WELCOME - January 2012 - #111
Welcome to Issue #111!
Check out the latest "Ask Henrys", plus Henry's new Editorial, and Book Review, as well as news important to appraisers -- all in this issue.
The Blog and our newsletters are FREE to the appraisal community, and always have been.
Our 14,900 real estate appraisal readers have shown great loyalty and interest over the more than 25 years we've been publishing REV; we really appreciate you all!
Your continued feedback is very important to the success of our endeavors. If you are interested in writing an article for publication, please submit it via email to Ruth Lambert, our editor, at Editor@revmag.com.
Thanks again for your interest in our publications!
HSH
askhenryharrison@revmag.com
P.S. For information regarding advertising opportunities and FREE p.r. in our Blog and email newsletters, please click here: ADVERTISING
*Reprinted with permission, from HOUSES: The Illustrated Guide to Construction, Design and Systems, by Henry S. Harrison
Editorial
We all probably know the playful Chinese curse: "May you live in interesting times." Watching the current political gambits on TV and YouTube it certainly reminds us that we live in a new instant age. Unfortunately, at least so far, this "silly season" seems to be a lot more about entertainment than substance.
The political process at the moment appears to be primarily (pun intended) a media and money circus, rather than a realistic and practical discussion of the work that needs to be done to deal with America's real problems, both economic and social.
Given our current economic doldrums, and the continuing problems of unfair taxation, high unemployment, millions of Americans still without health care, and the dismal condition of our infrastructure, it's easy to become disheartened.
Still, I feel that there's real hope to focus on.
Although we are firmly part of a global economy now, America continues to be the one country that still offers the most personal opportunity, growth, innovation and success for millions of people from thousands of diverse backgrounds.
We have all THE BASICS right here. Our economy is vast, responsive and solid under the current turbulence. Let's hope 2012 proves to be a year of wisdom, power and potency, for our country, its leaders...and our profession!
Ask Henry
Dear H2,
In a reassessment, is a foyer considered to be a room? Thank you for any input you may have.
William Kalif
wkutopia@yahoo.com
Dear William,
In most areas of the country, a foyer is not counted as a room. If in your market area it is customary to do so, however, you should follow the custom. In order not to confuse the reviewers, you should explain in a comment the reason you included it.
HSH
askhenryharrison@revmag.com
Announcement
"The FHA Appraisal"
Denver, CO
February 23, 2012
This FREE one-day class discusses FHA appraisal requirements including Appraisal Protocol, & updates to FHA appraisal policy, and equips attendees with the knowledge to determine property eligibility. (The earlier class, on Feb. 16th, is full.)
This course provides a refresher for seasoned FHA appraisers, as well as provides valuable information to appraisers new to the FHA roster. Prior Registration by Feb. 20th is required, but the course is free of charge.
Click here: FHA Class
News
The ASB is currently considering changes for the 2014-15 edition of USPAP. All interested parties are encouraged to comment in writing to the ASB before their upcoming meeting in Savannah, GA on February 10th, 2012.
The actual deadline for written comments is extended to March 12th, 2012. Respondents should be assured that each member of the ASB will thoroughly read and consider all comments. Comments are also invited at the ASB public meeting on Feb.10th in Savannah, Georgia.
Written comments on this document can be submitted by mail, email or FAX.
Snail mail address:
Appraisal Standards Board
The Appraisal Foundation
1155 15th Street, NW, Suite 1111
Washington, DC 20005
Email: asbcomments@appraisalfoundation.org
Fax: (202) 347-7727
To review the current proposed changes, click here: USPAP COMMENT
Ask Henry
Henry,
Subject is a purchase marketed as 3,100 sq.ft. County has subject listed as 2,059 sq.ft. Appears subject possesses a finished upper level, apparently original and legal, which does not possess a bathroom.
I presume, at a minimum, that there is functional obsolescence? However, presuming the upper level is legally finished and otherwise of good quality, it's hard to compare to other properties with 3,000 sq.ft. that offer greater utility. Would you give partial value to upper level and not include in sq ft calculations?
