1. real estate

VOLUME 21 • ISSUE 8 • August 2013
www.appraisaltoday.com
How to find the best AMCs!! And get info on AMCs that cold call you,
check out your current clients, etc. Use AppraisalAdvisor!!
ince fee appraising started in the
U.S. in the 1930s, we have all
had the same top question: "How do
I find good clients?"
Appraisers have always been very
reluctant to share the names of their
best clients with other appraisers.
Sometimes you could get a name
from an appraiser who worked in
another geographic area and was not
a competitor. Or, another competing
appraiser would do you a big favor
by giving you a client's name. Every
so often, the appraiser would give
some more information, such as
"always pressures for value" about a
mortgage broker.
Pre-licensing, most appraisers, both
staff and fee, belonged to professional appraisal associations. Staff
appraisers and chief appraisers were
regular attendees, so you could ask
them directly about getting work.
Since licensing and the decline of
residential appraiser participation in
appraisal associations, opportunities
to network with lender staff appraisers (and fee appraisers) has significantly declined. That was a very easy
way to get info, but that is gone,
unfortunately.
Getting good information on
AMCs is even more difficult, as very
few are local and personally contact-
S
ing chief appraisers is very, very difficult, if not impossible. Five appraisers working for an AMC will often
have five different experiences, even
in the same local market. Appraisers
usually have the similar opinions
about direct lenders.
Now, for the first time, appraisaiseradvisor.com (AA) has information
on AMCs and lenders contributed by
fee appraisers, including fees: when
fees are paid, how easy to work with,
etc. The data is analyzed and is easily
accessible.
You can easily file a complaint,
using AA's Uniform Complaint
Form.
Through the end of 2013, there is
no fee to join. I have no idea why
every appraiser who does
AMC/lender appraisals has not
signed up!!
Note: although I refer to AMCs in
this article, AA has ratings on direct
lenders, including mortgage bankers,
plus a large database of direct
lenders.
Every appraiser who does lender
work should use appraisaladvisor to
find out about:
• AMCs you never heard of (or direct
lenders) call you for an assignment.
Don't accept the appraisal until you
check them out on AA.
• Are you getting good fees from
your clients? Find out what other
appraisers are getting paid.
• Regularly check your clients.
Individual AMCs can change over
time. For example, your AMC client
drops their fees or quits sending you
orders. Or, they start paying later and
later and may be heading towards
bankruptcy.
• You want to find some new AMCs
or direct lender clients. Clients come
and go. Every appraiser should
always be looking for new clients.
The "Catch 22" for
appraisaladvisor - getting
appraisers to rate their clients
As we all know, we don't like to
share client information with our
competitors. It is very hard to over-
IN THIS ISSUE
How to find the best AMCs. Use AppraisalAdvisor! . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 1
Dodd-Frank ASC appr. hotline-Use communication to avoid borrower complaints . . .Page 6
When adjustments (or lack of) can’t be proven . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 10
Revisiting the FannieMae/Freddie Mac 2005 URAR form Amiguities and liabilities .Page 12
Doug Smith - from hotel manager to appraiser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 14
August 2013–©Appraisal Today–PAGE 1
come that decades-old habit.
Many appraisers want to report
AMCs that are not good to work for
various reasons - to "sound off" (similar to posting on appraiser chat
boards) or just to let other appraisers
know about them.
There are some AMCs and lenders
that appraisers like to work for.
These are the clients that have
always been hard to find. Most
AMCs are national, so the vast
majority of the appraisers reading
your reviews are not your competitors. But, the best local direct lenders
in my area are listed on AA, with
high ratings.
If your favorite AMCs get higher
ratings from you, they will be able to
show their clients, the lenders, that
they are better managed than other
AMCs that appraisers hate. Then you
will get more business from them.
There are some positive reviews,
as the average AMC rating was 2.7 in
5/13. I was unable to get an update
by my deadline.
For now AA is free. When they
start charging, the price will be based
on how many reviews you contribute,
so there is a financial motivation,
which we all like. No billing information is required.
What about just searching the
Internet for AMC information?
Many appraisers say they can
search the Internet. Why sign up for
appraisaladvisor.com?
There were hints on the Internet for
many months before the failure of
AMCs where appraisers lost lots of
money. But, few appraisers knew
about this. I heard the rumors for
months. But, I am a publisher and
did not want to "get into trouble" by
writing about these rumors in my
email newsletter and paid Appraisal
Today newsletter. I did let people
know if they called me. Sometimes I
would hint about it in a private email.
Searching the Internet for AMC
info is very time consuming and not
PAGE 2–©Appraisal Today–August 2013
reliable. There are many web sites to
search. The most active chat board,
appraisersforum.com has very few
positive reviews. As with many chat
boards, negative comments predominate. Also, there can be considerable
negative comments if you post anything, so most appraisers, including
myself, seldom post there.
Don't rely on what one, or a few,
appraisers day. Get the opinions and
data from many appraisers.
Never, Never be too dependent on a
few clients
How many of us have ever been
satisfied with all our clients? Even if
we are satisfied with our current
clients, they always come and go
over time.
Also, it is NEVER a good plan to
have over 30% with one client as
they could quit giving you work
tomorrow. It is better, of course, to
have 20% or less with one client, but
most of us get comfortable with one
or two clients that give us most of
our work.
Now, all of that has changed with
appraisaladvisor.com. For the very
first time, appraisers are sharing
information about their clients. The
information includes a lot more than
fees.
Finding good clients in the past,
prior to HVCC
Most fee appraisers worked for
direct lenders, some worked for
AMCs (about a 10% market share),
and most worked for mortgage brokers, who had about an 80% origination market share.
Most clients paid about the same
fees for your geographic area. For
mortgage brokers, fees were COD.
Direct lenders were a minimal credit
risk. Even when business was way
down, fees did not change much.
There were not a lot of special
requirements, computerized reviews,
hordes of "checkers" and "reviewers"
and people calling for status updates.
You needed to learn Fannie Mae and
FHA guidelines. Some clients would
have additional requirements, but
they were not excessive. None had
armies of people making phone calls,
and non-appraiser "reviewers".
Finding good AMC clients
AMCs are much more difficult.
You need a lot more information
before deciding.
You need to know their current fees
in your market, their fee trends over
time, payment trends,
Also, AMCs change over time. For
a year or so, after AMCs took over
the market, I would recommend one
to my paid subscribers. But, too often
they would soon drop their fees,
increase their requirements significantly, etc. Or, they would be purchased by another AMC and everything would change.
AMC deadbeat clients
As far as I know, there have never
been thousands of appraisers with
unpaid, uncollectible billings from
direct lenders. Lenders always paid.
Mortgage brokers worked small geographic areas and could be sued in
small claims court. But, the vast
majority of appraisers were paid
COD.
Over 80% of AMCs started after
HVCC in 5/09. Many were started by
appraisers without a lot of funding
for reserves when the market
inevitably slowed down.
To start a national AMC required
several million dollars. Few started
with that much money.
