CMG Comment: Best quote I’ve seen so far on the Flood Insurance rate increases: “To be clear, if Biggert-Waters 2012 goes forward unabated, hundreds of thousands, and perhaps millions, of Americans who have played by the rules, built where the government told them, maintained insurance, and never flooded – will lose everything.”
CMG Comment: We are all for quality control and adding professionalism to the appraisal industry, and just hope that this new initiative will be fairly executed. Our only fear is that FNMA will use computer models to “scrub” data from submitted appraisal reports and will identify appraisals which include items that the computer models sees as “errors” without actually READING the reports and analyzing the specific items in them. Appraisal reports are often complicated products, and require specific discussion and explanation in order to be complete and accurate – and must be fully read to be understood. That is a problem with the current trend towards computerized valuation, specific data fields in reports (ie. the new UAD formats from FNMA), and reliance on form field data. Currently, there are new requirements for very specialized formats to be used to complete Fannie Mae compliant appraisal reports, which allow automated computerized review of check boxes and data fields in reports, but DO NOT allow for variations that exist in a large majority of homes appraised, and the computers are not able to “read” addendums or comments made by the appraisers which explain these items specific to the home being appraised. As a result, more and more appraisers are relying on these restrictive “click this box” form fields to complete their appraisals of homes, instead of writing more information which is directed at the individual home they are appraising. In our opinion, this leads to a less accurate and professional report. And with this increased demand for this type of report compliance, there is a potential to punish the appraisers (like US) who take additional time and care to provide more detailed information – which the computers then ignore – and reward those appraisers who take the short cut approach.
Local, state and federal lawmakers looking for solutions
CMG Comments: Continued discussion on revising the Biggert-Waters Act, which has dramatically affected flood insurance rates. Hopefully, some common sense measures from our legislators will be made to correct this issue which is greatly affecting 1,000′s of local residents, their home’s values, and their ability to sell their homes.
This measure (Biggert-Waters) does NOT just affect wealthy waterfront home owner’s in high priced “McMansions”, but many, many moderate priced homes which have had FEMA backed flood insurance for decades under one set of rules, and now the rules have changed. Many people (ie. elderly home owners on fixed incomes) are facing being forced out of the homes they have lived in for years due to flood insurance premiums rising $1,000′s per year.
We are continuing to follow the latest on this issue, and it’s affect on home values in our area.
We have posted certain news stories which discuss aspects of the appraisal industry, and changes to appraisal regulations, etc.
As with any media story, most of these reports contain some good information – as well as some that is mis-leading or inaccurate. The problem seems to always be that the reporters of news outlets report wide generalities as hard facts, which may or may not apply in all areas of the country or in all cases.
Here is an example: in one story which we posted a link to, which contained some good information about AMC’s (Appraisal Management Companies) it also contained the following paragraph:
- Here’s how appraisals used to work: The agent would meet the appraiser at the door of the property with a stack of comps, and they’d discuss what was happening with sales in the local area in the past few months. The appraiser would be knowledgeable about the area, having worked in it for a long time. He or she would have direct contact with the agent, and most appraisals would come in at or just above the purchase price.
This statement contains so many generalities, under the premise of “Here’s how appraisals used to work” that are untrue (at least in the case of our practice). Yes, the appraiser should have knowledge of the market area… but the idea that the “comps” be provided by the listing or selling agent to the appraiser (which would be a potentially biased start to your sales research), or that most appraisals would “come in at or just above the purchase price” are the concepts that gave appraisers (the Good and the Bad) all a bad name.
Bottom line is that appraisers should be:
- Geographically competent – the exact distance they may have travelled that day to perform the appraisal is not the issue, but their actual experience and knowledge of a market area IS. And appraisers should be knowlegable about the market they are performing the appraisal assignment in.
- Unbiased and professional in their valuation – and unswayed by ANY party to the sale/transaction etc.
- Take the appropriate time and perform all required work to provide an accurate and complete appraisal report.
There are other requirements of course, but those are just a few basics (which are also included in the requirements of USPAP).
So, while these news articles are all interesting and discuss some issues which are occurring in the industry (ie. appraisers working for low fees for AMC’s in areas which they may not be experienced, turning in sloppy work to meet unrealistic deadlines), they should not be assumed to reflect the entire industry. This type of thing is what those of us (like us here at CMG) are fighting against, and have been struggling to resist for several years now – the ability to compete in business against bad practices for low fees, and maintain a professional and accurate product (and hopefully be able to maintain our fees at a level where we can stay in business).
Providing real estate appraisal services to the Tampa Bay area.