Thanks
Rick Bacich
rickbacich@ssctv.net
Dear Rick,
It is not possible for me to give advice about specific properties. However, here are some thoughts that may be helpful. It is up to you to determine what the actual GLA is and use it as a basis for your appraisal. This is a separate problem from estimating what the value is. From what you say I see no reason not to include the upper area in the GLA. However you can give it less value than other parts of the house. You must make this judgment based on what is expected in your market area. You must describe what is causing a loss of value (if any) due to functional obsolescence.
News
Senators Flee Internet Piracy Bill
Support for two online piracy bills in Congress dropped dramatically on Wednesday after opponents of the legislation staged a dramatic protest in which vast swaths of the Web effectively went dark. More than 4.5 million people signed their names to the Google petition and 300,000 people emailed or called their lawmakers, according to the protest organizers.
In New York, San Francisco and Las Vegas, protesters held rallies to draw attention to the bills. The Library of Congress said late Wednesday that it had been hit with a denial of service attack by “a group opposed to the online piracy legislation.” By evening, a number of lawmakers had done an about-face on the legislation.
The Senate version of the bill lost four of its co-sponsors, including Sen. Orrin Hatch (R-Utah). “It is simply not ready for prime time and both sides must continue working together to find a better path forward,” Hatch said in a statement about the Protect Intellectual Property Act.
The online piracy bills had been aimed at protecting U.S. companies against foreign Websites that illegally post copyrighted material. Companies opposing the legislation had argued that the bills would impose heavy regulatory costs, harm innovation and give the government too much power to shut down Websites accused of copyright violations even if they are later found to be innocent of the charges.
“The entire approach is philosophically wrongheaded,” said Wikipedia founder Jimmy Wales last Tuesday evening in an interview with The Washington Post before the protest began. In a statement posted to his public Facebook profile, co-founder and chief executive Mark Zuckerberg said the bills “get in the way of Internet development.” Google’s chief executive, Eric Schmidt encouraged his followers on Twitter to sign Google’s petition against the bills, calling on them to “Defend the web!”
The darkened Web sites represent some of the largest properties on the Internet: Google easily has the widest reach, with 187.1 million unique visitors in December, according to data from ComScore. Wikimedia, which owns Wikipedia and other Wiki sites, and Craigslist also have broad audiences, reaching 83 million and 49.8 million unique visitors, respectively, in the same period. Reddit, which compiles links to funny stories, was visited by 4.8 million users last month. Another participant, Boing Boing, had 1.6 million visits.
Most responsible parties agree that some kind of intellectual property protections are needed in the current "free for all" world of downloads, uploads, YouTube, Wiki and Google. Still, the anarchic values of open structure and little regulation still hold the hearts and minds of most users of the Internet who fear that by regulating anything, the nemesis of overregulation and lost integrity will ensue.
Ask Henry
Dear Henry
I'm a huge fan of your articles and Q and A for a long time.
I’ve been asked by a lender to do a "final inspection" on a HUD resale for just the utilities hookup. The original appraisal was done a few months ago by a different appraiser for a different client. The new lender (my client) is asking specifically that only the utilities be checked. Can I do that? And what form would I use (all the standard forms imply that the appraiser doing the final inspection is the one that did the original appraisal). Any suggestions on what form might protect me from being tied to the original appraisal?
Thanks!
Paul Ryan
paulgryan@cox.net
Dear Paul,
It does not make any difference what form you use (or maybe just a letter) as long as it is crystal clear that you are not making an appraisal or rendering any opinion as to what affect the connection of the utilities will have on the value of the property. If you give such an opinion, you are making an appraisal and must conform to all the USPAP requirements for making an appraisal.
Thanks for your kind comments.
Article
Newly published guidance from the Appraisal Institute helps appraisers know when and how to use distressed sales, such as foreclosures, as comparable sales. Such knowledge is crucial in the current market where distressed sales are common, creating complex valuation challenges.
AI’s Guide Note 11: Comparable Selection in a Declining Market notes: "transactions used in an appraisal assignment require adjustments for changes in market conditions."
The Appraisal Institute’s Guide Note 11 says: “A declining market will likely exhibit very little sales activity. When the sales comparison approach is necessary, but there are virtually no current sales in the market area to analyze as comps, the appraiser must: (1.) Expand the geographic area for comp search, then adjust for location as appropriate, and/or (2.) Use less recent sales, then adjust for market conditions as appropriate.”