The well established AMCs, started
prior to HVCC, were better funded
with regular established clients. Some
were connected to a major lender,
such as Rels, which is connected with
Wells Fargo. There were smaller
AMCs with some financial risk for
appraisers but they had a small market share.
Almost all of the September 2012
issue of Appraisal Today discussed
deadbeat clients, including collection
tips, using factoring services, lender
liability for unpaid fees,
etc. To determine the creditworthiness of AMCs I wrote about credit
bureaus such as Dun & Bradstreet.
But, they had little useful information. I also found a small credit
agency that had setup a way for people in a specific industry to share
information. But, it would only work
on Internet Explorer 9, which limited
its use.
I also heard about a new service
that would give appraisers information on AMCs before they went out
of business, using a database of data
supplied by appraisers. That seemed
the best way for appraisers to find
out about them before they went out
of business. So, I quit writing about
how to determine creditworthiness
until now.
What is the connection between
Dave Biggers, founder of a la mode
forms software and Matt Biggers,
co-founder of AA?
Matt is Dave's son. Matt spent
many years listening to appraiser
issues at the dinner table with his
father. As Matt got older, he still
communicated with Dave as he is his
son. They have always had a good
father-son relationship. Matt's grandfather was an appraiser, so now there
are three generations in appraising.
As Dave's son, Matt worked sometimes at a la mode when he was
young, such as being at exhibit
booths. But, Matt never was a regular
employee there.
Like many other children of business owners, including fee appraisers, Matt did some work when he
was young. His first assignment,
when he was very young, was shredding documents. Unfortunately, he
shredded some important documents,
so he didn't do that job any more.
Dave Biggers is retired from a la
mode, but is still a good resource for
Matt, as an experience business person as well as a father.
Who started the company?
The co-founders are Matthew
Biggers and Kim Drago, both recent
college graduates and residents of
Atlanta, Georgia. They have been
friends since childhood.
Matt graduated in 2012 from the
Georgia Institute of Technology with
a degree in Business Administration,
with a concentration in Operations
and Supply Chain Management. This
seemed like an unusual degree for his
current business to me, but it was
technical, since the school is tech-oriented, including database management classes. He also took engineering classes.
Kim Drago, the Chief Marketing
Officer, graduated from the
University of Georgia with a degree
in Journalism/Public Relations.
During summer and winter breaks
from college, she worked at a la
mode in marketing and learned a lot
about the appraisal industry. She has
done marketing and public relations
work for several companies.
When was the company started?
After HVCC stared in 5/09, in
2010 Matt noticed that appraisers
were not being paid and got the idea
of an AMC rating service to help
avoid deadbeat clients.
Before his college graduation in
May, 2012 he had developed a business plan and specifications. He hired
a development team of programmers
(independent contractors) to develop
the web site.
The company has always been personally funded and has no advisory
board or partners.
In February, 2013, they started beta
testing and opened the site to subscribers in April, 2014.
How does the company make any
money?
Per Matt, they are a "bootstrap
startup".
For now, the service is free, so
there is no income.
They plan on allowing AMCs and
other clients to do paid advertising on
their profile pages. This advertising
will not be "signup for $500 bonus"
type of ads, but will include a banner
ad and information on their company,
pre-screened by AA.
Through the end 2013, there will
be no cost to subscribers. After that
date, there will be fees, depending on
what data you want and how many
reviews you contribute. For example,
high fees to those who don't want to
contribute data, but want all the
information. Low fees would be for
those who contribute reviews,
depending on the number of reviews.
The company keeps costs low - the
only employees are the co-founders,
Kim and Matt. When computer programming assistance is needed, independent contractors are hired.
But, since the founders are young,
are recent college graduates, and
don't need much money (no mortgage, car payments, children, etc.)
they can use their savings for living
expenses.
How many appraisers are using
AA?
Unfortunately, I was unable to
obtain information by my deadline.
But, since it is a new service, started
in 4/13, it is probably increasing.
AA listed in the a la mode Store
a la mode forms software company
has a "store" where services are listed
that can integrate with a la mode.
Recently Appraisaladvisor was
added. When you want to do a
review for a client, the data can be
automatically transferred from a la
August 2013–©Appraisal Today–PAGE 3
mode to the AA database.
It is free for the appraiser.
Matt made it clear that it was not
listed because he was Dave Biggers
son and there is no connection
between AA and a la mode.
just that - independent. It wouldn't be
fair to allow a staff appraiser, or any
staff of a company for that matter,
write reviews about the company.
Note: AA verifies license status at
www.asc.gov.
Note on information below. It was
taken directly from the FAQs section,
available by clicking "support" in the
lower left of every page. I interviewed Matt and asked the questions.
Their writeup is well done, so I am
repeating it.
Why are non-appraisers allowed to
register?
Who can use Appraisal Advisor?
Currently we have membership
available for independent fee appraisers, staff appraisers, AMCs, lenders,
real estate brokers/agents, government agencies, and other.
Anyone registered with Appraisal
Advisor as any user type can read the
reviews in our system. However,
only Independent Fee Appraisers can
write reviews.
What are reviewer "levels"
What does this mean for you? The
greater the number of reviews, the
lower your price will be when they
start charging. Also, the more the
number of reviews, the more
involved and experienced the reviewer. Their fees contributed over time
will show trends better than an occasional contributor.
• Novice - more than one review
• Jr. Reviewer - over 4
• Reviewer - over 30
• Sr. Reviewer - over 50
• Contributor - over 125
• Sr. Contributor - over 250
• Top Contributor - over 400
Why can only independent fee
appraisers write reviews?
Only independent fee appraisers
can write reviews because they are
Appraisal Advisor being accessible
to all members of the industry is beneficial for everyone. Appraisers can
be heard, find new and better clients,
and instantly know fee information.
Also, lenders and AMCs can utilize
the feedback they receive to better
improve their business and support exactly like restaurants, hotels, and
other companies use other review
sites.
How do they stop staff appraisers or
non-appraisers from writing fake
reviews that are good about their
own companies, but bad about their
competitors?
We have something that we call
our internal "Watchdog Statistics".
Though we don't want to identify
them all right here (as that would
alert "wrong-doers" of possible ways
to circumvent them) they do alert us
of potential users manipulating the
site with purposeful and malicious
intent.
When an account is flagged, we
deactivate it and contact the user via
e-mail and/or phone to manually verify that they are indeed an
Independent Fee appraiser. If they
aren't, their account and all subsequent reviews they've posted are
immediately removed from the system.
The Watchdog Statistics have
already been successfully used multiple times in identifying non-appraiser
users who signed up as Independent
Fee Appraisers and attempted to
write reviews. They were all handled
amicably and successfully.
What information is publicly shown
in my profile?
PAGE 4–©Appraisal Today–August 2013
The only public information on
your profile is your username, your
latest written reviews, a number total
for how many reviews you have written, and your recommendation criteria.
What information is publicly shown
with my review?
Only your username, the written
portion of the reviews (if completed),
and the 1-5 ratings will be displayed
with your reviews.
Why does it show (no AMC) next to
Credit Unions and Lenders when I
know they use one?
