January 2015 Has Come and Gone and We are Still Here

The most feared date in the appraisal industry has come.  January 26, 2015 arrived with much trepidation and trembling amongst myself and my appraiser colleagues.  The day of the Collateral Underwriter (CU) had finally arrived.  Yet, it turned out to be a pretty typical day for most.  We are now over a week removed from the CU and I have yet to receive even one CU-related revision request.  I guess that means one of two things; either I am an incredibly talented appraiser who uses all the best comps and supports every one of my adjustments, or I work for awesome companies who realize the flaws in CU and have chosen not to implement it.  For purposes of my daily ego-stroking exercises, I choose to believe it must be the former.  

AppraiserCUHumor aside, CU is a big deal.  Though I may not have received any revision requests related to CU yet (and I stress the word “yet”), many of my peers have.  My inbox has been flooded the past few weeks (even before the 26) with questions and complaints from my fellow appraisers about CU.  They are finding more and more of these requests and it is making their lives a bit frustrating.  I get it.  Revision requests (especially those pesky ones which are silly and really have no bearing on the final value) take time.  Time is money in the independent, fee-appraiser world.  Though I have yet to experience CU directly, it is only a matter of time.  

The most frequent question I am getting right now from other appraisers is “What are you doing differently now that CU is here?”  It is a great inquiry and one I have been contemplating and preparing for long before January 26.  As for me and my office, we have made two fairly significant changes to the way we appraise real estate (and both have everything to do with adjustments).

First, I am more circumspect about the adjustments I make.  In the past, it was pretty common for me to make a $2,000 for a fireplace or deck.  CU caused me to reevaluate that.  On a $325,000 house, can I really support a $2,000 adjustment for ANYTHING?  That is less than 1% of value!  Maybe I can, but I doubt it.  Since I do not have the data to support such minimal adjustments, I have stopped making them.  If I cannot support a small adjustment (like sprinklers, fireplaces, decks, patios, etc), I just do not make it.  Of course, an explanation is made in the report to this effect.  

Secondly, I am much more careful about the support I have in my workfile for the larger adjustments I do make.  Do not misunderstand, I am not convinced that every adjustment can be supported.  I know others who feel differently on that matter, but I do not believe that ample evidence exists in every case that a $48 per square foot adjustment should be made over a $47 adjustment.  I just don’t. However, that does not keep me from trying.  If support can be made for adjustments (regression, paired-sales and other methodologies), I am not only going to process it, but I am going to keep that evidence in my workfile should it ever be needed.  

The other encouragement I would give is to be sure you truly are choosing the best comparables available to begin with.  If you are picking sales simply because they support some preconceived notion of value (yours or someone else’s), you will get caught. And you should get caught!  Fannie Mae has access to all kinds of data.  We live in the era of big data and, though that reality comes with some notable drawbacks, it makes it harder for the unscrupulous to hide their unscrupulousness.  If you have three, really good comps in the neighborhood, yet ignore them to use three, higher sales in another subdivision, you better have a good reason for doing so (and document it).  

Like it or not, Collateral Underwriter is here.  It is my hope that either the flaws in the system will be recognized and addressed or it goes the way of the buggy whip, but until then we must deal with reality.   We must find ways to work within the world of CU and still make a living as real estate appraisers.  My advice is to not overreact.  We can spend a great deal of time fretting about CU and making changes to our business practices that may be futile.  Remember, CU has caused me to make only two, fairly minor, changes in the way I appraise.  Both of them probably needed to be made anyway.  Though it comes with some notable baggage, in a small way, CU can cause us to be better and more careful appraisers.    

Dustin Harris, Creating ‘Value’ for Real Estate Appraisers

38 thoughts on “January 2015 Has Come and Gone and We are Still Here”

  1. Pingback: January 2015 Has Come and Gone and We are Still Here - Appraisal Buzz

  2. So, You simply cow down?… and stop making the minimal adjustments you used to make on a daily basis as part of the appraisal process. And why?, because you are allowing the loan process to dictate what should or should not be part of your appraisals. Seems everyone is forgetting the appraisal process is not supposed to be contingent on the loan process

    1. The Appraiser Coach

      Robert: I think you misunderstood my point. I am not cowing to anyone. I am simply saying that CU reminded me of a fundamental of appraisal practice that I think I have forgotten over the years. That is, markets dictate values not appraisers. If I cannot support a $2,000 patio adjustment, should I really be making it?