It continues: “Appraisers cannot categorically discount foreclosures and short sales as potential comps in the sales comparison approach.” However, due to differences between their conditions of sale and the conditions outlined in the market value definition, these might not be usable as comps.
Further, foreclosures and short sales usually do not meet the conditions outlined in the definition of market value, the Guide Note says. A short sale or a sale of a property that occurred prior to a foreclosure might have involved atypical seller motivations (e.g., a highly motivated seller.) A sale of a bank-owned property might have involved typical motivations, so the fact that it was a foreclosed property would not render it ineligible as a comp. However, the Guide Note also points out, if the foreclosed property was sold without a typical marketing program, or if it had become stigmatized as a foreclosure, it might need to be adjusted if used as a comp. Also, some foreclosed properties are in inferior condition, so adjustments for physical condition may be needed.
Click this link to download the free PDF: “Guide Note 11: Comparable Selection in a Declining Market”
Article
2012-13 Edition of USPAP Released
Effective Date: January 1st, 2012 - December 31st, 2013
The Appraisal Foundation, a congressionally-authorized nonprofit organization dedicated to the advancement of professional valuation, announced that the 2012-13 edition of the Uniform Standards of Professional Appraisal Practice (USPAP) has been released. USPAP is the generally accepted standards of practice for the appraisal profession in the USA.
The 2012-13 edition of USPAP will be valid for two years, from January 1, 2012 through December 31, 2013. As with the prior edition, the new edition includes the standards of professional practice for all appraisal disciplines as well as guidance from the Appraisal Standards Board (ASB) in the form of USPAP Advisory Opinions and USPAP Frequently Asked Questions (FAQs).
Changes to the document include:
• Revisions to DEFINITIONS of “Client,” “Extraordinary Assumptions,” and “Hypothetical Condition,” as well as a new definition of “Exposure Time”;
• Creation of a new RECORD KEEPING RULE and related edits to the Conduct Section of the ETHICS RULE;
• Revisions to Advisory Opinion 21, USPAP Compliance; and,
• Revisions to STANDARDS 7 & 8: PERSONAL PROPERTY APPRAISAL, DEVELOPMENT & REPORTING.
CLICK HERE TO VIEW THE VIDEO ON 2012-13 USPAP CHANGES
Copies of the 2012-13 edition of USPAP are now available for purchase from the Appraisal Foundation Store at www.appraisalfoundation.org. The 2012-13 edition of USPAP is available in printed spiral bound copy for $75 or as an electronic PDF download for $60.
In the coming weeks, USPAP will also be available in Flipbook format and for eReaders including the iPad, Kindle, Nook and the Sony Reader.
Books
The Facebook Effect: The Inside Story of the Company That Is Connecting the World
READ THE FIRST CHAPTER for FREE on your iPad, Smart Phone, PC or Mac!
Ask Henry
If I lease some farmland to a farming family for 99 years, how do I calculate the value of this lease? Is it just a discounted cash flow plus the reversion of the land? Or does such a long lease typically include return on and return of capital and the reversion has no value? No buildings are involved in this deal. Thanks in advance for your help.
Dear Don,
For all practical purposes, a 99 year lease is a sale. It is not the original lease date that counts ~ it is how long the lease has to run. Some states prohibit leases longer than 99 years and others say they are the same as sales. Trying to discount income for 99 years into the future, and then trying to add the present value of a reversion 99 years in the future results in a meaningless figure. Should you consider global warming (aka climate change) or that the population of the world may be 10 billion people or may be zero? Some appraisers take the position that some small number is needed to reflect the difference between such a lease and ownership. My problem is that I don't know whether it should be a plus or minus adjustment. In most condemnations I am familiar with, a very long lease is treated as a sale.
Editorial
Having just lived through Hurricane Irene, and the significant tidal flood damage done to our summer cottage in Long Island Sound from the 7 foot storm surge added to our normal high tide of 8 feet, this article struck our attention.
The GOOD NEWS: My own experience dealing with FEMA personnel in a difficult situation has been surprising, given their less than stellar reputation.I found them to be professional, courteous and genuinely helpful. In our area of the Connecticut shoreline there was a great deal of damage, including the wash-out of many of our main access roads. Nonetheless, the FEMA adjusters showed up and did their job of assessing the damage in a timely manner.
