According t the HVCC code, I should be drawn and quartered. I may have influenced him on an appraisal value.

No, I did not break the code, because the appraiser called me. But I did have a moment to chat with him about the state of our industry.

He was not very happy about the new code, he indicated that he has taken over the spot that used to be held for mortgage brokers and loan officers. That being the lowest of the low in the real estate world.

Turns out that I am having trouble finding anyone that likes this new HVCC code. I checked out where it came from and boy was I surprised when I found that the Attorney General of the state of New York is the primary force behind its adoption.

Here's the deal Andrew Coumo used to be the head of HUD. He had a lest than stellar run in that position. After that gig he went to work with a director of a company called AMCC (appraisal management company).

Because he is the son of Anthony Cuomo a big time mover and a shaker in New York politics, Andrew gets the Attorney Generals job.

Next thing you know WAMU is getting fined for conspiring with an appraisal group to inflate prices on a ton of properties. They paid a fine in the millions. They were guilty.

So Attorney General Cuomo goes on a mission to fix the appraisal problem by separating the heavy handed influence large lenders have on appraisers.

That was the big complaint by appraisers in the past. The brokers, the banks, the credit unions , the bankers, and yes the realtors all put pressure on the appraisers to come in at unrealistic values.

According to the HVCC code, I should be drawn and quartered. I may have influenced him on an appraisal value.

No, I did not break the code, because the appraiser called me. But I did have a moment to chat with him about the state of our industry.

He was not very happy about the new code, he indicated that he has taken over the spot that used to be held for mortgage brokers and loan officers. That being the lowest of the low in the real estate world.

Turns out that I am having trouble finding anyone that likes this new HVCC code. I checked out where it came from and boy was I surprised when I found that the Attorney General of the state of New York is the primary force behind its adoption.

Here's the deal, Andrew Coumo used to be the head of HUD. He had a less than stellar run in that position. After that gig he went to work with a director of a company called AMCC (appraisal management company).

Because he is the son of Anthony Cuomo a big time mover and a shaker in New York politics, Andrew gets the Attorney Generals job.

Next thing you know WAMU is getting fined for conspiring with an appraisal group to inflate prices on a ton of properties. They paid a fine in the millions. They were guilty.

So Attorney General Cuomo goes on a mission to fix the appraisal problem by separating the heavy handed influence large lenders have on appraisers.

That was the big complaint by appraisers in the past. The brokers, the banks, the credit unions, the bankers , and yes the realtors all put pressure on the appraisers to come in at unrealistic values.

So Mr. Cuomo came up with this plan, the appraiser industry group was for it big time, initially... then he got fannie mae and freddie mac to endorse and adopt the plan. They adopted the plan way to quickly.

The rest of the real estate industry was not really sure what the effect of this new code would be. Then reality struck, appraisals started coming in with very conservative values.

Some purchase loans were killed by low appraisals, refinances , were killed right and left. The rules had changed dramatically and who was served, I repeat who was served?

Realtors, loan officers, appraisers, builders, banks, credit unions, and the consumer are being negatively effected by the effects of this code.

Wait a minute the reason for the code was to protect the consumers, right? It now costs more to get an appraisal, it takes longer, and the quality of the appraisal is inferior.

Quality appraisers are looking for a different line of work, most realtors are working in some other job just to make it through this period. Mortgage brokers and loan officers have fled the industry to the tune of 50% from just a year ago.

The cost of the code to consumers in lock time, appraisal value, equity, and loan fees is estimated at about $700 additional dollars per purchase or refinance .

Ok, so the purpose of the code was to protect consumers, well didn't we have laws in place to do that before? Yes, we did. Were these laws enforced? No, the reason, no funding to enforce. Hum....

So instead of our government enforcing the laws it already had in place, they feel it is OK to dump the cost of this stupid code on the backs of Realtors, loan officers, appraisers, builders, banks, credit unions, and the consumer.

One of the NAMB spokes persons asked the asst. Attorney General of New York this very question and they acknowledged the results were costly and they said they were OK with that.

Well I am Not!