(no AMC) appears next to Credit
Unions and Lenders to remind you,
the appraiser, to review the Credit
Union or Lender ONLY if they did
not use an AMC. The presence of (no
AMC) does NOT imply that they
don't use an AMC, but if they have
any reviews, then it's a fairly safe bet
to assume that they don't use one.
What is considered fraud?
Fraud includes writing things about
a client that you know are not true,
making things up about a client, signing up as a user type that you do not
actually belong to, trying to give
many false positive or false negative
reviews on one client, or any other
attempt at doing something that you
know isn't true.
The most data is on fees
Many appraisers post their fees and
how long to get paid. Fewer appraisers rate their clients on other factors,
such as:
• Respects Appraisers' Judgement
• Stipulations
• Requirements
How does AA get profile
information on AMCs and lenders?
We've populated our database using
information from the state AMC registries and government databases of
banks and credit unions. (My note:
over 130,000 profiles are included)
We hand-verified every AMC's
information to make sure that the
AMC contact information was up-todate according to their website and
registration information.
As more states require AMC registration, we will add those AMCs to
the database. Additionally, some
clients may have been added by
users.
My comment on the Uniform
Complaint Form: Be sure to read all
the FAQs before filing a complaint.
There are specific regulator requirements.
Why do you require so much
information in the Uniform
Complaint Form?
We designed the form to be full,
robust, and actionable. That way, you
don't have to spend hours or days
going back-and-forth with each regulator clarifying aspects of the complaint. All the information they will
need is already there in the form.
Why do you require that I attach
my appraisal report, order form or
contract, and correspondence
between me and my client?
We went through every regulator's
complaint forms and most require
two things before they step in: previous, documented contact with the
client regarding the complaint and
any and all documentation regarding
the actual appraisal. Because of this,
we recommend including these three
things at a minimum.
Having these three things included
in the UCF helps expedite the process
of getting appraisers paid or having
their complaint addressed, and has
contributed to our phenomenal success rate so far.
A few tips about using the web site
• “7 reviews, 3 written” comment.
The other four reviewers only contributed fees.
• "not enough data" - 30 reviews are
required for the information to be statistically reliable.
• Finding AMCs/lenders. Some AMCs
have very similar names. AA provides
the address so you can figure out who
is who.
• Fees: on the right side box is the
AMC's fee in your specified geographic area. The right side box is the
national fee.
• If there are only a few reviews, the
information is less reliable.
• Fees can vary widely, geographically, from some AMCs. Others pay the
same fees where ever you are located.
Also check an AMC's fees for your
area, as well as nationally.
Where to get more information
Go to www.appraisaladvisor.com.
Watch the videos and check out the
FAQs on the support page (link at
bottom left of each page on the Web
site). It is easy to use, but does take a
little time to learn to navigate.
Look in the mirror and ask yourself
if it is something you could use in
your business.
August 2013–©Appraisal Today–PAGE 5
Dodd-Frank ASC Appraisal Hotline
Use communication to avoiding borrower
complaints and lawsuits
By Doug Smith, SRA
he introduction of the ASC
Appraisal Hotline is a current
and real threat to individual appraisers. Spending a bit more time with
the borrower or property owner is the
place to start.
Additionally, consider that all
aspects of communication are essential with an emphasis on empathy
and listening. In appraising, as in
most interactions, manners count.
T
About the ASC's Appraisal
Complaint National Hotline
On March 15, 2013, The Appraisal
Subcommittee (ASC) opened The
Appraisal Complaint National
Hotline. A little noticed section of
the Dodd-Frank Act, officially the
Dodd-Frank Wall Street Reform and
Consumer Protection Act, passed in
2010, required the Appraisal
Subcommittee (ASC) establish a
complaint hotline.
The Appraisal Complaint National
Hotline was introduced to allow
lenders, homebuyers, and appraisers
themselves to report complaints
about alleged non-compliance with
USPAP and/or appraisal independence requirements. The impact of
this available reporting source is yet
to be determined.
The hotline was introduced to be
an informational resource, but most
agree it will likely be an avenue for
consumers to direct complaints when
an appraisal does not meet their
needs to complete a loan or there is
an issue with an individual appraiser.
The mechanism is that when a
complaint is received over the hotline, it will be redirected to appropriPAGE 6–©Appraisal Today–August 2013
ate state and federal regulation organizations.
The ASC will not investigate the
complaints or retain the referrals for
future reference.
The ASC offers some guidance on
the website complaint page: "Before
requesting a referral, you must know
if your complaint involves violations
of USPAP or appraisal independence." This instruction may seem
bewildering to the average consumer,
but it is not likely these instructions
will serve to hinder the complaint
process.
The website goes on to outline the
following:
The Hotline will: "Refer complainants to the appropriate legal
authority to receive complaints of
alleged non-compliance with USPAP,
or appraisal independence standards,
including improper influencing or
attempted improper influencing of
appraisers or the appraisal process.
The Hotline will not:
• Initiate complaints
• Act on your behalf
• Arbitrate
• Assist in appealing the outcome of
complaints
• Follow up on referrals previously
provided
Despite these strictures contained
on the website, consumers will want
to complain based on their experience with an individual appraiser. It
is very likely appraisers will be in
line for receiving a complaint which
may very well escalate into a lawsuit.
Quality of work vs. poor
communication - what physician
lawsuit research can teach
appraisers
Quality of work may very well not
turn out as the main issue of the complaint. Facing up to the potential
impact of the ASC Hotline, appraisers should address the basics of communication and interaction with
whom they interact in the appraisal
process.
Appraisers, of course, are concerned about becoming a party to a
complaint submitted to state appraisal
boards and to complaints that escalate into lawsuits.
Appraisers are well aware that the
first line of defense for avoiding
complaints and lawsuits is to produce
a fully credible and convincing
report. People reasonably assume that
for those providing a service (e.g.
doctors, lawyers, accountants and
appraisers) poor quality, or bad luck,
leads to litigation.
However, few appraisers consider
important proactive steps available to
lessen the likelihood of a borrower or
property owner taking complaint
action in the form of a complaint sent
in to a state appraisal agency or filing
a lawsuit.
These suggestions come from an
unlikely source: research in the medical profession seeking answers as to
why doctors are sued.
The reason doctors get sued,
according to the research, is not
because of poor quality alone, and
neither is it misfortune, it is much
more subjective than either of those
things - trust and confidence.
Patients do not sue doctors they
like, or, as Aristotle put it, 'between
friends, there is no need for justice'.
There is a strong suggestion from
research that manners count and personal communication skills weigh
heavily in complaint and lawsuit risk
factors.
Competency, the first line of defense
While the recovery of the housing
market appears to be well underway,
current economic conditions and only
gradually improving trends in many
markets remain a challenging environment for appraisers.
Client relationships have undergone a profound change with the
introduction of HVCC (Home
Valuation Code of Conduct) which
was replaced by the Dodd-Frank legislation.
Appraisers are dealing with new
clients as work provided by mortgage
brokers was taken over by appraisal
management companies. These new
clients are requesting more report
detail as well as the Market
Condition Report (1004MC).