At issue in Congress now are new requirements for flood insurance coverage in residential and business areas near levees, dams and other flood-control structures.
According to a report October 19th in Property Casualty 360, two Gulf-Coast senators are seeking to remove a Senate flood-insurance legislation provision requiring flood coverage in areas already protected by levees, dams or other flood-control structures. Sen. Thad Cochran, R-Miss., and Mark Pryor, D-Ark., announced late Monday that they are seeking to have Sec. 107 of the National Flood Insurance Program Reauthorization Bill deleted from the proposal. The provision was included in a bill that was reported out of the Senate Banking Committee Sept. 8.
Cochran and Pryor are raising the issue despite the fact that the Senate is working under the pressure to pass another temporary extension of the National Floord Insurance Program (NFIP), now slated to sunset Nov. 18.
The Senate must pass a bill, then reconcile its version with a somewhat different House bill, H.R. 1309, the Flood Insurance Reform Act of 2011, before that date, or NFIP will lapse.
Seems Congress is once again playing brinksmanship with America's flood insurance program. After our recent experience, that doesn't seem wise to us.
Summer Cottage "Pre-Irene":
Post-Irene Damage from Tidal Flooding:
Matt Gannon, assistant vice president of federal affairs for the National Association of Mutual Insurance Companies, voices sympathy for the concerns of Cochran and Pryor, but adds that the Senate bill’s Technical Mapping Advisory Council was established to address this very type of issue. But Cochran and Pryor say they are asking their colleagues to join them in signing a bipartisan letter to the banking panel asking for reconsideration of Sec. 107. This provision would have expanded required insurance coverage to “areas of residual risk” that are located behind levees, near dams or other flood-control structures.
“The NFIP must be reformed, and I believe the Senate Banking Committee has done yeoman’s work on crafting bipartisan reform legislation,” Cochran says. But he notes that Sec. 107 creates new flood insurance coverage mandates on families and businesses that are already protected by strong levees and dams, and believe that "the blanket approach taken in the current bill should be changed in order to ensure fair treatment for those protected properties."
Ask Henry
Hello Henry,
I have an underwriter saying that the economic life needs to be included on all reports, even though the URAR form 1004 says it is needed for HUD/VA only. Have I missed something in this regard? Thanks in advance for your time.
Yours,
Dianne Mendel
mndcns@att.net
Dear Dianne,
The USPAP states that for every appraisal, the appraiser and the lender client must have a scope of work dialogue. The designers of the URAR 1004 have incorporated some of their scope of work requirements into the URAR. What the URAR is telling you is that Fannie Mae and Freddie Mac do not require that you estimate the remaining economic life while the HUD/VA does require it. However, if the appraiser feels it is necessary in order to make a credible appraisal (which is required by the USPAP) it should be included. What the underwriter is saying to you is that for the lender/client they represent, it is required, which is their right.
Ask Henry
Hi Henry,
I did an FHA Appraisal for Lender A back in July. I was paid and the file was closed. I was not able to inspect the attic at the time, as the attic entrance was sealed off. This was noted in the appraisal report. Last week (3 months after my previous inspection and report) Mortgage Company B called and said they have my appraisal, the loan did not close with Lender A and they have a new lender who will accept my appraisal. However, they need me to go back to the property and inspect the attic for a fee. I refused as I completed the original assignment for Lender A and the file is closed.
Mortgage Company B and the homeowner keep calling me to comply and do the attic inspection. I called Lender A and they said "do not inspect, this is a USPAP violation and changes the scope of work." I want to be done with this appraisal and Mortgage Company B. My questions is whether this is indeed a USPAP violation? What is the best way to handle this with Mortgage Company B and the homeowner, who both keep calling me?
Thanks for your time,
Rob
rburkley@columbus.rr.com
Dear Rob,
The USPAP is quite clear that when the client changes, it requires a new scope of work dialogue and a new appraisal. There is nothing that requires you to make a new appraisal for the new client but why not do so? However, there is also nothing to stop you from making the inspection as long as it does not become part of your original appraisal report. For a new appraisal, you are permitted to use any of the data in the old appraisal as long as it was not provided to you on a confidential basis. It should be easy to update the physical description of the property, the neighborhood data, etc., and make the attic inspection which will be part of the new scope of work requirement. I suggest offering to make a new appraisal for Mortgage Company B, taking into consideration that much of data will already be available to you. You'll make the homeowner happy, and may even develop a new client.