      1. Yes, For the same reason you made it all the other years except this one… because you know it made at least some value difference. $2K for a patio, another $2K for the hot tub, $2K for retaining walls, superior landscaping– the market actually does dictate some minimal adjustment that you now recognize as unwarranted based on how you perceive CU. CU didn’t all of a sudden remind you not to make adjustments that make marketable differences, it told you not to make them based on your opinion, so you stopped making the adjustments altogether. In other words you have allowed the loan process to dictate why you no longer make ANY minimal adjustment “Since I do not have the data to support such minimal adjustments, I have stopped making them”

        1. I agree with Robert. It is not a good idea to stop making small adjustments just because you don’t have statistical or paired sale support. I understand that even with multiple regression, small adjustments get washed out. A house with a fireplace might also have other quality factors that might look like value coming from the fireplace (when it is many factors) in paired sales, grouped data, or regression. However, small adjustments can still be supported. If you have experience that a market demands a patio, the patio is almost new, and the patio costs $2,000, maybe it can be reasonable that the adjustment is close to the cost. If the market does not demand a fireplace and the cost is $3,000, maybe it would be reasonable to reconcile a value that is less than the cost. Do not let the client change the way you look at a property.

      1. I agree with Robert and Gary and will also wager you have made many “small or minimal” adjustments in the past that you coud not “prove through market data.”

        1. If you are responding to me Michael, your wager would pay off. Yes I have (and still do) make many adjustments that are minimal and/or are not directly supported with readily available market data. I admit it. How many appraisers out there will also admit that? I think a only a few brave ones. The rest will continue to make adjustments and pound the drum claiming they have support and the method is reliable and they’re the best appraisers ever and everything they ever have done and ever will do is great and anyone who thinks or acts differently is a slacker hack. Why? Well, because one of the things we have to do under USPAP is do what all our peers do. So if everyone pulls adjustments out of the air, then we must all do it too. If everyone publicly claims the method is reliable, then who are the minority opinions to disagree and subsequently not comply? All of us know what BS that is, but who would wager their license and livelihood to tell the truth? I have no fear I could (and do) conjure up data that supports each and every adjustment I ever have and ever will make. Do I like it? No. Do I do it? Yes. Do I rely on adjusted values to make my final reconciliation of value? It depends. Do I inform the client that adjusted values are often not reliable due to the biased nature of the method? I do now and should have been doing it all along (a USPAP requirement friends). We all make adjustments for these reasons: a) the 1004 form format requires it (client assignment condition) b) everyone else does it (USPAP requirement mandates we employ the recognized methods of our peers). The problem I have and the point I am trying to make is that now FNMA is essentially calling our bluff and asking for more support. So, if you cant support it, why make it? Why is there anything wrong with writing in the report that there may be differences between the subject and comparable properties that buyers may react to in terms of dollars that cant be reliably quantified and subsequently supported with the available data? This is what the coach is deciding to do and this is what I intend to begin doing (and have started to do to some extent), just as soon as the rest of my peer group catches up, if they ever do. Kudos to the coach on this one.

  3. Robert , you are correct…let’s not be held hostage and run scared….They want us to prove our adjustments? I say prove me wrong…let’s get back to what we were taught this profession was about….read the following….
    Not all adjustments in the Sales Comparison Approach can be directly extracted or supported by the available market data with a high degree of accuracy. It is impossible and nowhere does USPAP state that all adjustments must be supported by paired analysis. This stipulation would make every assignment unacceptable for an appraiser. Some adjustments have an element of subjectivity and professional judgment which the appraiser has applied based on prior observations of the reactions of typical/knowledgeable buyers’ and sellers’ in the marketplace. As a professional appraiser, I am constantly analyzing the market and I am in contact with other Real Estate Professionals – agents and appraisers, as well direct market input with having personal interviews with buyers and sellers. Finally, the adjustments are refined using sensitivity analysis within the grid and tested for reasonableness with the selected comparables. This method is a standard and well accepted practice within the appraisal industry. It is NOT a USPAP violation as USPAP Standards Rule 1-1 states; “In developing a real property appraisal, an appraiser must be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal”.