Producing a credible and convincing opinion of value is made more
difficult due to scarcity of market
data as sales slow. The change in
market conditions as well as client
demands place a premium on the
issue of competency.
In the new appraisal environment
there is technical revolution with
much of the review work relegated to
running reports through computerized rule sets that focus on data entry
rather than the integrity of value
opinions. Appraisers are spending
their efforts and energy on ensuring
that reports meet technical rule set
compliance rather than on essential
analysis of the appraisal problem at
hand.
Appraisers consider education the
main avenue of achieving competency. In the new economic environment, a designation from an appraisal
organization is a signal in the marketplace that an appraiser has taken
additional steps towards achieving
competency.
Appraisers in this new market
environment must consider adding a
designation to stand out from the
crowd and professionally benefit
from the education component that is
the main gateway to an appraisal
organization designation.
The USPAP Competency Rule is
front and center in the appraisal
process. Of all the content of USPAP,
the Competency Rule is probably the
best stated.
It outlines reasonable steps for the
appraiser to follow and competently
perform appraisal assignments.
However, there are times when the
appraiser is experienced and competent, but there are technical issues
and approach issues that hold up the
process.
Appraisers in the past relied on a
local network of colleagues and
emphasis was on a body of information kept in the appraiser's library. Of
all the books, one of the most recommended is "Appraising the Tough
Ones: Creative Ways to Value
Complex Residential Properties" by
Frank E. Harrison, MAI, SRA and
available through the Appraisal
Institute.
For the commercial appraiser, a
comprehensive book with sections on
market analysis, highest and best use;
the application of cost, sales comparison, and income capitalization
approaches, I recommend "Market
Analysis for Valuation Appraisals"
by Stephen F. Faning, MAI, Terry
Grissom, MAI, and Thomas D.
Pearson, MAI, also available from
the Appraisal Institute.
Today the local network has
expanded literally worldwide with
Chat Forums dedicated to appraisal
issues such as www.appraisersforum.com and websites such as
www.Appraisaltoday.com and
www.appraisaltodayblog.com containing a wealth of information. Also
useful are other appraiser online
forums, linkedin forums and yahoo
email chat groups.
The key to using information
received on forums and websites is to
be discerning in its application to the
appraisal problem at hand, casting a
critical eye on suggestions made on
the Internet.
While competently completing a
report remains the most important
factor in protecting the appraiser from
complaints and lawsuits, the factors
that motivate a person to act on their
dissatisfaction with an appraisal
report may have nothing to do with
competency factors, but center on
how the person feels about their personal interaction with the appraiser.
Why doctors get sued - poor client
communication
Malcolm Gladwell in the book
"Blink" cites some recent research
about why doctors get sued. Gladwell
summarizes the research as follows:
"Recently the medical researcher
Wendy Levinson recorded hundreds
of conversations between a group of
physicians and their patients. Roughly
half of the doctors had never been
sued. The other half had been sued at
least twice, and Levinson found that
just on the basis of those conversations, she could find clear differences
between the two groups.
"The surgeons who had never been
sued spent more than three minutes
longer with each patient than those
who had been sued did (18.3 minutes
versus 15 minutes).
They were more likely to make
"orienting" comments, such as "First
I'll examine you, and then we will
talk the problem over" or "I will leave
time for your questions" - which help
patients get a sense of what the visit
is supposed to accomplish and when
they ought to ask questions. They
were more likely to engage in active
listening, saying things such as "Go
on, tell me more about that," and they
were far more likely to laugh and be
funny during the visit.
August 2013–©Appraisal Today–PAGE 7
"Interestingly, there was no difference in the amount or quality of
information they gave their patients;
they didn't provide more details about
medication or the patient's condition.
The difference was entirely in how
they talked to their patients.”
Malcolm Gladwell, in his book
"Blink" drew attention to this
research by Wendy Levinson, as well
as to a subsequent piece of research
by Nalini Ambady, a Harvard psychologist. Ambady took Levinson's
recordings of doctor-patient conversations and filtered out the content.
The words were filtered and thereby
rendered unrecognizable; however,
the intonation, pitch and rhythm were
preserved. Without knowing the doctor's skill level, experience or specialism - indeed without being able to
decipher the specific words Ambady could predict whether a doctor had been sued.
How? She could do this by reference to the tone of voice of the doctor. If the doctor's voice was judged
to sound dominant, the doctor tended
to be in the claims group; whereas if
the voice sounded less dominant and
more concerned, the doctor tended to
be in the no-claims group.
What can appraisers learn from this
research?
The message from the research is
that appraisers could lessen the likelihood of complaints and lawsuits if
they spent an extra bit of time with
the borrower or property owner.
More often than not when a property is being appraised for refinancing,
the appraiser has an opportunity to
interview the borrower during the
inspection process. How the appraiser
interacts with the borrower during
critical interactions can dictate
whether a potential problem becomes
a complaint issue.
Interviewing the seller is sometimes difficult to accomplish when
the property is sold. Appraisers mostly rely on the interview with the sellPAGE 8–©Appraisal Today–August 2013
er's agent. An interview with the listing agent, with full opportunity given
the agent to explain the positive
aspects of the property, goes a long
way in demonstrating the appraiser is
conscientiously making an effort to
determine the property value.
Of course, directly speaking to the
seller is a more certain way to
accomplish this step but this process
should only be taken with the assistance and knowledge of the listing
agent.
Instead of hurrying through an
inspection, an appraiser lessens
potential problems by taking a few
moments to directly interact with the
borrower or property owner in a
meaningful way.
The emphasis of the research is
that showing empathy and listening
carefully plus paying careful attention to communication skills go a
long way to prevent complaints and
lawsuits.
Is it an inspection?
At the heart of most appraisal
assignments is the site visit and
inspection of the improvements.
Although appraisal guidelines from
Fannie Mae and FHA, for example,
describe the process of viewing the
site and improvements as an "inspection," some appraisers seek new
terms to describe the process.
Many potential buyers are contracting for home inspections as part
of the due diligence process. The
home inspection focuses on the physical condition of the improvements
and the operation of the mechanical
systems. These inspections include
an assessment of the plumbing and
electrical systems.
Some appraisers, not wanting to
imply that they are acting similarly
as a property home inspector choose
to label the process as "property
viewing" or some other term that
avoids the use of the word "inspection."
The term "inspection," however, is
engrained into the literature and
guidelines published by various entities and therefore, I don't see that
these concerns have much merit.
Inspection - a four step process
The inspection of the site and the
improvements involves four steps.
The first step is the actual viewing
of the property. The appraiser sets
out in the scope of work the degree
to which the property is inspected,
whether it is viewed from the street
or if the interior of the improvements
is viewed. Inspections completed for
FHA address specific elements the
appraiser must include within the
scope of work statement that may
exceed the scope of work found in
the Certification found as Item #2 of
the 1004.
The second step is recording the
results of the visual inspection to
include photographs and notes for
the work file that reasonably reflect
the results of the visual inspection.
The third step is to verify various
elements such as site size, the presence of easements. In addition, some
information can only be verified by
the borrower or property owner. The
property owner may also be a source
of information relative to concluding
an opinion of value.