Here is what we can do, there is currently a bill in Congress that is called HR 3044. It suspends the HVCC code for 18 months so that additional study and research can be done as to what the unintended consequences are of the Code (HVCC).

You and everyone you know needs to contact their congressman and encourage them to support HR 3044.

Do not assume the other real estate professional down the street is going to do this, he is expecting you to do this. Tell your congressman specific stories of how you have been effected by this new code.

If you do not have a story, you have not been very active in the real estate industry in the last 3-4 months.

This is a must do, if you have ever stood up for something this is something that is worth while.

One last thing, remember that the Code was designed to reduce the pressure that Banks, brokers, credit unions, builders all put on the poor appraiser to inflate the value of the real estate. Well check this out, the code allows for Banks to own up to 20% of the appraisal management companies. Is that a potential conflict of interest? Something to think about...

Sample FHA Repair requirements (this list is based on Carlton Mitchell's interpretation of FHA regulations)

Exterior peeling paint exposing unprotected wood (built after 1978 is not a factor)

Peeling paint on a home built prior to 1978 (exposed unprotected wood not a factor) interior or exterior

Active wood eating insects observed or damage observed with no documented treatment

Excessive foundation cracks or foundation movement that affects the livability or structural integrity of the home ( a structural engineer may be needed to determine scope of work for repair applicable to county building codes

Real Estate Appraisal Fee

The first thing many clients ask when calling an appraiser is “how much does the appraisal cost?”.

What techniques are used to reconcile market price variances? (regression modeling/match pair sales)

Does the appraiser have experience developing appraisal reports for your particular intended use?

To board of a market segment definition could compile large number of data points from inferior or superior market segments skewing the statistical model or supporting an opinion of value not reflective of the subject property.

Beware, like many things in life you get what you pay for. This does not mean the more you pay the higher the value but more importantly ensure the appraiser you hire has experience in statistical modeling and is familiar with local market trends.

Condition typically carries a lot of weight in residential market pricing. An inadequate investigation in this area can have a negative impact on the opinion of value. When appraisers take short cuts in sales analysis the appraiser may end up doing a disservice to the client by developing an opinion of value from data points not reflective of the subject property. In the context of time is money, how much time do you think the cheapest appraiser will spend on data analysis?

Carlton Mitchell has passed a back ground check required by several lenders!

First of all, LSI would like to thank you for your willingness to participate in the background check project in order to begin to take USAA Mortgage, Wells Fargo and US Marshalls’ business.

We are pleased to advise you that each of the individuals listed below have the background check, making them eligible to complete the affected orders. Only the following are eligible. Please note that it will be the to ensure that only the following complete USAA, Wells Fargo and US Marshalls orders. Each affected order will be clearly marked as such. I can be contacted as indicated below to further discuss this or to add additional appraisers to the roster. Have a good day.

Great Buys in FHA Foreclosures

FHA foreclosures have been steadily rising in the last three years and the number of new homes getting on the selling block keeps coming by the day. A dominant market is taking a new form today and that is FHA foreclosures. Real estate market forces have pushed the price tags of homes down nationwide but the number of FHA foreclosures has continued a sustained increase in rate up to this point. Market analysts are even predicting a new wave of foreclosures. This time, it will hit the prime mortgage sector.

At face value, this means more homes priced cheaper will be available for potential homeowners as mortgage lenders are pressed to dispose of FHA foreclosures to ease their liquidity problems. The prospects seem to be attractive for those with sufficient equity.

Words of Caution on FHA Foreclosures

Buyers of FHA foreclosures should be wary with their buying of homes from the FHA foreclosure listing. As would be expected, most of the foreclosure homes for sale are results of default of sub-prime mortgage loans. In this case, a lot of these real estate properties have not sufficiently built on its equity from payment of mortgage from the original homeowners. You might end up with a home with a price tag that is almost equal to its actual value or at best with only 10% off from the original cost.

Buyers of FHA foreclosures are forewarned of these types of foreclosure homes for sale which investment experts term as “land mines.”

Buyers of FHA foreclosures are strongly advised to do a thorough title search. Study the structure of mortgage on the foreclosure homes for sale. In some instances, there might be a second mortgage on top of the principal mortgage.