  4. Interesting discussion, but if making deck/patio/porch adjustments, would it also not follow that the size of the deck/patio/porch would matter? One house might have a large porch and no patio, while another has a tiny porch and a patio. The one without the patio in this case may have superior market appeal. It’s not cut and dried is all I’m saying.

  5. The Appraiser Coach

    Great discussion. I love where you guys are coming from. Definitely good ideas to think through. Keep them coming.

  6. I agree with the coach on this one and disagree with the prior commenters. If we are going to quote USPAP, it also says we must appraise in the context of the client imposed assignment conditions. Here’s a quote from the 1004, cert # 9 “I have reported adjustments to the comparable sales that reflect the markets reaction to the differences between the subject property and comparable sales.” Note it does not say the appraiser should report what they “know”. If you can not extract an adjustment, how do you know you should make it? Because you “know” it? Less than an hour ago my trainee told me that an egress window in a basement adds value to a property. My reply was “really, how much value and how do you know that?” He sat there with his mouth open before saying he just knew it. Now, maybe an egress window does add value, but should he at that point just pull a value out of the air and adjust for it?

    This brings me to the conversation at hand (which I admittedly did a horrible job of explaining on a prior post on this forum). Requiring appraisers to “support” adjustments is not something that the 1004 form requires of the appraiser (you know, the thing we sign our name to), however it is something that is required of any appraisal that is submitted by a lending institution for purchase by FNMA. It is one of the “Unacceptable Appraisal Practices”, defined in the FNMA Selling Guide. That means that an appraiser will not get in trouble for not supporting their adjustments, however a lending institution might get a repurchase demand from FNMA if the appraiser failed to support their adjustments. This is why we have all begun to see more “assignment conditions” that address this issue. This is the only issue that any decent appraiser should be concerned with when it comes to the new CU, mostly because all of the other issues are adequately addressed by any appraiser worth a nickel.

    “Supporting Adjustments” however is an interesting term. What constitutes support in the eyes of FNMA? Funny, there is no defined parameters of support to be found anywhere!!! LOL. The Selling Guide simply says the appraisal must support them. This is why we keep seeing assignment conditions that ask for adjusted features to be “bracketed”. Lenders think that offers support. I have no clue how they came up with that idea, but there it is.

    In my opinion, adjustments are in general highly unreliable. So unreliable (in most cases), that putting them in an appraisal borders on submitting a misleading report, which as we all know is a violation of USPAP. The problem is that we have all done it for so long that it has become a recognized methodology and subsequently under USPAP we must do it!!!!

    I remember a few years ago I did a lake property where I found that all property (with similar frontage) was worth about $2 million. Didn’t matter if the house was 10 or 100 years old, so long as the house was substantially large and of good quality. I submitted the appraisal without adjustments and explained that the market data did not support adjustments and rather supported not making adjustments. LOL. Of course the appraisal came back and the “senior” appraiser at the firm said that I should make adjustments because all of my peers would have made adjustments (and said he was one of my peers). So, I made the “typical” adjustments and sent it through. The report looked worse because the adjusted values were then all over the place, but I suppose I had no choice because all of my peers would have done it that way. This is the type of contradiction in the industry that drives me crazy. I did what the client asked of me (1004 form, FNMA Selling Guide) and signed my name to it, but instead had to capitulate to a group of “peers” who often think too little about what they are doing and just keep on keeping on because it is what they have always “known”.

    I suppose if a lie is told enough times, it can sometimes become the truth.

    The big change I have made this month is adding a comment in my appraisals that tells the reader that I did not, and they should not, rely on adjustments as they do not offer as unbiased support as the unadjusted sale prices.

    1. The Appraiser Coach


      What are your thoughts about the growing movement for a push to go to forms that do not allow for adjustments at all? In other words, value comesmore from a qualitative approach of comparable selection rather than a quantitative approach of adjusting.

      1. M, Coach I respectfully disagree. We are the professionals. That is what they pay us for, our professional opinion. Which is based on what we went to school for. The knowledge and learning based on good appraisal practice, theory and technique on how to create a reliable appraisal report. Are we to throw everything we learned out the window because someone decided `we want it done this way’ although we as appraisers know they are wrong. They keep trying to change the way they want us to do things. I dare say in theory the way appraisals were done 40 years ago has not changed. We still have to come up with an opinion of value. However because they screwed up the lending world they thought it best to change how appraisals were done to make the appraisal seem more reliable. By the way, if we are not going to make adjustments then there is no need for the appraiser. Any idiot can fill out a form. That is called an AVM.

