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Non-Lending Appraisal Assignments: Interview with Joshua Walitt
by Kendra Budd, Editor
It’s no secret—traditional mortgage lending assignments have declined substantially. This has caused significant pain within the appraiser community, especially for those appraisers who exclusively did lending work.
In the wake of this drastic drop in traditional lending appraisal orders, many appraisers are only just beginning to explore non-lending assignments and diversify their businesses. “Don’t be dependent on just one type of product or one type of client” is an old adage in the appraisal profession that rings especially true today.
But, what exactly are non-lender assignments? How do appraisers navigate them?
We sat down with Joshua Walitt, Principal Consultant for Walitt Solutions and the course author and instructor of Non-Lending Appraisal Assignments (7 Hrs CE), available on-demand at OREPEducation.org, to gain a better understanding of the ins and out of the world of non-lending assignments, and answer the multitude of questions appraisers have.
Here’s what we learned.
Q: What are non-lender appraisals? What makes them different?
Walitt: Also called private appraisals, typically when someone says “non-lending appraisals” they mean something that is not for mortgage or foreclosure appraisals. There are a variety of assignments that fit into this bucket. We have pre-listing and pre-purchase where folks might be following the advice of a real estate agent, or a homeowner who is looking to list a property themselves, or maybe there is a waiver situation or some other reason that a party wants to know the value before they purchase a home. Whatever it is, it’s not being ordered by the bank.
Non-lending appraisals also require a lot more client interaction. In mortgage appraisal, you may never speak to a person or have very few messages that go back and forth with a client. But with non-lending appraisals there’s a lot more communication that is necessary.
One example of this is the engagement letter. For many appraisers that have only done mortgage work, they don’t have their own engagement letter because they’re so used to the client (lender or AMC) setting the requirements for the order and sending over an engagement letter. With non-lender work, it is the appraiser who is responsible for providing the engagement letter to their client and one of the first mistakes that appraisers can make is not having that engagement letter.
So, the first thing that has to be established in these appraisals is communication. I like to refer to this as the “kitchen table talk,” where you sit down with the homeowner or the agent, usually at a kitchen table. You’re having a longer conversation than you normally would, where you’re pinpointing what this assignment is really about—problem identification. So, you need to ask: what problem am I solving here? Is it related to the date of death? Okay, when did they pass away? Is it related to when a separation occurred? Okay, when did you separate? What was the price when you bought the home seven years ago? What kind of value are we solving for? Is this going to the IRS? Asking a lot of questions is imperative.
In our course, Non-Lending Appraisal Assignments, we go over some of the questions and discussion points you have to establish: whether that’s with your client or your agent, or even if an attorney is involved acting as your client’s agent. You have to really dig in. Collecting that information is different from mortgage work, it includes different intended uses and users, different intended users, different types of value, different effective dates, so you really need to master these moving parts.
However, you do have to write a different style report. You’re probably going to be writing in a bit more detail. Maybe it’s going to be seen by the IRS. Maybe it’s being read by a homeowner and they don’t necessarily know a lot about appraisals. Maybe it’s appearing before a jury or a judge. We really want to have our ducks in a row and make sure the report is clear. We want to ask ourselves: “Are we progressing through the story where someone can actually understand what’s going on?”
You’ll also use a different form or at the very least, write in a different narrative. Don’t use the mortgage appraisal forms that you use in everyday mortgage appraisal work. They clearly have inappropriate pre-printed language that just does not apply, and state boards love when you use the wrong form. It’s an easy check-box on their investigations and can get you into trouble. It’s like fitting a square peg into a round hole.
(story continues)
Q: What types of non-lender work is there?
Walitt: There are so many different types! Just to cover a few, we have estate planning, estate distribution, divorce, tax appeals or assessment appeals, and then one that has a lot of different assignment conditions is IRS appraisals—so related to donation or taxes where you have to meet requirements of the IRS. There are others but those are some of the big ones.
Q: Are some fields more lucrative than others? Are there some fields that appraisers should avoid?
Walitt: You know, I wouldn’t say any one of them is any more or less lucrative. I think that varies by different appraiser’s experience and how they run their business. It could also depend on your area—maybe there’s just more of a certain type of work available.
For example, some appraisers don’t want to be involved in testimony. They don’t want to go to hearings, depositions, or trials. But, assessment appeal, bankruptcy cases, and divorce appraisals, could all involve or even require appraisers to go to a hearing. It would be weird to take on this kind of appraisal then tell a client that you’re not going to show up and follow through. You need to know that could be expected by your client. Obviously, this could be a separate engagement or separate fee scenario, so it goes back to having that communication beforehand. You don’t want to go into certain types of assignments and then panic when it comes time for testimony. So, if that doesn’t interest you, just look at the other types of assignments.
Something that is different is that in the mortgage lending space everyone usually wants the appraisal value to be high. In non-lending work, you see both sides of the spectrum. So, we need to be comfortable in our methods because you’re going to get a different push and pull in different types of assignments.
For example, in divorce appraisals one party usually wants a high number and the other wants a low number. I worked a divorce appraisal where one person was very difficult to work with and it took me weeks to get the appraisal scheduled. Once I finally found a time to meet with them, it seemed everywhere I walked there was a problem in the house (according to them). I had to have my professional shield up. I had to stick to the facts—what was absurd versus what was reliable.