These types of FHA foreclosures are not the “best buys” we are looking for.

Another aspect to consider when buying foreclosure homes for sale is that the real estate properties are being sold “as is.” It is then imperative on your part to factor in at least an additional 25% on the price tag of the property you are buying. This amount should cover all the unforeseen costs involving repairs and defects on the home which may not be apparent on initial inspection.

You don’t want to end up spending the 30% savings you thought you got from buying FHA foreclosures for repairs and defects you only discover after you move in to your new home.

Another practical tip for would-be buyers is to avoid foreclosure homes for sale that were already on the listing for quite a while already. On inspection you would most likely find out that these homes have significantly deteriorated as most mortgage lenders are hard pressed to maintain an even increasing number of foreclosed properties.

A final reminder to buyers of foreclosed homes; most of the FHA foreclosures were originally owned by people who would have surely gone into serious financial troubles. With this situation in mind, expect these former owners of not being able to have done some decent maintenance and care of the now foreclosed property.

Expect to face some serious house repair of practically all aspects of the entire property. Don’t be surprised to find some punched holes in doors and wall panels courtesy of the former owners of the home.

Once these are sufficiently covered by the would-be buyer, then it is safe to move on to the next phase, and that is to commence the buying of FHA foreclosures.

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Who Should Hire the Real Estate Appraiser and Why?

Everyone involved in the sale of real estate has a vested interest in the results of a real estate appraisal. The outcome affects the seller, the buyer, the lender, and even the realtor.

A too low valuation of the property by the appraiser could mean a seller must lower the asking price. For a lending officer, it could mean a lesser commission or none at all. A too high valuation means the buyer could be paying more than the property is worth. For the realtor, his/her commission could go higher or lower, which is based on the purchase/sell price of the real estate.

An appraiser, who should be licensed by the state, performs the real estate appraisal. It is best to hire someone local with years of full-time experience in order to get a more accurate appraisal. The appraiser and appraisal are governed by the minimum standards, published periodically in the Uniform Standard of Professional Appraisal Practice by the Appraisal Foundation. The Foundation is chartered by Congress.

The recent real estate bubble, unfortunately, brought problems for appraisers and many involved in real estate transactions. According to Realty Times in their April 2006 issue, appraisers have been routinely asked by lenders to inflate real estate values to keep up with the ever-rising real estate market. One real estate appraiser in San Diego quit and turned in his license to the state, after being fired three consecutive times for refusing to inflate his valuations. Now, real estate appraisers across the United States are under a microscope from federal financial regulators and Congress.

The real estate appraiser may be hired by the seller to determine an accurate selling price or by the buyer to ensure the accuracy of the purchase price and mortgage; but generally, the lender does the hiring or uses their own in-house appraiser. Though buyers may assume the lender has their best interest, mortgage lenders have their own best interest at the forefront, especially some not-so-scrupulous lending officers who may be targeting a higher commission.

If I were a seller, I would hire my own real estate appraiser to ensure I was getting the most for my property. As a buyer, I would put the money out upfront to hire an independent and objective appraiser with no connection to anyone within the real estate transaction. This ensures that I do not contract for a mortgage, based on an inflated appraisal valuation, that will give me a new home with a lower or negative equity. The lender still may require a different appraiser.

If five different real estate appraisers evaluated the same property within the same timeframe and under the same conditions, it could result in five different and varying real estate valuations. Why? There is no set checklist or established value for each property feature and amenity. Though appraisals are based on prescribed standards, it is a subjective process.

If there is more than one real estate appraisal and they disagree significantly, you have options. If the value is too low for the seller, renovations may raise the value — or you can decline to sell. If the lender insists on its appraiser’s value, which disagrees with your real estate appraiser’s value, as the buyer you can look for financing elsewhere — or decline to purchase the real estate. There also is the option to bring the appraisers together to come to a common agreement on the value.

Remember, the person looking out for your best interest is yourself. Ensure the appraiser in your real estate transaction is reputable, objective with no connections to anyone in the transaction, local and experienced.