Lastly, the information is coherently reported within the completed
appraisal report.
The third step, that of verifying
information in an interview with the
borrower or property owner, is the
critical step that, in addition to contributing to the substance of the
appraisal, is the appraiser's opportunity to win the trust and confidence
of the borrower or property owner.
The interview process
Research as to why doctors are
sued, suggests the importance of
"orienting" comments. For instance,
some appraisers prefer to inspect the
exterior first. The appraiser arrives at
the site, visits with the borrower or
property owner, introduces him or
herself and outlines the inspection
process.
The appraiser lets the person know
that they will inspect the property
from the exterior, measure it and take
photographs. This is to be followed
by the interior inspection.
At this time, the appraiser may
suggest that, at the conclusion of the
inspection, the appraiser will undertake an interview about some of the
specifics including any improvements that might have been made
recently.
Lastly, the appraiser may ask the
person if they have any questions.
The important issue is that the borrower or property owner is "put in
the know" about the process and that
there will be time for questions
which helps the person get a sense of
what the visit is supposed to accomplish and when they ought to ask
questions.
In the actual interview process,
research indicates that doctors who
had no claims against them were
more likely to engage in active listening, saying such things as "Go on,
tell me more about that." Appraisers
quickly find that property owners
take pride in their property and the
improvements they make to their
properties.
Giving the opportunity to discuss
these improvements demonstrates
real interest in the property and the
appraiser's effort to understand the
issues that affect value.
The subject of humor must be
addressed carefully, but the research
revealed that doctors who laughed or
inserted some humor in their interactions were more successful in instilling confidence and trust.
For appraisers, a friendly
demeanor, remembering to smile
may be sufficient. There is a knack
to using humor in interactions and
this factor may have less of an application in the appraisal interview
process.
Lastly, the study concluded there
was no difference in the amount or
quality of information doctors gave
their patients; they didn't provide
more details about medication or the
patient's condition. The difference
was entirely in how they talked to
their patients.
Appraisers, then, must consider the
role of instilling confidence and trust
in the appraisal process over and
above sheer competency to avoid
complaints and complaints that escalate into lawsuits.
The introduction of the ASC
Appraisal Hotline is a current and
real threat to individual appraisers.
Spending a bit more time with the
borrower or property owner is the
place to start.
Additionally, considering all
aspects of communication is essential
with an emphasis on empathy and
listening. In appraising, then, as in
most interactions, manners count.
Where to get more information
Go to the Appraisal Subcommittee
Web site at www.asc.gov
The book "Blink" by Malcolm
Gladwell is available online or at
some local book stores.
Appraisers should consider joining
the Real Estate Advisors Defense
Institute READI at
www.liability.com/readi Also
Appraisers should keep up-to-date on
LIA Claim Alerts at
www.liability.com/claim_alerts
Each State Appraisal Agency has a
mechanism for reporting complaints
and disposition of those complaints.
Some have newsletters that comment
on issues. Reviewing complaints
made locally is a worthwhile means
to keep abreast of local complaint
issues.
August 2013–©Appraisal Today–PAGE 9
When adjustments (or lack of) can't be proven
By Dustin Harris
Editor's note: I agree with Dustin's
opinions. I have spoken with several
USPAP expert appraisers I highly
respect who do not agree with "No
"support. No adjustment.". See the
Claim Alert from Liability Insurance
Administrators about the URAR and
UAD, which includes this topic, in
this newsletter.
It comes up in nearly every class or
conference I attend - the topic of subjective adjustments, and the instruction is always the same - don't do
them! I hear it from USPAP instructors, appraisal methodology teachers,
reviewers, and clients; "You cannot
make an adjustment without proving
your adjustment."
Though I certainly agree with the
principle (and it is in line with
USPAP), it does not always reflect
reality.
Just yesterday, I participated in a
frustrating conference call where no
less than three individuals pounced
on me for not making an adjustment
that they felt was obvious. Of course,
we appraisers are not only required to
support our adjustments, but the lack
of adjustments as well. I get that.
I agreed with them and usually go
to extremes to prove my analysis, but
this was one of those unique situations. See, the subject sat near (not
on) an old railroad track. Of course, I
know this area well and know thatthough this stretch of railroad is
'active,'-it is far from busy. In fact,
neighbors report that one-maybe twoslow-moving trains pass by per
month!
As part of my due-diligence, I
searched for other sales which had
similar, potential external obsolescence. None could be found. I
searched as far as 50 miles north and
75 miles south for something similar.
Nothing. I expanded my search to
PAGE 10–©Appraisal Today–August 2013
three years. Still nothing. I even
looked at listings to see if any could
be found and if they were listed for
any less than sales not near this particular rail-line.
As you might guess, I was unable to
find that either. What was I supposed
to do next? In the end, I put a statement in the report that "the subject is
located relatively near a railroad track.
The market was searched thoroughly
for something similar. No sales or listings could be found. Due to the infrequent use of the railroad track and the
slow nature of any trains traveling
through this area, it is assumed that no
external obsolescence adjustment is
warranted and none is made."
During my 'conversation'/hand slapping lecture with the three individuals,
I was told that this was "unacceptable
behavior." Some of you may agree
with them. Despite the fact that they
were in control over whether I get any
additional work from them as a client,
I decided to engage them in a bit of a
debate.
The conversation went something
like this:
Me: "I understand your position, and I
am humble enough to desire your
feedback on this matter. Will you
please help me by suggesting ways I
could have done better?"
Them: "Well, you could have supported your findings. You cannot decide to
not make an adjustment just because
you did not feel it was warranted."
Me: "I agree, but I am not sure what
else I could have done here."
Them: "You should have gone back
further in time to find a comparable
sale."
Me: "Normally, I would have, but this
particular area has a new MLS and
three years is about as far back as it
goes."
Them: "Then use county records.
MLS is not the only source. You
should have researched when the subject sold last and if it sold for less
than similar houses at the same time."
Me: "Unfortunately, this is a non-disclosure state and that information is
unavailable."
Them: "Well, then you should have
expanded your geography."
Me: "I actually expanded my search
over 100 miles."
Them: "You did not state that in the
report."
Me: "You are right. It is in my workfile, but I did not spell it out in my
report. I should have done so."
Them: "We would like to see you be
more specific in your research next
time."
Me: "I agree and I will do so, but I
am still at a loss as to what I could
have done differently to show evidence as to why there was no adjustment made for the railroad track."
Them: "How about finding something
with similar external obsolescence."
Me: "I actually like this idea and have
used it many times in the past, but I
am not sure how it would have helped
here. I am just not sure what, if anything, would be similar in nature to an
almost deserted railroad track."
Them: "Well, you just need to do a
better job next time."
Case closed. Well . . . okay . . . thank
you for letting me know I need to be
trained to pull rabbits out of my hat in
order to be a good appraiser!
The fact is, I was speaking to three
'experts' who live and work in fancy,
urban high-rise buildings many miles
from rural Idaho. In their world,
maybe it is always possible to prove
an adjustment (or lack of one). In my
neck of the woods, reality can be
slightly different.