When I wrote the report, I addressed what had been said to me. I made notes such as “no cracks in the windows, no cracks in the flooring,” which this client had insisted were present. I might not normally note these things, but I knew that it could be an issue, so I needed to address them proactively. I asked the client if I could record an interview with them and during our recorded conversation they admitted to there being no cracks. I needed to establish that because I knew they had a motivation to make this property look awful. My job is based on facts and markets. I had to do what was right. So just like in mortgage lending assignments (and perhaps more so), you get pressured often. Your job is to handle it professionally and proceed based on the facts and market data.
Q: How can appraisers get started with non-lending appraisals?
Walitt: Contacting agents! A lot of agents want pre-listing appraisals, especially on complex properties. One of the best ways to find this type of business is networking with real estate agents. Hopefully, as appraisers we’re already talking to them, whether on the phone or about the listing we’re appraising—we should be talking to them all the time in mortgage work.
This is a great opportunity to deepen those relationships and leverage your network to get referrals. So yes, we might market to agents for pre-listing, but the relationship shouldn’t be limited only to getting pre-listing appraisals.
Who do people go to when they’re getting divorced, or when they’re having a life change? Oftentimes, the only professional they know who’s in real estate is the agent they used previously. Real estate agents are referring people out all the time for various appraisals. In a divorce case, you’ll also meet an attorney, and that can open up even more opportunities. Or if a listing is related to taxes, you’ll meet an accountant who’s going come to you in the future from now on. There is a sea of opportunities for appraisers.
A lot of people have also found success in publishing blogs and other information. Some appraisers generate some very useful statistics and publish those to their websites. Look at your website and ask yourself: “what is this really telling my client?” Having valuable website content can help your clients see what is going on in the market, while also keeping it simple. You don’t want to overwhelm them, they don’t need to read a novel.
You’ll also want to present yourself to a myriad of people on your own time—to attorney offices, brokers, and accountants. You can bring donuts, sandwiches, or even bottled water. You’re not going to walk out with a ton of assignments. You’re probably going to walk out with zero appraisal assignments. But at least you’re showing people that you know your stuff. Get in front of people. Are you convincing when you talk? If you’re presenting at a real estate office or in any venue and you captivate people to where they listen and understand, that’s going to be good for you.
You need to put your name out there. Some people think mortgage lending has dried up, and now they want to switch to non-lending. Now is a good time to take some classes on non-lending appraisals and start branching out. But, it takes time. You’re not going to get 20 appraisals the first month. It is a marathon. Even when mortgage work comes back, you’ll want to keep working this side of your business because it’s always there and you’ve got to tend to it.
Q: Why is now the right time for appraisers to start non-lender work?
Walitt: I think two-fold. One, it makes sense to have these other lines of business. You don’t only want to rely on mortgage lending. The second reason is that you have time right now because it’s slower. You have the opportunity to take the courses you want and develop additional skills—sales, presentations, and appraisal methods and techniques.
We also have time to send emails, to call up the broker offices, to ask for 30 minutes and if they’re looking for something different.
It’s not just the practical money side either. It’s the fact that we have time to make contacts, to revamp our website and our marketing strategies. It makes sense to focus on expansion even if, and when, the mortgage work comes back.
Q: Is there anything appraisers should know about non-lender work before starting?
Walitt: You need to know your craft. Some people think they can just start completing divorce, estate, or tax appraisals. The reality is you don’t know what you don’t know, especially if you’ve never done non-lending appraisals. It is just logical and professional to know the needs of a job that you’re working on. You need to educate yourself.
We have to understand what the problem is we’re solving. One example is that mortgage appraisal work allows an appraiser to say: “I’m appraising it as repaired,” which is acceptable in some mortgage assignments. We have to understand whether or not that type of presumption or consideration is appropriate for other assignment types. We can’t just turn a report over to a client and say: “Here it is ‘as if’ this damage is repaired.” They need to know how the damage affects the value—that’s how they ordered the appraisal. They want you to appraise it with all the damage because that’s the nature of the assignment. So, we need to make sure we’re not applying our experience from the mortgage side if it doesn’t really translate.
I think understanding our minimum standards, especially in reporting is crucial because we are using those different forms. We’re no longer just obeying a singular form.
Q: Should every appraiser explore non-lender work?
Walitt: Absolutely. The reason might surprise you. I talk to appraisers who only do mortgage work and that’s all they want to do, but I say just dip your toe into other assignments. Even if you just learn about them, the quality of work is going to improve your mortgage appraisals. When you step back and see how different types of clients, intended uses, and appraisal types work, you’ll appreciate and understand mortgage appraisals a lot better.
About the Author
Kendra Budd is the Editor of Working RE Magazine and the Marketing Coordinator for OREP, a leading provider of appraiser E&O insurance—trusted by over 10,000 appraisers. She graduated with a BA in Theatre and English from Western Washington University, and with an MFA in Creative Writing from Full Sail University. She is currently based in Seattle, WA.
OREP Insurance Services, LLC. Calif. License #0K99465