Letter to the Editor
Industry Cooperation
To the Editor:
I've been in the business going on 40 years and have attempted to find others that are willing to cross association lines in an effort to foster cooperation, for any number of purposes not the least of which is to guide legislation in directions favorable to the appraiser community.
I have talked to some other pros out here in the Portland Oregon area who are willing to get involved in an information campaign to foster understanding, cooperation and unity. We have already had praise from some legislators out here who desperately want to hear from unified Industry Coalitions. They simply don't have time to listen to individuals who may not represent everyone.
We need to get together on many issues that affect us all. The appraise community is being devastated by large powerful organizations. Do you have any resources from past articles that relate to that subject? And further, would Mr. Harrison be interested in receiving progress updates or offering his support to this kind of effort?
Thank you,
Matt Gloege, Certified Res. Appraiser
Oregon City, OR 97045
fho2@comcast.net
Dear Matt,
I had a discussion with Henry about your email to me, and while we both agree that a cohesive well-represented national appraisal profession would be an excellent thing, based on our experiences over the past 40+ years, we do not see any hope that this "gang of cats" can be herded together, even if it would be very much in their best interests.
Sadly, unlike doctors and lawyers, appraisers do not have any history of working in a unified manner on the national level that would enable them to have real political impact.
We appreciate your efforts in advance, and wish you the best of luck.
Yours,
Ruth Lambert, Editor
Ask Henry
Hi Henry,
In my experience, when I've done estate appraisals, the date of death provided the lower value for the client. If the estate has not been settled, say for more than one year, and the value decreases after DOD, will IRS accept a current value? I've encountered a situation, in which the electricity went off during an ice storm, the oil-fired boiler (which has a reset switch to prevent a buildup of oil in the firebox was not reset by anyone when the power came back on because no one was living in the house. The pipes froze, burst, and did a tremendous amount of damage as a result of water gushing from the baseboard hotwater system. The estate is in its third, going on 4th year. What is the property way to provide an estate appraisal?
Jack Sotack, Waymart PA
accent@echoes.net
Dear Jack,
The effective date of the appraisal is determined at the scope of work dialogue between the appraiser and the client. There is nothing in the USPAP other than this requirement. Often when the appraisal is made for estate work the date of appraisal is the date of the death of the owner, but not always. Whatever the effective date of the appraisal is date that you use for the condition of the property on that date and the market at that time.
BREAKING NEWS
Check out the
FREE VIDEO of USPAP Changes
for 2012-2013
For many appraisers, a video presentation will be the least painful way to learn about the forthcoming USPAP regulations.
The Appraisal Foundation has announced the release of a free video on its website entitled "A Preview of Changes to the 2012-13 Uniform Standards of Professional Appraisal Practice (USPAP)". It is ready now.
The video is just 23 minutes in length, and features an interview with the 2011 Chair and Vice Chair of the Appraisal Standards Board (ASB), J. Carl Schultz, Jr. and Barry Shea, respectively. A PowerPoint presentation is available for simultaneous viewing as well.
USPAP changes discussed in this video include:
1) Revisions to DEFINITIONS of “Client,” “Extraordinary Assumptions,” and “Hypothetical Condition,” as well as a new definition of “Exposure Time”;
2) Creation of a new RECORD KEEPING RULE and related edits to the Conduct Section of the ETHICS RULE;
3) Revisions to Advisory Opinion 21, USPAP Compliance; and,
4) Revisions to STANDARDS 7 & 8: PERSONAL PROPERTY APPRAISAL, DEVELOPMENT & REPORTING.
A Mock Administrative Hearing and an audio webinar on Fair Value Measures are also available online from the AF's eLibrary.The Appraisal Foundation has plans to expand its eLibrary later this year with a videotaped session on Green Buildings and their Valuation, coming in late 2011.
Click here now for the USPAP VIDEO.
