DON'T FORGET!!! As of August 1, 2012 HB2778 will be in effect. If you are doing appraisals for an AMC, you MUST put the fee paid to you by the AMC in the Scope of Work section of your report. This applies to ALL appraisals, residential and commercial, ordered through an AMC.
New updates for UAD appraisal reports:
Updated UAD Guidance
Bob Murphy, of Fannie Mae, recently sent an email announcing some UAD updates. Here's an excerpt:
As the GSEs continue to monitor the use of the Uniform Appraisal Dataset (UAD), we are committed to working with you and your appraisers toward continued success with the appraisal dataset. As previously communicated, we are providing you with a periodic UAD update.
In support of your continued use of the UAD and successful submissions to the Uniform Collateral Data Portal® (UCDP®), we are providing additional guidance for using the UAD:
Low Appraisals? Or Misinformed Industry Experts?
The article regarding Low Appraisals Hinder Valley’s Housing Market posted in the Town News is just absurd.
Michael Orr, an Economist with the W.P. Carey School of Business at Arizona State University is just that, an economist. His statements throughout demonstrate his complete and utter lack of knowledge when it comes to the real estate industry, including lending practices and valuations.
Mr. Orr states when it comes to homes being refinanced appraisers are being conservative in their appraisal reports and that all they need to do is come up with a number that justifies the loan.”
Contrary to Mr. Orr’s assertion, federal regulatory guidelines have separated the lenders from the appraisers to eliminate targeted values; as a result the appraiser is not even aware of the loan amount for which Mr. Orr assumes the appraiser is advocating. By law appraisers must be unbiased; and act as a disinterested third party in any real estate transaction.
Mr. Orr than states that appraisers are not particularly interested in providing a figure that represents the current state of the market. This could not be further from the truth. The appraiser is required to define Market Value in the report for purchase or refinance transactions and that definition is derived from Fannie Mae.
“Market value is the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he considers his own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.””
In other words, the appraiser is charged with valuing a property at its current market state based on the available sales data. The comparables used are selected by the appraiser; they are representative of the neighborhood market and not the general market. Lender guidelines typically demand that the appraiser utilize at least 2 comparable sales sold within the last 90 days, yet Mr. Orr suggests that the data used by appraisers is out-of-date.
Mr. Orr also states that appraisers are under pressure to guess low from the lenders.
As, Vice-President of the Coalition of Arizona Appraisers (CoAA), I am appalled at the commentary from Mr. Orr. My professional career as a Certified Residential Real Estate Appraiser affords me the ability and privilege to value a residential property in the State of Arizona. I can tell you with first-hand experience, the derivative of the value is not a guess, but an art and a science that includes substantial market and statistical analysis utilizing verified sales data that is comparable with the subject property; and I have the same access to MLS as any realtor who subscribes to it.
Here again, the Home Valuation Code of Conduct was implemented to alleviate any pressure for a value, high or low. The Dodd-Frank act continues today to promote appraiser’s independence by attempting to eradicate any and all lender influence. The State of Arizona, in an effort to eliminate undue influence, enacted A.R.S. 32-3633 which makes it a Class 6 Felony for any person who influences the actions of an appraiser for the purpose of securing an appraisal that is grossly misleading or fraudulent.
Appraisers are often told by agents that the value of the home should be based on the value that a buyer and seller agree to. This much is true, in a cash transaction maybe! However, a home is only worth what a bank is willing to lend when a buyer chooses to finance a loan.
Mr. Orr is partially correct in his final statement where he stated the lenders were stung when buyers defaulted on the loans and the homes were sold into foreclosure. However, Mr. Orr fails to point out that banks were lending at 100% to 120% of the appraised value and the borrower had nothing to lose with no money down. The banks will no longer lend with this policy and most all require a minimum of 5% to 20% down and based on the appraised value.
So it is not low appraisals that hinder the valley’s housing market, but misinformed buyers and sellers with high and biased expectations of what they think their home is worth. Keep in mind that appraisers do not make the market. They only analyze and report sales data that emanates from buyers, sellers and real estate agents.
Certified Residential Real Estate Appraiser
Vice-President of the Coalition of Arizona Appraisers
Governor signs HB 2778
Ann Susko, Legislative Committee Chairperson
The Governor signed HB2778 Friday May 11. It will become effective in 90 days. Let me recap some important issues involved with the development process of this bill.
