Real Estate Valuations and Appraisals

April Fools!

In a hush, hush session, the US Congress voted nearly unanimously for removing all licensing requirements for real estate and personal property appraisers. WOW! Finally, a congress that proved it’s on the take from the lending industry. Well, the good news is you can go back to selling values. Hell! What a windfall! I’ll be offering seminars on how to do it and not raise suspicions that you’re on the take. Of course you’ll sign an agreement that I get 5% of everything you do. I pray no one is dumb enough to have believed what I just wrote.


Actually, it felt good writing that. I’m not so sure it’s a bad idea. The topic really is professional associations of the appraisal profession. Before licensing there were several appraisal associations that were gaining membership on a going basis. Of course there were arguments as to which was better than the others. I can tell you that over the past several years, I’ve come to realize that none were better than any other. My mother, God rest her, always said, “There are good and bad of all kinds”. The associations created niches which appealed to certain people who then became the personalities of those associations and gave them character.

Over the years I have had to defend or at least attempt to defend real estate appraisers of every professional appraisal organization. Generally speaking, the only measurable difference is the amount for which they were being sued. Fraud is fraud. Shoddy is shoddy. Stupid is as stupid does from that famous man, Forest Gump.

Now each of these people who tempted fate and lost are not the embodiment of the association (s) with which they were affiliated. They are a product of their own minds. Unfortunately, they become for publication purposes representative of whichever association. So, just how much bashing should they bear. NONE! We have firemen who are arsonists, cops who are thieves, Doctors who created a need for malpractice insurance; and, then there are politicians….need I say more?

The point is the majority of appraisers are trying to be good appraisers. Licensing and state and federal law created a need for education and made it a business. Who can give the most seminars at the cheapest prices. I had an appraiser who appraised my house for a refi and admitted never having sat in a class. Everything was online. The report stunk but fortunately it didn’t hurt the loan. Until licensing, appraisal associations were providing formidable classes and seminars and there was growing pride and professional accomplishment. The feds and states succumbed to the technology of online training and the public is paying the price and has since 2007. In order for there to be growth in professional associations each must clean up its act. Knock off the association politics and get the right good people in front of your members and those considering joining. Invest in marketing to attract the caliber of member you need to maintain or create the organization character that you (officers and members) demand. There is a strong need for professional associations but the associations must face the facts; it’s not the mass number of members, but the quality of membership. When that is established there will be aspiring members knocking down the doors. So, park your egos and get off your 30 year old business and marketing mentality, and do something about this.


Florida, specifically southern Florida has a fantastically rebounding housing mar-ket. This follows southern California which is experiencing housing prices jumping as much as 35% thus far.

In the Orlando area housing prices are escalating at about 1.5% to 2% per month and their “season” is only starting. As for vacant land and site sales, the sale prices have already surpassed the peaks of 2004—2007. This is a very interesting phenomena. As mentioned in a recent newsletter, some of the cause of the upswing is the foreign investment buyers. Till the last several months, foreign investors were largely investing in the condo market in the Miami area. Now they are buying detached housing and multi-unit properties. Now, of course they are cash buyers and in effect they are retarding at the outset increased values, but the demand that they create is compelling the Floridian buying market to rush and get good locations and housing and they are paying more in order to insure they get their bite of this apple boom.
MORGTAGE COMPLAINTS- There have been over 1.5 million consumer complaints according to the Consumer Financial Protection Bureau, a watchdog group. Bank of America services 15% of all mortgage proper-ties in the United States and they are responsible for over 30% of the filed complaints. Of course much of the excuse is their take-over of Country Wide Financial Corp. But it is now tasting like sour grapes. It’s about time they assume the responsibility for shoddy processing and consumer complaints brought to them. It’s a sad state of affairs.

The real issue is the loan modification process, debt collection and foreclosures. None of these can be blamed on Country Wide. Wells Fargo serviced 21.5% of all mortgages in 2012 and had only 16% of the complaints. This is a much better track record than BoA.
SNORKELS FOR UNDERWATER PROPERY OWNERS- Corelogic reports that 200,000 home owners surfaced from being underwater during the 4th quarter of 2012. That is good news. Of course 200,000 isn’t a lot compared to the number of properties in the US but if you apply dollars to that it all of a sudden gets dramatic to most of us at least. Assume that the average value of the dwelling is just $200,000 that equates to lenders not having to take in or the public giving up 20% of that in short sale dollars. Well, the number if lenders be-came responsible is $40 billion. Is that substantial enough for you. Well, if it’s not then consider that a continual extended for 3 more quarters would relieve $160 billion of pressure from banks and consumers.

APPRAISERS BEWARE- Do you really know what a Summary Appraisal is? I recently reviewed an appraisal on a commercial property in which the preparer cited results and then didn’t explain the reason and rationale for the result. I believe in the preparer’s mind there was sufficient information to qualify the report for a Summary Appraisal status, but it wasn’t. The problem many of us have when writing an appraisal is we understand what it reflects and then we make the critical mistake thinking everyone reading it will also under-stand. That is presumptive thinking and a thought process that you will not be able to defend. The readers do not have the same cognizance that the preparer of an appraisal has. So, to avoid the problem you need to write more. Our responsibilities as appraisers is to advise our clients and intended users of the report as to what we saw and how we converted that to a value conclusion. It’s not your job to be certain they understand or agree but that you have provided sufficient information in a way which allows them to know what was done and to question that which they don’t agree. It is their prerogative. However, our writing must be readable and comprehensible. What really was disturbing about this report was the same preparer wrote a damning critique on my client who was guilty of a poorly done Summary Appraisal for the same property.