Any questions? Please Contact the AF directly:
Paula Douglas Seidel, Executive Administrator
paula@appraisalfoundation.org
IN MEMORIAM
As genuine MAC addicts, we at REV join the millions of fans and customers around the globe in mourning the death of Apple founder and former CEO, Steve Jobs. He enriched the lives of so many of us with unique 21st Century devices that are beautiful, practical and most importantly, fun to use.
For a moving convocation by one of this generations greatest thinkers, click the video below to watch Steve Jobs’ commencement speech at Stanford from May 2005.
Ask Henry
Hi Henry,
You do a fantastic job and are THE SOURCE for appraisal questions and dilemmas. I have one of those dilemmas now!
I have a client who is asking me to take a new assignment on an appraisal that is over a year old and that I did for another lender. Obviously, the new client wants their name on the appraisal, but they do not want a current value. May I take the new assignment?
Thanks in advance,
Mary Buckman, SRA
Green Bay, WI
maryb@vogelsbuckman.com
Dear Mary,
Thanks for the kind words.
The effective date of the appraisal is determined at the scope of work dialogue between the appraiser and the client. Many appraisals are made with an effective date at some time in the past. Whatever the effective date of the appraisal is, that becomes the date that you use for the condition of the property and the market at that time. The only USPAP restriction is that you cannot use any confidential information you received from the original client without their permission.
News
On September 30th, the Appraisal Institute released a new form intended to help appraisers analyze values of energy-efficient home features.
The Appraisal Institute issued the form as an optional addendum to the URAR (Fannie Mae 1004-Freddie Mac 70). It is intended to help the industry standardize the way residential energy-efficient features are analyzed and reported. The Appraisal Institute's addendum allows appraisers to identify and describe a home's green features. The form also will make it easier for appraisers to determine whether recent home sales should be used as comparable sales.
The Appraisal Institute plans encourage lenders, home builders, real estate agents and homeowners to take advantage of this new tool.
Click GREEN ADDENDUM FORM to download a PDF copy of the new form.
Ask Henry
Hi Mr Harrison,
I'm working on a cluster home attached on one side to another property. The two residences share a common wall, and the properties are very similar. My problem is that there are no other similar comps in the neighborhood; the last similar property was sold 3 years ago. Can i use aanother type of property as a comparable?
Thank you,
Al at Florida House Appraisals
coriale4@comcast.net
Dear Al,
Getting good comparable sales is a perpetual problem for appraisers. There are no rules about where you can seek comparable sales information. It is up to the discretion of the appraiser. If a client tries to restrict where you can get comparables from you should either talk them out of the restriction or refuse the assignment, because if you accept this restriction there is a good possibility you will be making an appraisal that violates the USPAP. There are exceptions to this rule which are complex and would require limiting conditions, assumptions and possibly a custom definition of value.
The USPAP requires that you make a "credible appraisal". If you do not think there are sufficient comparable sales available that make it possible for you to do this, I recommend that you turn down the assignment.
Ask Henry
Hello Henry,
I have a client who's requesting a market value and a disposition value on every commercial report. If you were asked to do that, what steps would you take and how would you go about coming up with your disposition value? Thanks for taking the time to answer my question.
Robert Jones
Certified General Real Property Appraiser
robertjones56@bellsouth.net
Dear Robert,
As part of the "Scope of Work" dialogue that the USPAP requires you to have with a client before you make an appraisal, you have to agree regarding what definition or definitions of value are going to be used. This is not a problem when the value in question is market value as its definition was blessed by the US government as part of the FIREA act. However, when a special value definition is needed, it is usually supplied by the client (ERC is a good example).
I think you are looking for trouble if you try to draft a custom definition of value. It might even be considered "practicing law without a license". My recommendation is that you suggest that the client have their attorney draft the definition they want you to use for disposition value.
Editorial
It is easy to become depressed when you follow the news these days.Unemployment seems to be stuck at a rate near 10%, millions of people are about to lose their homes by foreclosure, and the American dream of owning a home has turned into a nightmare for many Americans.
This past Tuesday, August 2, 2011, ends one of the most outrageous episodes of legislative nonsense I can remember. Our government shot itself in the foot -- inflicting an injury upon our economy and our people that will take years to heal. Recent polls show that the public's faith in their government has reached an all time low. This feeling crosses party lines and includes virtually every group polled. The selfish and self-serving behavior of too many of our so-called legislators is disgusting.