        1. The Appraiser Coach

          Colorado (as if we can believe that is your REAL name– 🙂 ):

          I hope you know I am being lighthearted with the name comment. Same could be said for this mysterious “M” person. 🙂

          “We still have to come up with an opinion of value. ” This is true. HOW is the question here. If you cannot support a patio adjustment, should you make one just because your mentor taught you to? This is not a matter of me allowing the regulators to change the way I appraise. Rather, CU has caused me to return to the basics of appraisal 101. As much as I hate CU, that is at least one sliver lining that has come with it.

          “…if we are not going to make adjustments then there is no need for the appraiser.” I would respectfully disagree. I think any appraiser would agree that comp selection is typically more important than individual adjustments. I have done experiments where adjustments were made in one focus group and where they were not on a second focus group. The difference in final value (blind selection) was less than 5%. It makes one wonder how important our adjustments really area. That being said, the reason I disagree with your statement is that comp selection is HUGE. The reason AVMs do not work, IMO, is that they often get the wrong comps. That is one reason you need a boots on the ground appraiser. Thoughts?

          1. LOL. Wow, I’m mysterious now. First of all I wholeheartedly support any “movement” (What? There’s a movement? were do I sign up?) that includes the use of qualitative analysis rather than quantitative adjustments. I took a class many years ago from a super smarty pants appraiser (I mean that in the most loving and respectful way) who taught us the difference between the 2 methods. She also taught us the importance of taking a step back from our data and development to evaluate the quantity and quality of data and how each of these affected the results. That’s USPAP 101 folks and most of us have forgotten that tidbit of “recognized” methodology. Which brings me to Colorados response. No. I do not think we should throw out everything we have learned, rather I think we should embrace it. The tricky part here is also USPAP. The client does get to decide how we develop an appraisal. The credibility of those results is also measured in the context of the intended use and intended user. That means that the client gets to decide if after they told us how they wanted it done, the result was credible or not. Then its our job to tell them if their required methodology is credible or not, or in other words, reconcile. The most simple example of this dynamic is an appraisal done for insurance purposes as opposed to an appraisal done for lending purposes. An insurance guy wouldn’t care what people are paying for similar properties and a lender wouldn’t care what it cost to rebuild the structure. While we might develop both types of value in a report sent to either client, we should then reconcile the differences of the approaches and form an opinion of which was more reliable for the particular client and their particular use (and we do this now on every report). In my opinion the same sort of reconciliation should be made towards the method of employing quantitative adjustments on a sales grid. Do buyers really purchase property this way? Was there enough reliable data available in the first place to extract these adjustments? How much opinion went in to the reconciliation of each adjustment? How do the multiple adjustments, or mini-appraisals as I like to call them, affect the reliability of the adjusted values? I think these are all things too many of us, including myself, have failed to inform our clients of over the years. I think we have taken the stance that if its good enough for them (credibility defined in the context of the intended user) that’s is good enough for us. To me the change in the industry is the expectation of the client in terms of credibility. They want to know if they can rely on our adjustments. I wonder how many of us will say yes sir absolutely sir because otherwise we will have to admit their own instructions/required methods were flawed and we never let them in on it as opposed to how many of us will tell them that their methods have been flawed from the from the get go, but sorry, we thought you knew that!!!! LOL. We’ll see.

            …mysterious…HA! My name is on my email coach. I would think you could look in a log and see if you wondered what my name is. Call me anytime. I don’t publish it because I would not be comfortable publishing honest opinions on a forum that is tracked, logged and catalogued for all of eternity, or at least until the server crashes. Too many conflicting opinions in this industry and many of mine are in the minority.

    2. Let me get this straight.

      You let some “senior reviewer” direct you to make adjustments you did not believe were warranted?

      OK, then how would you respomd to your State Appraisal Board whne they hold up both reports and ask “Sir, which one of these reports is the misleading report?” GOTCHA.

      1. Right! USPAP – an appraiser must employ the recognized methods of his peers. I would tell the state board that USPAP made me do it. As far as misleading, I think you’re right. Though, then I would say the client made me do it, and per USPAP, I had to do it like they wanted me to. Then I would show them that also under USPAP, credibility is defined in the context of the intended user. SO, if the client thinks its the way to go and they make me do it, how can someone say I misled them when they led me? But yes, I fear no court of law, but I certainly fear a state board. Law is law and contracts are contracts – judges don’t dwell in opinions – prove it or get out. A state board though? Way too many interpretations and opinions that could be levied there.

  7. Years ago I spent months and months writing a demo report to earn my SRA designation from the Appraisal Institute. The demo report was 110 pages plus 60 pages of exhibits and it is essentially an open book exam. By the time one is finished, you know the whole 650 page appraisal textbook forwards and backwards. The subdivision was near the air force base in Tucson, AZ, with 550 starter homes when built 27 years prior. Cheap, cheap, cheap with no frills. My point is that it took these 550 homes with perhaps 50-60 annual sales just to pull out a few adjustments like price/sf, patio, second bath. Massive amounts of data to find just a few simple adjustments from the market place. Appraisal is an art, not a science. Multiple regression analysis results can be and are manipulated. Realtors are not very helpful. Paired sales are few and far between. Regarding commercial appraising, there are two ways to make adjustments: qualitative and quantitative. Qualitative is popular with only pluses and minuses used for adjustments because it is nearly impossible to pull out of the market place. Obviously CU was developed by non appraisers who never took an appraisal course or completed an appraisal. This CU business is expecting more than the profession can deliver. Perhaps they catch some scofflaws, perhaps they don’t.

  8. Dustin;

    I totally agree, so much so that I sent in my first report in today
    without adjustments for the normal accoutrement’s. So I will see what
    happens if anything, since I gave commentary as to why.

    My reasoning is that since UAD came about, which can be viewed as
    a preliminary step to CU we had to code properties as C1 to C6 and
    Q1 to Q6 . We could no longer just say it is in “average condition”
    well, we can easily determine what Q1 and Q6 is, or C1 and C6 is however
    when you are in the middle it’s highly subjective. On man’s C4 is another mans
    C3. Fannie and Freddie know this and as long as you don’t start changing that comp’s rating
    from one report to the next on the same property it won’t be a problem.

    In addition UAD allows you to make adjustments to condition and quality up or
    down and still stay in that category. So you can actually make your adjustments for decks, patios, fences etc. within your quality and condition, just explain it. In a nut shell you can lump all these small adjustments in the C and Q rating and not have to spend countless hours proving a deck is worth $2000.

    You would not have to prove why you rated a property C3 instead of C4 because it’s not quantifiable it’s subjective. A deck, patio or fireplace is totally quantifiable. You can spend an enormous amount of time analyzing hundreds of sale thru regression analysis and matched data and it won’t tell you what the C or Q rating is, Only you can and it’s your call. After all when was the last time you were asked for a revision request or additional commentary as to why you rated a comparable as C3 instead of C4?

    So I see this as a way around this latest mess.
    Just my thoughts and my philosophy in this modern age no matter if you are doing
    appraisals, dealing with the IRS or insurance companies….Don’t Tickle the Computers”

    1. The Appraiser Coach


      Let us know how that turns out. I know that sounded sarcastic, but I really mean it. I am curious to see what will happen there.

      1. Hi Dustin

        The Appraiser Coach says:

        February 5, 2015 at 4:44 am


        Let us know how that turns out. I know that sounded sarcastic, but I really mean it. I am curious to see what will happen there.

        You wanted me to let you know how it turned out. Ok well it’s been over two weeks and I never heard a word. However I only did one report that way because I went full regression analysis after that. That was on a Thursday so I spent Friday and the weekend working on the business and not in the business. Yes I am a student of yours.

        So this is a retirement job for me and I barely know how to how to work a spread sheet and the
        last statistics class I took was in college, early 70’s no computers only mainframes back then.
        I was looking for an easy to use off the shelf solution. So I came across it at the Total Store.

        I signed up for SAVVI and it’s so good I hate to share it with anyone. There is a cost and a learning
        curve and you need to dump a minimum of 200 sales from your MLS or it has it’s own data base
        for most of the country.

        Unbelievable, it selects best comps and ranks them in order it will grid them and make the adjustments for you and then transfer them to Total. Then it gives you a 9 page professional pdf report to include in your appraisal. If you go to their website they have videos and a sample report and videos explaining it. It may not work so well in rural areas with few sales but in the D.C. Metro
        area it works great.

        Not only is it accurate 95% + they advertise, but it saves so much time with each report. I’m thinking and hour or more off each report. Not to mention revision requests. I have been using this for two weeks now and I can honestly say I have had only revision request and that was from a dinosaur reviewer who just couldn’t get it. I made up a canned comment that regurgitates the main bullet points in the 9 page report so I have at the ready.

        That’s my Update

  9. Dustin,
    Do you dare say the emperor has no clothes? “Since I do not have the data to support such minimal adjustments, I have stopped making them” That is one of the most honest statements that I have seen on an appraisal blog. Few are willing to speak the truth about the challenges, if not the impossibility of extracting reliable market based adjustments. And, I am not just talking about the smaller deck, patio, and porch adjustments. Starting a discussion about this subject can open you up to criticism and judgment about your appraising abilities. I admire your courage and I appreciate many of the comments especially “M” and Aaron. You all speak my language and I have been saying many of the same things for years.
    Just this morning I was asked to make an adjustment, or explain the lack of an adjustment for a small difference between the unfinished basement of one comp and the subject. I told them there was no market based evidence for an adjustment. I have done this many times. It is almost always accepted. About 5 or 6 years ago my USPAP teacher said he decided to stop making adjustments all together. He said he did everything in the reconciliation. I don’t know how that worked out for him.
    The real conflict comes when we are being asked to make an adjustment, but we cannot with honesty, derive that adjustment and “prove” a market reaction Like Aaron said “paired sales are few and far between” and ” Multiple regression analysis results can be and are manipulated.” Appraisers all over the country complain about how unreliable public records are. In my area the finished basements are included in the public records GLA. Garbage in garbage out. Regression tools are using this erroneous information to give us “90% confidence levels” in the results. Yeah right.
    To my mind, many of the generally accepted methods for supporting adjustments are nothing more than “smoke and mirrors.” Yeah, I know I am committing heresy. But, I would rather be heretical than hypocritical. That is why this will probably be my last year in appraising after almost thirty years. Appraising is an art not a science. I think the only answer for appraisers is to stop making adjustments if we can’t honestly support them with market data and then do a very thorough reconciliation.
    It is my experience that after observing hundreds of appraisals over the years, appraisers are not, and have not, been deriving market based adjustments for each and every adjustment they make in an appraisal report. I have never seen it done, nor have I ever seen an appraiser explain how they derived all of their adjustments. Appraisers that state they do paired sales, regression analysis, sensitivity analysis, depreciated cost, (etc) for every adjustment in every appraisal are being less than honest IMHO. It would take an unimaginable amount of time and the cost to the general public would be prohibitive. Again, I agree with Aaron when he said, “This CU business is expecting more than the profession can deliver. There is an elephant in the room and nobody wants to talk about it.

    1. The Appraiser Coach

      Pennsylvania (what is up with the comments from States today) 🙂

      First of all, I am no emperor, but I do appraise naked so maybe it fits. Open myself up for controversy? Crossed that bridge a long time ago. I put my tax returns on my home page, so I guess I am an open book.

      In all seriousness, I appreciate the feedback. I often find that appraisers talk about how great they are at appraising, but backing it up is a different story. For example, I once had an appraiser email me and say that he supports all of his adjustments on every report (so what is the big deal with CU? he asks). When I challenged him to show me how, the conversation quickly stopped.

      Thanks for your open and honest feedback. I need to hear more posts like yours.

  10. The biggest reason the CU is here, is to catch dishonest appraisers. I have completed reviews for Fannie Mae. Doing some of these reviews, it was clear to me that the appraiser was committing fraud. The guy’s house was OVER appraised by my review (retrospective) by about $300k. Almost double of what the house was really worth (remember the good ole days when the mortgage broker told you the value, if you could not hit it, you would not get paid or work). This guy lost his house, and then hung himself on the front porch. Look at Fannie Mae’ latest press release on fraudulent appraisals. Other questions to ask is, will the CU flag those first apprasials that show values are rising. Your apprasial will stick out!. Your house sold for the highest price in the subdivison. Prices are rising, but you can not bracket the sales price. What will the realtors, sellers, and buyer’s think when you low ball the deal? I have started a file to keep all of my paired vacant land sales that have resold recently. I have started limited paired sales analysis on each report. A report takes me 6-8hrs to complete in my rural market area, and I get paid $270-$375.00 for the job. I barely survive. If I extend the time of the reports (doing paired sales on all, etc) by 1-2hrs, I will die a poor man. It’s that simple. Honesty! The biggest lender out there pays the lowest fee, and there threatening to not work with anyone that raises there fees. …Anyway, An appraisal is like a puzzle, if you find the right comps everything will (usually) fit together (almost all of your adjustments will be right there in front of you!). But you have to include the cost approach with land sales. Have a great day! when paid correctly, being an appraiser is a great job!

  11. I too feel that most adjustments are not supportable and have felt this way for a long time. I stopped making those small adjustments years ago for this reason. I make sure to comment in my reports why I didn’t make adjustments for those areas. I tried eliminating all of my adjustments once in a report and it got kicked back to me because the reviewer felt that I needed some kind of adjustments despite my extensive commentary stating that due to limited data in the area there were no adjustments being made in this report and that I was basing my opinion of value on the comparable sales in the report. Some of the sales were superior in areas and inferior in others. The sales were weighted based on how comparable they were to the subject and bracketed my opinion.

    How many times have you come across a house that was superior in either lot size, condition, age, GLA, # of bedrooms or bathrooms, garage size, or some or many other features that sold for less than the other houses. I find this on a weekly basis it seems. Even the sales comparison classes and the advanced sales comparison classes still don’t address the real world. House A has a fireplace and sold for $202,000. House B does is the exact same house as House A and does not have a fireplace, therefore a fireplace is worth $2,000. What a bunch of CRAP! Match paired sales are a joke in my market area and I’m guessing in most other market areas as well.

    I think that we have been brainwashed into thinking that we MUST adjust for things regardless of how supportable they are. It amazes me when I see a report provided to me either for field review, from the lender, or the homeowner and the appraiser put in the fireplace as a line item adjustment. Or when I see across the board adjustments for enclosed porch verses a covered porch versus a deck or a patio no matter how big or small the items are. A 10′ x 10′ deck gets the same adjustment as a 20′ x 20′ deck. “I’ve always adjusted $1,000 for a deck and I always will.” IMO it’s part of the reason we as appraisers are coming under fire. Yes a deck has some value over not having one but as an appraiser we are to support our adjustments and value. Why not just say that comparable 2 was weighted more heavily in your final opinion of value because it was similar in age, condition, GLA, room counts, and it had a deck. Comparables 1 and 3 were weighted less because they were inferior to the subject in the following areas…

    We are not dinosaurs but if we don’t remain flexible and adapt our ways we might end up like them.

    1. Please excuse my typos. The screen to comment in is a small area and I missed a few things when I was proofreading. Dustin – it would be nice if there was an edit button available after posting. 🙂

      1. The Appraiser Coach


        There is an edit button on my posts (next to the date and time), but maybe it shows up because I am the moderator. Anyone else see that on their posts?

        1. I think we all need to consider how we got here….it was through our training, schooling and common sense. For all you guys and gals that don’t think an adjustment would be warranted just because you can’t prove it on an appraisal….if you were looking at 2 identical homes with a nice wooded view to the rear and the only difference was one had a nice deck on the rear of the home, you would be willing to pay $2,000 more or would you rather spend the going rate to have that same deck built by a contractor? To me this again goes back to good appraisal theory and technique. There is value in a deck, patio, extra bathroom, basement finish, etc…..the market will dictate that…I dare say start asking buyers of recent sales what they would have been willing to pay extra if a home they bought had lacked a certain feature……Again, we are and have been held hostage now for years by the government, Freddie, FNMA, AMC’s, etc…. There is no one out there that we can turn to for help that will stand up and protect us and go to bat for us…..we have to individually stand up for ourselves or just become robots….the system that is now in place to do an appraisal is full of flaws. They will not allow us to do our job. I would love to see all appraisers nationwide have to belong to an organization like, NAR with realtors, where we would have a say. Have attorneys represent us…..when changes are deemed necessary for the lending industry from an appraisal standpoint that they actual would come to us and WE would let them know what changes, if any, need to be made on an appraisal form. And when we turn in appraisal….then that’s it. The appraiser has spoken…this is his or her professional opinion of value…the appraisal stands as it is…..after all we, not them, are the professional that has been trained, schooled to do this, not them……but that is just wishful thinking I guess….

