. There is so much! So this podcast has some random appraisal thoughts on all sorts of appraisal topics. True, some of them are my own personal rants. Others came in from other appraisers’ questions. Thanks for listening!

Ask Why! It’s OK! Appraisers have an ethical obligation to understand what they are doing. We call it COMPETENCY. USPAP even has a Competency Rule. Why? Because the client has the right to assume our appraisals are credible, accurate, reliable, and reproducible. Our reports must not mislead anybody. And how do we do all this? Simply, we ask “WHY?” a lot. Our client is going to ask, “Why is my property worth only $350,000?” We are the professionals, the experts. It is our job to be able to explain to the client why their property has a value of $350,000. Nothing says the client has to agree with our value opinion. But we have to understand the appraisal process so we can explain both how and why we came to that conclusion. Real estate appraisal training does an adequate job of showing us what to do. It does a mediocre job of teaching use how to do something. But, one of the areas in which real estate appraisal education is deficient, is teaching us WHY we do something. Basically, our QE and CE ignore this why question. How so? Have you ever asked your mentor how to calculate a GLA adjustment? If s/he said, “Oh, just use $65 per square foot”, you should have asked “WHY?”. Then, if s/he said, “Well, that’s the way I’ve always done GLA adjustments”, again, you need to ask “WHY?”. Then, if s/he says, “Don’t worry about it. It works fine!”, then you need a new mentor, now!. Ask Why! It’s OK! Why do you need a new mentor? Is your present mentor is incompetent? Does your present mentor know no more than you already know? Is s/he is competent to teach you anything? Is s/he is training you to fail? Ask Why! It’s OK!

10 questions Fannie Mae just has not answered? There are probably more than 10, but this podcast covers only 10 of them. Maybe we appraisers have not asked the proper questions? Maybe Fannie Mae does not trust enough to give us the answers. But the point is, we appraisers have questions. Fannie Mae has answers. But she has not gone out of her way to provide them to us. So, Tim Andersen, the appraiser’s advocate raises some of them here. This is to give the good folks at Fannie Mae a good goosing – just to get them started. 10 questions Fannie Mae does not answer for for us? How about “How are we supposed to provide a floorplan when we don’t put boots in the living room?”. Technology helps us answer this question, true. But the fact is, we had to ask it. And, Fannie Mae still has not answered it (as of this podcast). Again, that technology exists, but which technology? Even some of the AMCs are on this bandwagon. Those AMCs ask us to use their software, their apps. Does that put them “in charge” of the appraisal and its reporting? USPAP makes it clear those are our responsibilities. But USPAP does not govern or constrain lenders and their helots, the AMCs. These 10 questions Fannie Mae does not answer extend to neighborhood analysis, too. From experience, it’s likely the appraiser is already familiar with the neighborhood. But what happens when the appraiser receives an assignment in a recently-constructed subdivision? Will staying at a desk help the appraiser who is expanding into new geographical areas? How will the appraiser come to know the nuances of that new town or county? 10 questions Fannie Mae does not answer include the Selling Guide. Right now, it assumes the appraiser inspects the subject’s neighborhood. How will that be possible if the appraiser stays in the office? OK, the appraiser can get in the car and visit the new neighborhood, true. But, isn’t the purpose of a desktop appraisal to cut the time they appraiser spends outside of analyses? So, if appraisers are out inspecting neighborhoods, they are complying with Fannie Mae’s current requirements. But they are not at their desk analyzing. That’s not complying with her requirements. Therefore, is Fannie Mae going to change the Selling Guide so it is internally consistent with her adoption of desktop appraisals? When? So many questions. 10 questions Fannie Mae just has not answered include so many more, too. Let’s hope she chooses to heed our call and then answer our questions. Thanks for listening!

USPAP says support everything! That’s really great advice, but is it practical? Appraisers have only so much time and money to do an appraisal. That report must get out the door quickly and timely! So, is there really time to explain and support everything? Let’s put it this way: there probably is not. But try selling that to your state appraisal board! You won’t. Your budget and turn-around time limitations are irrelevant. There’s a reason USPAP says support everything. With support, your value conclusion is accurate, reliable, reproducible, and credible. USPAP demands the appraisal conclusion(s) be credible. Our friends the GSEs, et al, demand accuracy, reliability, and reproducibility. We appraiser can give them both. Yes, it takes more effort, more organization, and more planning. But remember that defending yourself against a formal state charge will cost a lot more than whatever you appraisal fee was. So, how to reduce the chance of such a charge? Support! In the workfile is you support for every statement of fact in the report. That’s where you support every opinion and conclusion in the appraisal. Support and explanation are the keys to keeping the state off your back and out of your wallet. USPAP says support everything! Take USPAP’s advice. If you see it, save it in the workfile! If in doubt, DON’T throw it out! Keep it in the workfile. Was a transaction not arm’s-length? Keep it in the workfile! It will come in handy when you are appraising to a standard other than market value. Did a potential comp have surplus land? Keep in it the workfile so you can measure how the market handles that issue. USPAP says support everything. There is no such thing as a workfile too thick!