Allow me to give another example.
As part of my territory, I cover a little, tiny town near the Idaho/Montana
border. Its population is less than 100
and there are fewer than 1.2 home
sales per year. In fact, there have been
no sales (zero) in that town and surrounding area in the past 2 years. I
cannot tell you how excited I get
when we receive an engagement letter
for appraisal service in that area!
Yippee!
Needless to say, I make it worth my
while (much higher fee) because I
know what I am in for (both in initial
work and underwriter grilling after
the report is turned in). I performed a
relocation appraisal service in that
area a few weeks ago.
Believe it or not, I was able to
prove every adjustment (using dated
sales and sales from another similar
market) except the sprinkler system.
In the end, I gave an across the board
adjustment of $2,000 for the amenity
and made a comment.
In the overall scheme of things, the
$2,000 adjustment accounted for less
than 1% of the overall value, yet the
client was not satisfied. They wanted
proof.
For the sake of brevity, I will not go
into the details, but you can be
assured that I did my due diligence to
try and accommodate their wishes.
In the end, they requested that I
take the adjustment out if it could not
be supported. Now, in light of
USPAP's guideline to not be misleading, what is the right thing to do here?
Making a subjective adjustment might
be 'wrong,' but isn't it also wrong to
leave an adjustment out of a report
that should obviously be there (since
when is an automated, underground
sprinkler system not worth something?) just because there is no
'proof?'
Now, do not misunderstand. It
would be a mistake to use this article
as justification for sloppy appraisal
work. I see fellow appraisers use the
phrase, "paired-sales analysis" all of
the time to justify their subjective
adjustments. Just using the phrase is
not an excuse for good appraisal
work.
The number of times that proving
adjustments is impossible are few and
far between. The examples used
above are exceptions and not the general rule. In fact, I had to really think
hard to come up with a recent second
example for this article. A huge
majority of the time, I am able to
prove adjustments (or lack of adjustments) through comp selection or
using other traditional methodologies.
A quality appraiser should do no
less.
I understand USPAP. I understand
Fannie and Freddie guidelines, but
reality is that they cannot always be
followed to the exact letter (to say
nothing about the ambiguity in some
guidelines in deciding what defines
the letter).
And what do you do when, in order
to satisfy one guideline, you have to
bend on another? In the financial
world (especially in the serious realm
of mortgage loans), I take risk management seriously. I will always do
whatever I can to support my
appraisal analysis and conclusions.
Perhaps the description I gave in
the report concerning the house near
the rail-line was not detailed enough.
If there was any lesson learned here it
would be that we need to do whatever
it takes to prove adjustments, but if-in
the end-you run into an unusual situation, explain, explain, explain.
Now, go create some value!
About the author
Dustin Harris is a multi-business
owner and residential real estate
appraiser. He has been appraising for
nearly two decades. He is the owner
and President of Appraisal Precision
and Consulting Group, Inc. He owns
and operates The Appraiser Coach
(www.theappraisercoach.com) where
he personally advises and mentors
other appraisers. His principles and
methodologies are also taught in an
online, Mastermind group (www.themastermindingyourownbusiness.com.
He and his wife reside in Idaho
with their four children.
August 2013–©Appraisal Today–PAGE 11
Revisiting The Fannie Mae/Freddie Mac 2005 URAR Form
Ambiguities and Liabilities
(March 2013) Reprinted with permission of Liability Insurance Administrators (www.liability.com)
Editor's comment: I don't agree with
the statement below "UAD Adjustments
now must be precise and must be fully
supported by specific numbers to avoid
USPAP violations." I am not an attorney or an expert on UAD, but USPAP
can have different interpretations. See
the article in this newsletter, "When
Adjustments (or lack of) Can't be
Proven" written by Dustin Harris. It is
always good to have differing opinions!!
t has been eight years since the
URAR form was revised. From 2005
to mid-2008, the real estate market
experienced a boom and a bust the
likes of which we have never seen
before, and we are finally seeing a
slow recovery. Also during this period,
the economic recession and poor lending practices lead to new regulations in
I
Appraisal Today
ISSN 1066–3900
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PAGE 12–©Appraisal Today–August 2013
both the appraisal and banking industries. Based on the new regulations,
Fannie Mae/Freddie Mac mandated
appraisers to add more information to
the URAR form.
As of March 2009, the Market
Conditions Addendum to the Appraisal
Report required appraisers to research
and analyze the general market conditions. In September 2011, Fannie Mae
mandated that appraisers employ the
Uniform Appraisal Dataset (UAD) as
part of the URAR form. The goal was
to standardize information supplied by
the appraisers on the forms, especially
as to descriptions of quality and condition of the subject property and comparable sales. Another directive was that
whenever adjustments are made to an
appraisal for the year the dwelling was
built (actual age) vs. the effective age,
the appraiser must provide an explanation for the adjustments. Finally, Fannie
Mae also dictated that the proximity of
comparable sales to the subject must be
stated in miles and include the "applicable directional indicator". Many of
these changes were a result of the
Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010
(Dodd-Frank Act).
These dizzying changes make the
appraisal process more difficult than
ever. Those appraisers who fail to
keep up with these new regulations
risk potential liability. We asked our
national claims counsel to highlight
a few areas of concern for appraisers.
Appraisal Dataset (UAD)
The UAD is a significant change
on the URAR form that could create
more liability for appraisers. Instead
of vaguely stating the property is in
"average" condition, appraisers must
select the UAD code which reflects
the condition of the property as
defined by Fannie Mae. By having to
select a unique code with a specific
definition, any adjustments made for
the selection of a different code for
the comparable could be a minefield
mainly because of the preciseness of
the code.
Let's say, for example, the appraiser decides that the subject property's
condition falls under C2, i.e., the
improvements feature no deferred
maintenance, little or no physical
depreciation, and require no repairs.
However, the appraiser then notes
MBA Loan Volume Application Index – 1/11 to 7/13
Market Index
Base = 100 in 1990
1600.0
1400.0
1200.0
1000.0
800.0
600.0
400.0
200.0
0.0
No
v11
De
c11
Ja
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Fe
b12
Ma
r12
Ap
r12
Ma
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Ju
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Au
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that Comp 1 condition is C3, i.e., the
improvements are well maintained and
feature limited physical depreciation
due to normal wear and tear. Let's also
say the appraiser makes a $50,000
adjustment to reflect these differences.
The report should explain this adjustment and the work file should provide
support for this adjustment...perhaps
paired sales, or other appraisals
reflecting similar adjustments of property in that approximate location.
UAD Adjustments now must be precise and must be fully supported by
specific numbers to avoid USPAP violations. If the subject report ends up in
a lawsuit, testifying that the $50,000
adjustment between the subject's C2
condition and Comp 1's C3 condition
is based on your "experience" or on
vague "market conditions" will likely
not be enough to convince a judge or
jury. The definition of each UAD code
is too precise; your adjustments have
to be just as precise and have to be
consistent within that neighborhood
and for similar housing.
