Readers Respond

Choosing Comps
I have been fortunate to be an appraiser for 21 years.  I still like being an appraiser. Judging from your articles you do also.  First I want to thank you for your articles in Working RE. I find them helpful. So today I need a little help.  I am fighting with an underwriter regarding substitute neighborhoods. They are insisting that there is a one-mile rule. I’m saying that there is not. Now they want proof. In your article in Fall 2011 you state there is no “one mile guideline for Fannie Mae, Freddie Mac or FHA.”  I would like to send them your article but underwriters don’t believe appraisers. Can you help me prove there is no one-mile rule? I appreciate any help you can give. – R. Phillip Edsall

Yes, indeed, there is no one-mile guideline from Fannie Mae, Freddie Mac, USPAP or FHA.  A so-called one-mile guideline can come from a lender if they choose but not from any of the above.  If you want the underwriter to contact me, they can email me at pgspool@bellsouth.net.  There is no mention of a one-mile guideline because there is none.  The underwriter can also go to Efanniemae.com and look it up themselves. Again, they will not find anything regarding a so-called one mile rule. Fannie Mae has a Handbook for appraisers.  Copies can be obtained by calling them at (800) 471-5554 and ask for publication number CT147. By the way, Fannie Mae only has a 15% net and a 25% gross adjustment guideline and not a 10% line item guideline.  The 10% line item guideline is for FHA only. – Philip G. Spool, ASA (story author)

Building Business: What’s Next?
(Story first published in Working RE’s Online News Edition. See Building Business: What’s Next).

I think your estimating 10 appraisals per month is not a bad number considering the amount of time required to answer call backs from AMCs. If 10 appraisals a month is the norm the appraisal profession is not a viable business. Work the numbers to NET assuming a 40% to 50% expense ratio. This is why all the appraisers I know are effectively retired and completing appraisal from their homes/caves. – Edward M. Douglass, SRA

Edward – Your observations are correct that the appraisal profession is not a viable business if the expense ratio is over 40%. This is the reason why we have changed our business model to cut costs and vary our clients and put more money in our pockets. However, keep in mind that the appraisal profession is not the only type of business that has been affected. Every year, we analyze our income/expenses and make adjustments. For instance, this year we slashed our phone bill by over $3,000. We also changed will save on our appraisal software. Also, I continue to drive my car with over 104,000 miles. These three suggestions have saved us at least $8,450 this year. – Lore D’Astra (story author). (D’Astra is author of FHA Appraiser Inspection Checklist).

No one is paid $350 anymore and most of your suggestions won’t pay for that service either. – Casey Tartaglino

Casey – We realize that fees vary by region, however, our office does not accept appraisal fees under $350 at this time. To demonstrate, below is a list of the residential appraisals for properties that I personally completed within the past 30 days.  Keep in mind that the type of clients varies per month depending on the assignment.  Further, we review the client base periodically to look for the areas which can be developed. – Lore D’Astra (story author).

Customary and Reasonable Assignments
(Story first published in Working RE’s Online News Edition. See Customary and Reasonable Assignments).

Thank you for shedding a brave light on a subject that many appraisers want to ignore. The bottom line is….it is THE APPRAISER who decides what is customary and reasonable….not the AMC, not the government and not the borrower. Of course, that does not paint the entire picture, as you wisely point out, it is actually the invisible hand of the market which decides. – Dustin Harris (the Appraisal Coach)

Well said, Mr. Anderson! Having begun in the appraisal field some 30 years ago, I recall thinking how fortunate to learn a profession which values integrity, experience and professionalism. While my practice is in the commercial area, I have had requests from AMCs whose contact representative can provide only a vague street address for a “drive-by” to be completed in an unrealistic time frame. When I take the time to qualify the client, who is most often in a faraway state, informing them that as a new client I require a retainer fee and balance paid upon completion of the report (before delivery of the report), the response is either silence or some comment like: “Oh we don’t do that.” There’s your answer. I choose to decline. I have no intention of supporting a third-party “made-up” industry add-on fee to my credibly developed, opinion of value to which my signature is attached. While I may be one of the few left standing, I choose to be a part of the solution and to reaffirm the integrity of the independent, professionally developed and credible opinion of the real property valuation.
– Susan C. Adams, Certified General

I agree 100%. The description of the industry appraiser is right on. I have seen, reviewed, and been asked to do field and desk reviews on industry appraiser assignments and all the bank or AMCs really want is a new appraisal because they know and realize that the appraiser that provided them with the original report does not have a clue about real estate values in this area and they need someone to review… i.e. (correct) the appraisal before the loan can be closed. Unfortunately, I seldom get the assignment to do the review because I tell them my fee for looking over the report and then providing them with a review and a new appraisal. In the end, I assume the borrower probably has about $600-$700 added on to their loan costs because of the AMC’s unwillingness to use a competent appraiser in the area in the first place. – Marty Glaser

Great article, however, it is not always possible to turn down the low fee orders. I have stood my ground and refused to work for low fees. I went from making a six figure gross income to less than $25,000 gross for 2011. Just was taken off of a lenders approved appraiser list via the AMC because of low values and slow turn times. I have never had an assignment for more than seven days and usually less than five. I just sent in my letter to the state board to place my license in in-active status. I just can’t make it anymore as an appraiser. For 16 years I have loved my job, now I can’t even stand to think about it. Such a sad state that we appraisers have let this come to. We can blame everyone else but we let this happen to ourselves. The AMCs formed a strong organization but for appraisers it is every man for himself. Good luck everyone. I hope you all fair better than I did. – Chris, New Jersey Certified