          1. Colorado, that’s the thing. How often are you looking at two identical homes as stated in your example and the only difference is the deck? I’m not saying the deck doesn’t have value.

            What I’m saying is how do you prove it is $2000? Is it because you were trained that it was 10+ years ago? When I started in 2003 my supervisor gave me a sheet that said to adjust $X for this and $Y for that. He never updated it nor did he explain how he came up with the adjustments. It was what it was. As far as I know he was still using the same list years after I left.

            That’s why I try to find comps that bracket the subject’s features as much as possible and assign weight to the properties in my valuation reconciliation. When you do it like that you’re not ignoring the fact that one property has a deck and another doesn’t. This is considered in the weighting process and explained in the commentary. “Due to the lack of market data to extract an adjustment for a deck, no adjustment is made in this report. Comparable 1 has a deck similar to the subject and comparables 2 and 3 do not, therefore comparable 1 was weighted more in the final opinion of value.” This takes into account that the deck has value but doesn’t hold you to using an unsupportable $ amount that you have always used.

          1. Ken;
            How do your prove it’s not worth $2,000? Look…….I’ve said this before….this comes down to we are the professionals. We have been trained to do it the right way. At least I was 30 years ago and that has not changed. What has changed is some yahoo up in Washington that knows nothing about appraisal theory or technique and tells me `you can’t make that adjustment if you can’t support it by some method I understand.’ Oh yeah? Prove me wrong….you take my appraisal in a court of law in front of my peers and say `this loan went bad and looking at the appraisal we question some of the appraiser’s adjustments as they were not supported by market extraction’…..and the judge says to you sitting on the jury `did the appraiser in this report use sound appraisal theory and technique?’ and you would have to say ` why, yes he did your honor a $2,000 deck adjustment, a $20 a sq/ft GLA adjustment in this price range would be considered acceptable based on the fact that some adjustments have an element of subjectivity and professional judgment which the appraiser has applied based on prior observations of the reactions of typical/knowledgeable buyers’ and sellers’ in the marketplace.’

            You guys and gals do what you want to do…..but in my daily practice nothing is going to change. I’m the expert , the professional…..that’s why they contacted me in the first place to give them my professional opinion based on sound appraisal doctrine, theory and technique…..

  12. Minor adjustments aside, the post CU, and automated review revision requests that I have received lately have been ridiculous, and very time consuming. I spent four extra hours last week re-explaining what had already been addressed in one report. If a qualified human underwriter would have actually read the first draft of this report, no revisions or further explanations would have been necessary. I like being an appraiser, but I don’t do it for the thrill of dodging Fido’s landmines or for the opportunity to walk through a stranger’s home, I do it for the money. Appraisers are no strangers to adapting to change. As a result, it was necessary to raise my standard URAR fee of $500 to $600-$700 depending on the client, and anticipated additional time required. If the competition wants to complete these orders for less, it’s their option. But so far, as a result, this has allowed my turn times to be shorter, which in many cases has proven to be just as important to many clients as a lower fee.

  13. The Spicy Italian

    Idaho – I’m moving to your area! Those are some great fees! Just kidding about moving.

    Every job has changes – local appraisers should meet together and discuss how they are doing the process of adjustments – look at MLS pictures together and come to a general consensus (not exact numbers, just a range of generally acceptable adjustments and why). It is then the appraisers on the edges are slowly eliminated and the CU becomes less stressful for the rest. It’s just a way to refine the process, nothing more. We just continue to evolve and do what it takes to produce credible reports. Remember, we do get paid. If you fight back too much, you will only feel more pain. Roll with it. That’s what Dustin is trying to communicate. Not roll over, just roll. Isn’t that life anyway? We live, we die (and hopefully we spend eternity with our Savior – sorry – had to throw that in cause I love Jesus).

  14. Wow. Re-reading this thread after some time has past – great stuff. I thought I was alone. Turns out I’m not. Some great tidbits on how to address some of this posted by many – thanks!

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