What in the past made America a great country was that the people believed in democracy and enjoyed the benefits of being free as a direct result of our democratic form of government. Hopefully, it will sink into the heads of voters of all persuasions that we want and need an effective government. Then we will wake up and through the power of the vote put into office people who will once again make our government function.
Having gotten that off my chest, let's examine what this Budget Control Act of 2011 did for housing and us real estate professionals. To answer this question, you need to look at the actual bill. Here is the URL: http://www.nytimes.com/interactive/2011/08/01/us/politics/debt-ceiling-bill-text.html?hp
You will see that the bill is just 74 pages and if you look carefully you will see at the top that there is a search function. Try it out by typing in the word "budget" and see what happens. The result is that it appears 35 times, and each time is shaded yellow. Now try "Housing". Guess what? The word "Housing" does not appear anywhere in the 74 pages. Try "mortgage". Same result. Try "foreclosure". Struck out again. No results for "taxes" either.
The bottom line is that the government officials -- the President, the House and the Senate -- continue to ignore the best way to jump start the economy and create millions of jobs: fix up all the foreclosed houses and sell or rent them.
I invite you (if you haven't already done so) to read my Editorial in the June 2011 Issue of REV, entitled "Economics: How to Solve Housing Market Chaos & Help Relieve Unemployment." [Click on the highlighted word "Editorial" at the top of this paragraph to go there.]
Sound Off!
I see some merit to your proposed solution to the housing industry crisis (June 2011 Editorial). I just do not give it much hope. There are too many powerful lobbies that would rather just suck off the taxpayers while they sail to the Hamptons in their newly redecorated yachts.
I am sorry to say that the lessons that should have been learned from the RTC back in the mid-1980s were soon forgotten like a bad dream. The exuberance of lessened oversight allowed a new class of lenders that have brought back the dream as a recurring nightmare. The cost to taxpayers this time is more than money -- it's a fundamental sense of security and faith in our leaders and elected representatives that has been lost.
Regulation and the standardization of the appraisal industry should have been a good thing. New forms (then the MC and now the UAD) were supposedly designed to help. Now, appraisal is being delegated to the lowest common denominator generated by a computer model. May as well call it an AVM and be done with it.
Yes: we as an industry are growing old. There will be no new blood when the pay is less than a mindless position in a fast food or retail associate's job. There is no substitute for experience and honesty -- and experience is damned expensive. Tell me how many less than honest people have been reprimanded or lost their certification? Tell me how many young people can withstand years of substandard pay and costly education to qualify for a tenuous crack at independent self employment? And what is the meaning of "reasonable and customary fees"? All I know is that back in the 1970s, fees were in the $300+ range, there was a rotation at most lenders, and if too many bad valuations surfaced, you got drooped like a hot potato. Maybe there was more time and physical labor involved. Today, the cost of everything from insurance to data sources to software and hardware has skyrocketed. Rates have not changed much, except that the AMCs take a hefty cut. Many appraisers do not want to or will not work for an AMC -- or so they say.
Try to live in this market if you do not have some steady work! I would like to know just what percentage of assignments are not involved with an AMC. Perhaps someone should do a survey!
Joe Johnson
Cert. Residential Appraiser, FL
Breaking News
July 27th, 2011
FHFA Sues UBS to Recover Losses to Fannie Mae and Freddie Mac
Washington, DC – The Federal Housing Finance Agency (FHFA), as conservator for Fannie Mae and Freddie Mac (the Enterprises), has filed a lawsuit in the federal district court for the Southern District of New York against UBS Americas, Inc., and related defendants alleging violations of federal securities laws in the sale of residential private-label mortgage-backed securities (MBS) to the Enterprises. FHFA seeks to recover losses and damages sustained by the Enterprises as a result of their investments in UBS Securities.
The lawsuit alleges that UBS Americas made numerous material misstatements and omissions about the mortgage loans underlying the private-label MBS, including the creditworthiness of the borrowers and the quality of the origination and underwriting practices used to evaluate and approve such loans. The defendants also failed to conduct adequate due diligence. This lawsuit seeks to recoup the losses suffered by the Enterprises related to their $4.5 billion investment in securities sold by UBS.