John Harris is an expert researcher and writer on real estate topics such as economics, credit improvement tips, home selling advice and home buying preparations. For more on San Diego Homes for Sale visit http://www.twtrealestate.com.

5 Things to Look for in a Property Appraiser

Homeowners who are seeking a property appraiser often ask “How should I choose which real estate appraiser to use?” When selecting a property appraiser, keep the following in mind:

Always make sure a property appraiser is licensed or certified by the state to perform real estate appraisals. While state licensing and/or certification isn’t always an indication of quality, it ensures that an individual is has met certain standards and been authorized to perform property appraisals. Some states do not require licensing to perform real estate appraisals. It is unwise to use the services of any professional who is not licensed or certified.

Don’t be afraid to ask an appraiser for a copy of their license. A good appraiser will readily provide this documentation. Copies of licenses are commonly requested by mortgage brokers and loan officers. Once you get a copy of their license, it’s a good idea to check with the government agency which issued the document to ensure the license is active and in good standing.

Many excellent real estate appraisers carry a professional designation. The most widely known industry designations are SRPA, SRA and MAI. These designations are issued by the Appraisal Institute. These designations demonstrate an appraiser's commitment to continuing education and ethical standards. Oftentimes, the standards required to obtain these designations exceed those set forth by state licensing/certified requirements.

Ask the real estate appraiser what percentage of their work is performed in the neighborhood in which the property is located. Appraisers who do a lot of their work or live in a particular area often have a deep knowledge of property values in that area. Additionally, they are more likely to know how “neighborhood variables” such as school districts and fire departments affect the property values in the area.

Lastly, find out if the property appraiser has experience performing appraisals for consumers as opposed to real estate professionals. Mortgage brokers and loan officers have distinctly different needs than homeowners. An appraiser who understands the needs of homeowners is more likely to help you learn about the appraisal process and answer questions you may have along the way.

About The Author
Mary Collins currently works for http://www.find-appraisers.com and is a consultant with experience in the real estate industry. She and the staff at Find-Appraisers.com are focused on helping consumers and real estate professionals quickly find licensed/certified property appraisers in any county across the United States.

Divorce Appraisals

Finalizing a divorce involves many decisions, including "Who gets the house"? There are generally two options regarding the house - it can be sold and the proceeds divided, or one party can "buy out" the other. In either case, one or both parties should order an appraisal of the residence. Divorce appraisals require a well supported, professional appraisal that is defensible in court. When you order an appraisal from us, you are assured that you will get the best in professional service, courtesy, and the highest quality appraisal. We also know how to handle the sensitive needs of a divorce situation.

Attorneys and Accountants rely on our values when calculating real property values for estates, divorces, or other disputes requiring a value being placed on real property. We understand their needs and are used to dealing with all parties involved. We provide appraisal reports that meet the requirements of the courts and various agencies.

As an attorney handling a divorce, your needs oftentimes include an appraisal to establish fair market value for the residential real estate involved. Often the divorce date differs from the date you order the appraisal. We are familiar with the procedures and requirements necessary to perform a retroactive appraisal with an effective date and Fair Market Value estimate matching the date of divorce. The ethics provision within the Uniform Standards of Professional Appraisal Practice (USPAP) binds us with confidentiality, ensuring the fullest degree of discretion.

Estate Appraisals

Settling an estate is an important and sometimes stressful job. As an executor you have been entrusted to carry out the wishes of the deceased as swiftly and exactly as possible. You can count on us to act quickly and with sensitivity to the feelings of everyone involved.

Settling an estate usually requires an appraisal to establish Fair Market Value for the residential property involved. Often, the date of death differs from the date the appraisal is requested. We are familiar with the procedures and requirements necessary to perform a retroactive appraisal with an effective date and Fair Market Value estimate matching the date of death. The ethics provision within the Uniform Standards of Professional Appraisal Practice (USPAP) binds us with confidentiality, ensuring the fullest degree of discretion.

All too often, people do not fully appreciate the need to have a detailed real estate appraisal prepared in support of the numbers being used in documents filed with revenue authorities.