The original bill was proposed by AAREA. After many discussions with appraisers around the state, CoAA determined there were some items in the proposal that would result in unintended consequences for AZ appraisers. During the course of the legislative process, CoAA's lobbyist, Ben Alteneder and I met with the bill's sponsor and all of the stakeholders (those who would be impacted by the bill). At least twice we met with AAREA, AI lobbyist and President, NAIFA, ABOA representative, AAR, homebuilders, and the bank lobbyists to discuss the resulting effects of the bill. It was necessary for each entity to discuss these issues with their respective boards for determination of the effects and whether to support or request further changes. Several items that were felt to be business decisions, eventual Federal rules or law were removed. The ABOA (AZ Board of Appraisal) did extensive research with the AG and the ASC and found several items were either not enforceable or could cause harm to appraisers.
Following discussions with seasoned appraisers, CoAA's Legislative Committee rewrote the "indemnification" or "hold harmless" clause to not be AMC specific.
ANY PERSON, PARTY OR ENTITY WHO HIRES, ENGAGES OR COMMUNICATES WITH AN APPRAISER DIRECTLY OR THROUGH AN AGENT SHALL NOT REQUIRE OR ATTEMPT TO REQUIRE THE APPRAISER TO SIGN ANY INDEMNIFICATION AGREEMENT THAT WOULD HOLD HARMLESS THE HIRING PERSON, PARTY OR ENTITY, ITS OWNERS, AGENT'S EMPLOYEES OR INDEPENDENT CONTRACTORS FROM ANY LIABILITY, DAMAGE, LOSS OR CLAIM ARISING FROM THE SERVICES PERFORMED BY THE PERSON, PARTY OR ENTITY, IT'S OWNERS, AGENT'S EMPLOYEES OR INDEPENDENT CONTRACTORS.
THIS SECTION DOES NOT LIMIT LIABILITY FOR SERVICES PERFORMED BY THE APPRAISER.
The last item is disclosure of the fee paid to an appraiser by an AMC. The law reads:
THE APPRAISER SHALL DISCLOSE THE FEE PAID FOR AN APPRAISAL REPORT ORDERED BY AN APPRAISAL MANAGEMENT COMPANY IN THE SCOPE OF WORK SECTION IN THE APPRAISAL REPORT.
The word SHALL means MUST. If you are used to relying upon the preprinted software form's Scope of Work, you must now add an addendum with your version of your Scope of Work which includes the fee paid by the AMC. This applies to both residential and commercial appraisals. Bear in mind this statement is now in LAW and enforceable by the ABOA.
My name is John Dingeman, and I am the current Vice-President of CoAA and am new to the appraisal world by all standards having only worked in it since 2003. To share with you some background, I grew up in the City of Detroit, where most all of my relatives worked for the “Big 3” in one capacity or another. My father was even a card carrying UAW member for nearly 20 years. I was further introduced to the unions as a young man working for UPS (the Teamsters) and for Ford Motor Co (UAW) for the better part of 3 years. And believe it or not, I AM NOT A FAN OF THE UNION! So when CoAA began its consideration of joining the American Guild of Appraisers, I like many of you had concerns.
The issues that face us as individual appraisers today reach far beyond our individual states; to think anything less would be naive. The banks are at the national level and are influenced there; they are big and they are strong. Trust me when I say, one voice might be heard, but a thousand cannot be ignored. When I learned that insurance agents and podiatrists, other PROFESSIONALS just like us, have formed similar Coalitions and have also aligned themselves with the OPEIU, it did not fall on deaf ears. To my surprise and delight, the union model presented to us through CoAA by the American Guild of Appraisers is not the traditional union model of the Teamsters and the UAW. It was nothing like the one I knew. The model in which they rely upon is for strong leadership at the state level through the Coalition and to support itself in dealing directly with the issues that face us locally here in the Arizona, but they are there to assist us when called upon at our national level where we truly need it.
You see, the Coalition and AAREA, were successful and effective at convincing our State to amend the law that would prohibit the use of the Hold Harmless Clause in HB 2778. That is a state issue and it was handled beautifully by both organizations. Once, the Governor signs it into law, you (the appraiser) no longer have to fear the personal consequences of signing an agreement that includes a Hold Harmless Clause. The state, however, cannot address customary and reasonable fees or properly address bank abuse and influence bestowed upon an appraiser! Our local banks, brokers, and credit unions – yes; the nationally chartered banks – not so much!
It is important to note that the American Guild of Appraisers is autonomous from the AFL-CIO and its governance is self-created. It will run according to its own agenda and will only ask for the OPEIU when needed, which will consist primarily of legal and lobbying assistance. The dues paid by the appraiser through CoAA will cover membership with the American Guild of Appraisers, $12.50/month towards the OPEIU, and mere pennies to the AFL-CIO. The Coalition of Arizona Appraisers will operate entirely independent of the Guild and OPEIU. CoAA is a corporation and will continue just as we have in the past.
When one of us complains to the CFPB or the OCC it is just one voice, one person. When we all stand together, unified, WE cannot be ignored. The American Guild of Appraisers has determined, because they know the DC players, that it is best to address one issue at a time. They have filed, via their attorney, a petition, which is like the step prior to a lawsuit, with the CFPB asking them to remove the presumption which allows AMC fees to be considered in the customary & reasonable fees determination. The end goal of all of the steps the Guild will take is to implement the Dodd-Frank Act, which greatly impacts appraisers, properly and fairly.
I implore you to consider joining CoAA and by virtue the American Guild of Appraisers as a viable option in restoring our profession, one we should all be proud of. We are APPRAISERS that hold a license and are privileged to provide a service no one else can, a real estate value! We deserve better! While I may be newer to the industry than most the one thing that has been consistent in my discourse with appraisers across our state and the country and resonates the most is that we need to stand together as one! The time has come and here is our chance! Please join me?
Your peer and friend,
CoAA affiliates with the American Guild of Appraisers
Over the past few years many of you have said to me, "I don't know why all of the appraisers can't get together and speak with one voice." I have not only been asking that same thing, but working on fixing it for 20 years. Twice, at different times, I have served on a task force to merge NAIFA and ASA. ASA and AI attempted to merge. None of these mergers ever happened because of egos and no one wanting to give up their "culture". We believe it is time to take a stand together to protect our profession. A house divided against itself cannot stand......Abraham Lincoln
A few weeks ago I was contacted by the Guild President who is also a friend of mine and a past President of NAIFA. The Guild is forming a coalition of state coalitions which will be an affiliate of the Office and Professional Employees International Union, AFL-CIO (OPEIU). OPEIU represents employees in professional, technical, office clerical, health care, education and other related work in the private and public sectors in the US, Canada and Puerto Rico. There is no ability to strike or collective bargaining. This affiliation provides us with better access to the "decision makers" and more clout to fight damaging consequences to appraisers. Although affiliated, CoAA will remain an autonomous association. More information will be forthcoming only to CoAA members.
The main reason behind forming this Guild is because the government and financial industry groups have been attempting to dictate the appraisers collective future. Although attempts have been made by others and other groups, their effectiveness has been limited by the lack of cohesion and ability to have sustained leverage on events and issues that shape the future of the appraisal profession. It is time to adjust our strategy and reassert ourselves collectively to meet these challenges. I have personally met with members of the Guild, their attorney, the representative of the OPEIU and the AFL-CIO lobbyist. They are all dedicated to working together for mutual aid and protection of our profession. This support will not only be on a National but also a State level. The AGA is aggressively pursuing changes in current Federal Reserve Board regulations that permit AMCs to pay appraisers who perform appraisal a fraction of the "customary and reasonable fee" that is required under the Dodd Frank Act.
Now is the time for ALL Arizona appraisers to step up and commit. If you truly want this support for our profession, it will not come without a cost. You must be a member of the Coalition of AZ Appraisers to benefit, to put forth your opinion, to receive pertinent information, participate in conference calls and receive personal support if necessary. The cost for the rest of 2012 is $75 ($50 to the Guild and $25 for CoAA operating expenses) for dues. Any extra donations are appreciated. Go to www.azcoaa.com and sign up. The CoAA Board of Directors feel we appraisers can no longer be disjointed and unwilling to work together for the common good. It is time to stand up as a collective voice to protect ourselves and our livelihood.
Ann Susko, CoAA President
Changes in the CoAA Board of Directors
Julie Friess has resigned as CoAA President due to an increasing demand of her business and nationwide teaching assignments. We thank Julie for her service and continued support of our organization.
The CoAA Board of Directors voted Vice President, Ann Susko, to advance to President. and John Dingeman, who volunteered, to be Vice President. The Board welcomes John who brings management and legislative skills to help guide CoAA's endeavors. The rest of the Board has not changed. CoAA is an organization of volunteers striving to support professionalism for all AZ appraisers. Everyone is welcome and encouraged to participate.
NEWS ALERT !!
Click on the link below to see the relevant CFPB page; it will provide you with information on the GFE and Settlement forms issue including how to submit electronic comments. There's a live link on that page (KnowBeforeYouOwe@cfpb.gov.) where stakeholder comments should be filed.