Finally, because of UAD, it is now
more important than ever for you to
review your report before transmitting
it. Be sure that the UAD codes you
selected were correct... was that really
a water view or did you mistakenly
select that code when you meant to
say no view? If you selected C2 and
your comps are all C3, have you made
adjustments that can be supported? Or,
did you select the same condition for
your subject and your comps to avoid
making adjustments?
by the borrower. The question then
comes down to, "for what purpose
may the borrower rely on the
appraisal?" We argue that if the court
decides Certification #23 takes precedence over the intended use/intended
user language then it should be decided that reliance can only be as to
value. It is not reasonable to assert that
a borrower can rely upon the appraisal
for information about the property's
condition because that is not the purpose for which the appraisal was prepared. In order to strengthen that argument it is still recommended that the
appraiser continue to include language
in the report that states... "...the
appraiser is not a home inspector and
the appraisal report is not a home
inspection. The appraiser only performed a visual observation of accessible areas and the appraisal report cannot be relied upon to disclose conditions and/or defects in the property."
The reliance issue is still complicated because of certain software problems. Some appraisers continue to use
software that indicates the appraisal is
for "Client/Borrower". If your software still shows this on the top of
many of the addenda (photo pages,
maps, etc), contact your software dealer and demand they change the program or switch to a software program
that does not have that misleading
information. Due to this problem
many courts have sided with plaintiffs
who argue that this language proves
the appraisal is prepared for the
client/borrower, so the borrower can
rely on the report, for any purpose.
Reliance issues
Although it was a hard fought battle
before the 2005 URAR form was
finalized, no one could convince
Fannie Mae that Certification #23 was
a Pandora's Box. As we suspected, and
as was stated in our claim alert of
November 2005, Certification #23 has
indeed increased liability for the
appraiser. No matter how many times
in the appraisal the "intended user and
use" is stated, the claimant will argue
that the wording in Certification #23
creates a duty to and allows reliance
Misuse of URAR Forms
Another issue that we often see is
some appraisers are still using Fannie
Mae/Freddie Mac URAR forms for
private party work. The 2005 URAR
form is only to be used for federallyrelated financial transactions. The
untouchable boilerplate language set
forth in the limiting conditions,
assumptions and certifications refers
specifically to "the lender". The
appraiser using this form for other purposes such as divorce, tax reductions,
estate appraisals, etc., is risking liability for creating a report that is misleading to the reader. This is especially
important if your report is submitted to
your state licensing board in conjunction with a complaint, and we have
seen discipline imposed as a result.
Conclusion
It is the continuing responsibility of
every appraiser to keep current as to
new developments, including which
forms to use in connection with which
assignments and how to best convey
all necessary information about the
property that is being appraised so as
to assist the client with whatever decision is being made. You should check
with your software company or your
state licensing board for residential
forms for non-federally related transactions. Ignorance is not bliss; ignorance leads to missteps, which lead to
liability.
Disclaimer
It is not the intent of the article to
establish an appraiser's standard of due
care. Instead, the article makes suggestions about conduct that may be well
above the standard of due care. This
article is intended for general information purposes. It does not imply or
warrant that implementation of suggestions will prevent claims. If you have
specific questions after reading the
article, you should consult an experienced local attorney to determine how
applicable law relates to your specific
facts or situation. No material contained in this article may be reproduced in any manner without written
permission.
About Liability Insurance
Administrators
LIA Administrators & Insurance
Services is a national insurance administrator, specializing in Errors and
Omissions Insurance for Real Estate
Appraisers since 1977.
www.liability.com
PAGE 13–©Appraisal Today–February 2013
Doug Smith - from hotel manager to appraiser
D
oug began appraising at the age
of 56, as a second career, not
unusual for appraisers. This is probably the main reason appraisers' median/average age is in their 50s today.
He was born in 1941 and is a good
example of "it is never too late".
In 1986, after a 5-year period of
18%+ interest rates and a loss of
many appraisers, the average appraiser age was the early 50s. This is similar to today's loss of appraisers.
Doug's e-mail since he began has
remained the same: [email protected]. "Hotelman" refers to
Doug's 32 years in the hotel business,
mainly managing larger convention
hotels.
He has regularly contributed to
Appraisal Today since 1999, soon
after he started his appraisal business,
offering over 100 articles on a far
ranging set of topics. His first article
was about a start-up list for an
appraisal business.
Over these past 13 years, Doug
made managing the multiple aspects
of a small business a recurrent theme
of many columns for Appraisal
Today.
Doug is both a business person and
an appraiser
As compared with most appraisers,
because of his business experience
and education, he has always managed his appraisal practice as a business. He has a "firm" not a one person appraisal "shop" in a spare bedroom.
Doug attributes his experience in
the MBA program as the motivation
and confidence factor that pushed
him into finally establishing his own
business.
Editor's note: my MBA is what
gave me the confidence to leave a
high-paid corporate real estate job
and start my appraisal business also!
PAGE 14–©Appraisal Today–February 2013
Doug's "time line"
1963 - graduated from college with
an economics degree and started in
the hotel management business
1980 - moved to Montana to take a
hotel management postopom
1990 - started doing hotel feasibility studies as hotel development companies were coming into Montana
1993 - started University of
Montana Graduate MBA program
1997 - received MBA degree
1997 - quit hotel managing and
started appraising.
1999 - became state certified general license
2009 - received SRA designation
from the Appraisal Institute
From hotel feasibility studies to
appraising
In 1997, encouraged by Steve Hall,
MAI from Missoula, Montana, who
had completed multiple hotel
appraisals on hotels for which Doug
had completed feasibility studies,
Doug made the leap into appraising.
Doug thus ended 32 years of active
hotel managing.
From commercial appraising to
residential - an unusual path
From 1999 to 1997, Doug did both
commercial and residential appraisals.
Commercial appraising is difficult
in Montana as it is a non-disclosure
state and there are relatively few
commercial properties. He could
make a lot more money doing residential appraisals.
When Doug started in appraising in
the late 1990s, NAIFA was very
strong in Montana and had mostly
residential members. Doug was active
in the local chapter and got his professional designation.
From 2002-2004, the Appraisal
Institute became the dominant education provider in Montana, and the
local NAIFA chapter dwindled. Doug
met many MAIs there and got his
SRA designation.
He has decided not to pursue the
MAI designation at this stage of his
life. Of course, I reminded him that I
got mine at the age of 60 after working on it for almost 20 years. Its
never too late!
The early years of appraising were
tough
Doug admits that it was not a
smooth transition into appraising.
Relying mostly on savings and working for multiple appraisers, Doug
accumulated education credits and
experience hours.
Doug speaks of this time: "All I
could offer potential mentors was a
willingness to work hard and the
ability to write narrative reports. I
came into appraising with a background of writing comprehensive
narrative feasibility studies. Potential
mentors were looking to benefit from
narrative reports that could be used
later as templates for future reports."
When I asked Doug why he didn't
do hotel appraisals, he said there was
not enough work, especially in
Montana.
Of this period, Doug says, "I
backed into appraising by doing commercial work first and then later
learning how to do residential
appraising."
"My final hotel was the Holiday
Inn in West Yellowstone. When I left
there I lived on hot dogs and drove
old cars until I could get my
appraisal license. I was as poor as a
church mouse.
Because I did so many feasibility
studies I had enormous amount of
hours and I got my Certified General
in less than one and half years."
Finding work when he first started
his business - AMCs
Finding business was the greatest
challenge of starting an appraisal
business. Doug visited every bank in
the community of Butte and the surrounding towns only to be told that
the banks were happy with their
existing panel and that there were no
openings.
However, Doug began to pay attention to appraisers on forums such as
Appraisersforum.com and other
appraisers who decried working for
appraisal management companies
who were in the beginning stages of
development.
Doug then developed a business
plan to specialize in AMC work and
ignore local lenders. By carefully
perfecting the application process,
Doug signed up with almost every
AMC working in Montana.
Because so few appraisers wanted
to work with these companies and
because the application process was
typically difficult, Doug soon had too
much volume to handle all the work
by himself.
Hiring office help to help handle the
volume
Doug made the decision to hire a
full time office helper, working out
an agreement with a local temp
agency to handle payroll matters for
a small fee. Doug later moved to
completing all the necessary steps to
do in-house payroll.
Doug now uses a full time office
person to assist with all the appraisal
matters in the office, plus often
times, another office helper.
Hiring trainees
Since beginning his appraisal business, Doug has mentored six appraisers. "In the hotel business, I was fortunate to have some extraordinary
managers who looked after me and
encouraged me. When I got into
appraising, there were five appraisers
with whom I worked to complete my
Rear - Jeff Buszmann. Doug Smith, Travis Kehl
Front - Irma Dwyer, admin assistant
experience hours."
From hotels (make people happy) to
appraising (sometimes upset and
"Mentoring, for me has been a
mad people)
good fit."
Doug is now mentoring two
appraisers with one just in the final
stages of completing the steps for
certification. They are both recent
college graduates with finance
degrees. One is planning to get his
MAI designation. The other has been
working for Doug for 6 months and
is doing resdential now. Both started
doing by residential and then moved
to commercial.
His next person will be trained in
residential appraising.
Two of his previous trainees started
their own businesses. One quit
appraising
He has an SRA designation and is
also an advisor to two persons who
are seeking their SRA designation
with the Appraisal Institute.
Doug states emphatically that,
"The future of the appraisal profession, more than any other component, is entirely in the hands of dedicated appraisers who are willing to
mentor tomorrow's appraisers."
The hotel business is tough - lots of
moving around and relatively low
pay due to the transition from corporate owned to franchised hotels since
he started in the 1960s.
Asked about the transition from the
hotel business to appraising, Doug
said that one aspect made him almost
give up appraising. In the hotel business, Doug said, "You work hard and
make people happy and pleased with
good service. In appraising, you work
hard but you don't necessarily make
people very happy." I could not readily adjust to the anger of some clients
and borrowers after working hard to
produce a credible report."
Doug sought out professional counseling, but said that the best help
came when at a NAIFA appraisal
course, the instructor, Lloyd D.
Werner, commented that appraisers
must, "Let the chips fall where they
may."
As time went on, a few once angry
attorneys and accountants sent other
engagements with Doug concluding
that in the end the truth always prevailed and it was important to maintain the integrity of the work product
PAGE 15–©Appraisal Today–February 2013
stand out from the crowd in every
aspect of their business."
"Appraisers need to pay attention
to how their appraisal looks, the
quality of their website, their appearance and demeanor when making
inspections. How a business presents
itself in the branding process and that
may very well be the key to success
in the future."
"I believe in designations."
"Appraisers who are successful are
appraisers who expect to be successful and the designation is a confidence builder on the road to greater
self-expectations."
Reverse mortgages - Doug sees
problems
Rural Montana home (shack?)
With a great view!!
no matter how well or how badly it
was received by the client.
Editor's note: I have always felt the
same conflicts, particularly withlender appraising. I started at an assessor's office, where my job was to
equalize taxes so everyone paid their
fair share. Of course, taxpayers didn't
like me, but I worked for the public
"good".
est challenge is that the profession, at
least residential appraising, is in the
grip of a technical revolution.
The monitoring of appraisal reports
has shifted to applying computerized
rule sets requiring appraisers to concentrate not on the real job of
appraising, but to managing the
report data to conform to rules and
computerized trip wires.
The difference between 1997 (when
Doug started appraising) and today
Branding your business
Asked about the state of appraisal
profession compared to when he started in 1997, Doug said that the greatPAGE 16–©Appraisal Today–February 2013
Asked about business advice for
appraisers, Doug suggests that
appraisers don't pay enough attention
to branding. "Appraisers need to
Doug also has a different view of a
common appraisal product, that of
appraisals for reverse mortgages. " I
have completely withdrawn from
providing appraisals for reverse
mortgages. These wind up having a
high misery index with awful fees
and heavily discounted appraisal
results.
It is almost certain these will be
next in line for the next scandal in
which Congress will involve themselves."
Editor's note: After doing a few of
them, I quit doing reverse mortage
appraisals in the late 1980s. I was
not comfortable with the terms (many
included shared appreciation), high
costs, and the inability of elderly
seniors to fully understand the terms.
Outside of work - wordworker,
skier, runner
Too many of just work, and don't
have any outside activities - "hobbies".
Doug has a full woodworking shop
in his garage and builds shakerinspired furniture. At his recent college reunion on the East Coast, he
donated two shaker-inspired pieces
of furniture.
He was raised in Marblehead,
Massachusetts and started wood-
working in high school. He was a
stage manager and built scenery. In
his junior year he was a carpenter in a
boat yard and really liked it. He went
into another career, but remained
interested in woodworking ever since.
While in high school he worked at a
yacht club and met a few college hotel
management interns who got him
interested in that as a career. He was
planning on going to hotel school, but
a yacht club member persuaded him
to go to college, which would give
him many more opportunities. He
graduated with a degree in economics
in 1963 and joined the Sheraton Hotel
company's training progam for hotel
management.
Doug never married, but had an
adopted son from a relationship when
he was young. The son died, but he
still sees his granddaughter and her
children occasionally.
He is an avid skier and runner.
Doug started skiing in high school and
skied 5 times last year in Montana. He
participated in the Boston Marathon in
1978. He still does half marathons as
a walker now.
Doug, when asked about retirement
plans, candidly reported he has no
plans to formally retire. "I have slowly
built a small firm that, as I add
appraisers, offers no incentive for me
to withdraw from day-to-day appraisal
activities Instead the business firm
offers me an opportunity to work on
assignments that both interest me and
ones that are within my physical capabilities."
Doug in his wood shop, building
Shaker inspired furniture
No sking photos in August. Darn!!
I somehow imagine Doug dying
out in the field with a Disto in one
hand and a tablet in his other hand
(or whatever techie items are hot)!!
Where to get more information
To read Doug's recent articles, go
to the paid subscriber Web page. For
older articles, use the link to the list
of previous articles on that page. If
you want to read one (or more) of
them, send an email to
[email protected] and we will
send it to you.
PAGE 17–©Appraisal Today–Febuary 2013