Opinions of value used in documents filed with the revenue authorities should be supported by a detailed report as to how the appraiser arrived at his conclusions. Such a report will certainly demonstrate to the authorities that the numbers used are well founded and substantiated.

Having a professional appraisal gives the executor solid facts and figures to work with in meeting IRS and state agency requirements. It assures peace of mind to everyone concerned because we are there to stand behind the appraisal if it is challenged.

Few things to consider when analyzing residential real estate market price trends.

1) General search parameters statistically compiled are not as reliable as a specific market segment defined and compiled. For example, a few market segments may increase the average and median sold prices which may be hidden in a larger market view. In Washington Dc metro area it is common to have many market segments with in a small geographical area with varying supply/demand situations and varying market response to condition variances. Even at the micro level certain models with in a neighborhood may illustrate a completely different market reaction than other models.

Grouping all units with various condition categories also skews the average and median sold price. Movement of the median sold price is typically used to illustrate price trends for a defined time period. A more reliable method to reflect price trends is to geographically define the market segment with physical features used as search parameters (age, size, style) than categorize into 3 main condition categories. Compile the 3 data sets and measure median sold price for each condition category (subjective analysis but is rooted in pictures and commentary provided by realtors).

In my experience generally prices for many market segments reduced to very competitive prices in 2008. With the increased absorption rate through out the Washington D.C. metro area median sold price indicators reflect stable to increasing trends from multiple year lows. However, in many case studies inventory is declining but still not in balance with demand and concessions are a large part of many transactions.

Demand is fueled by a reduced price structure and economical stimulus. When prices hold without concessions or market participants purchasing at a similar price structure without concessions than you have something to hang your hat on as indicating either a stable or increasing market. Furthermore, the process mentioned above should also illustrate a balanced inventory. Many market segments across the Washington D.C. metro area do not have a balanced inventory ( withdrawn/expired listings were included in the compiled data) and thus the indication of stable or increasing markets may be a temporary status. Interest rate increases are likely to have a negative affect on prices in the near future.

Carlton Mitchell Appraisersoncall.com

Fannie Mae’s market value definition and what it means to an appraiser

Jan. 2010 by Carlton Mitchell Certified Residential Appraiser in Maryland and Virginia.

The market value definition is pre-written in FNMA’s appraisal forms.

Here is the market value definition:

DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions* granted by anyone associated with the sale.

*Adjustments to the comparables must be made for special or creative financing or sales concessions. No adjustments are necessary for those costs which are normally paid by sellers as a result of tradition or law in a market area; these costs are readily identifiable since the seller pays these costs in virtually all sales transactions. Special or creative financing adjustments can be made to the comparable property by comparisons to financing terms offered by a third party institutional lender that is not already involved in the property or transaction. Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the market’s

reaction to the financing or concessions based on the appraiser’s judgment.

Most probable price: Please take careful note this does not say highest possible. Therefore, from a risk assessment this definition reflects a buffer signifying that there has to be market desire for the product at the appraiser’s opinion of value that is main street credible. I begin my market analysis with a market segment definition based on the location and physical features of the property I’m appraising for compliance with reflecting high probability.

Sometimes this market segment is limited to the neighborhood while other times due to limited neighborhood sales I compile sales from a larger geographical area to increase the data points to a high enough number to reflect probable market response.

There are two main factors that help keep the market segment definition creditable when increasing the geographical area. First, the appraiser should verify that the other neighborhoods where data is coming from has a historical price per sqft range similar to the subject neighborhood. If not than identify the cause of the variance and adjust for it in the appraisal. For example, neighborhoods A and B are predominantly rambler homes built post WWII. Neighborhood A’s ramblers are generally slightly larger than neighborhood B but through historical analysis and matching sales over time from each neighborhood sorted by condition illustrate that the price per sqft range from each neighborhood is small enough to not warrant a linear size adjustment.