As conservator of Fannie Mae and Freddie Mac, FHFA is charged with preserving and conserving the assets of the Enterprises. Through this lawsuit and additional lawsuits expected to follow, FHFA seeks to recover losses suffered by the Enterprises in connection with the Enterprises’ investments in private-label securities.
“FHFA is taking this action consistent with our responsibilities as conservator of each Enterprise,” said FHFA Acting Director Edward J. DeMarco. “From the issuance of 64 subpoenas last year to the filing of this lawsuit and further actions to come, we continue to seek redress for the losses suffered by the Enterprises.”
The defendants named in the lawsuit are UBS Americas, Inc., UBS Real Estate Securities Inc., UBS Securities, LLC, Mortgage Asset Securitization Transactions, Inc., and former UBS executives David Martin, Per Dyrvick, Hugh Corcoran, and Peter Slagowitz.
Article
by Tom Kirchmeyer, SRA of Kirchmeyer Klips
As of August 1, 2011, we will be delivering UAD compliant appraisal reports to some of our lender clients that have requested an early start in order to get used to the new format. Appraisers are REQUIRED to submit UAD compliant appraisal reports on inspections effective September 1, 2011.
Here are a few more UAD FAQs:
Question: Where is the name of an AMC involved in an appraisal assignment reported?
Answer: The AMC name must be reported on Page 6 of the appraisal report in the “Name” field under “Lender/Client”. The “Lender/Client” field on Page 1 of the appraisal report should be used for the lender only.
My take: We will no longer require that this statement be included on the report: “This appraisal was completed for KA on behalf of [lender]”.
Question: The UAD requires the distance between the subject property and the comparable properties to be reported in miles with a directional indicator. How does this apply to properties that are located in the same building or in very close proximity to each other (i.e., the subject and the comparable property are condominium units located within the same building)?
Answer: In cases where the subject property and comparable property are located in the same building, the distance is to be reported in miles. However, in such cases a directional indicator is not required. For example, for condominium units located in the same building, the required distance for this field could be reported as “0 miles”, “0.0 miles” or “0.00 miles.” For properties that are located in very close proximity to each other, but not in the same building (such as adjoining properties or properties located across the street from each other), the distance is reported in miles with a directional indicator. For adjoining properties, a correct entry for the required distance and a directional indicator could be similar to the following examples: "0.01 mile W" or "0.04 mile NE."
My take: You will no longer see “same street” or “3 blocks north”.
Question: Can the UAD be applied to the other GSE appraisal report forms?
Answer: Yes. The UAD specifications may be applied to the other GSE appraisal forms, where applicable, if required by the client. However, an explanation of any standardized ratings/definitions, abbreviations, and formatting must be included in the appraisal report or an addendum.
My take: I think it’s a great idea to have the appraiser continue using the UAD Quality and Condition ratings on other non-UAD compliant forms such as the 2-4 family, co-op, and manufactured home forms. As long as the appraiser includes the rating descriptions in the report, the lender and borrower will understand. I do think the new rating system for Q and C is better than the existing (old) system of average, average(+), fair, etc. And let's face facts: nobody ever truly understood what average meant!
Thomas J. Kirchmeyer, SRA is President of Kirchmeyer and Associates of Buffalo, NY. His Kirchmeyer Klips are popular with real estate professionals throughout the country. Click here for more information: http://www.kirchmeyer.com/index.asp?pid=64
Email Tom directly at: tk@kirchmeyer.com
Ask Henry
Dear Henry,
At one time, courses suggested appraising a property for the purpose of proving it was being assessed — and thus taxed — too high. If the result was a lowering of taxes, the agreed fee was often one year's tax saving. Can this still be done or have advocacy rules stopped this practice.
Thanks!
Donald
apps1@compfxnet.com
Dear Donald,
The Ethics Section (Management) of USPAP specifically prohibits an appraiser's fee being based on the outcome of the appraisal. Assessment appeals would be a great source of income to appraisers if they were allowed to do them with their fee based on the outcome of the appeal. Unfortunately, the USPAP is very clear that it is prohibited. Ironically, lawyers are permitted to be paid this way, and most often are.
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