Many times linear size adjustments are simply assumed. I have sent appraisals to lenders with out a linear size adjustment with market support for my determination only to have lender reviewer’s call and request a linear adjustment because “every report has a linear size adjustment over 100sqft”. I have to laugh because many appraisers’ use software that has a built in mechanism for automatically adjusting for size. The software often has a default variance setting of 100 sqft. Any variance over 100 sqft adjust. The appraiser inputs the multiplier and the software auto adjusts. If so many appraisers are adjusting for size base on a software default settings how is that a reflection of the market? Does every market segment respond to size in the same manner?

The second factor to keep the data compilation creditable requires the appraiser to set search parameters based on physical features to isolate sales from the data set that are not comparable to the subject. Meaning remove data points that simply would not be considered by the market place as in the same bracket. For example, if I’m appraising a 50 year old home newer homes typically would not be in my data set. Be mind full of location and physical variance that may skew the data set compilation from reflecting market response specific to the home you are appraising.

“buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.” This part of the definition caused issues in lender appraisal policy when foreclosures started to become wide spread in the market place. Some appraisers were saying that foreclosures or short sales should not be included in the appraisal if the subject property was not in a similar distressed status. On the surface that seemed reasonable but never set well with me. I simply do not like blanket policies as being the best fit for every situation. I choose to let the market tell me how to define the data set. The affect of distressed sales/listing can be determined by simple categorization. Create two columns with distressed sales in one and non-distressed sales in another. Break down into condition categories and compare the sale prices and days on the market to identify the market response. Than incorporate the outcome into the appraisal development process.

“price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions*”

Notice FNMA has a star beside this statement. I hear it all the time from realtors. FNMA allows up to 6% seller concessions as if it’s a free party to inflate prices or hold prices up when demand is falling. This is the beginning of FNMA’s directive to appraisers that we are responsible to determine misuse of seller concessions. Meaning that appraisers must determine if the concessions reflect market value or not. This is most noticed when qualified buyers purchase a similar unit without concession at a lower price. This is typically identifiable in multiple transactions and really illustrates where the market is moving. Also, take a neighborhood or a market area and run all sales for a 30 year period. Most likely you will find a big increase in seller concession during economical downturns. I’ll get into the significance of this historical data below.

“*Adjustments to the comparables must be made for special or creative financing or sales concessions.” Once again FNMA has a star to signify importance. Simply compile the data set and identify transactions with and without concessions and let the market determine where market acceptance is and net the concessions accordingly.

Now we get back to the historical data analysis. “normally paid by sellers as a result of tradition or law in a market area; these costs are readily identifiable since the seller pays these costs in virtually all sales”

Compile the sales data for 30 years for the defined market area. Can you say virtually all sales had seller concessions? It is law? In my market area Montgomery County Md and Fairfax County Va I can say seller concessions are not law. I’ll even say sellers really do not want to give money back at closing. I will also say virtually all sales do not have seller concession. Therefore, for FNMA compliance I must determine most probable market value and may need to net seller concessions to meet compliance.

“Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the market’s reaction to the financing or concessions based on the appraiser’s judgment.”

What FNMA is stating here is as mentioned above, determine probable market value and base the removal of seller concessions in the opinion of value rooted in market response. Yes, it may be a 100% concession deduction (dollar for dollar) across the data set.

Carlton Mitchell

www.appraisersoncall.com

Carlton provides residential appraisal services in Maryland and Virginia for a 30 mile radius of Washington Dc. Carlton specializes in Montgomery County MD. Carlton is a certified residential appraiser based in Silver Spring, Md. Carlton accepts fee assignments and is available for appraisal review work.

Appraisal Articles

Shh..., I Spoke with an appraiser today!

Sample FHA Repair requirements (this list is based on Carlton Mitchell's interpretation of FHA regulations)

Real Estate Appraisal Fee

Carlton Mitchell has passed a back ground check required by several lenders!

Great Buys in FHA Foreclosures

Who Should Hire the Real Estate Appraiser and Why?

5 Things to Look for in a Property Appraiser

Divorce Appraisals

Estate Appraisals

Few things to consider when analyzing residential real estate market price trends.

Fannie Mae’s market value definition and what it means to an appraiser

The market value definition is pre-written in FNMA’s appraisal forms.

Here is the market value definition: