Toni Bright: Absolutely, and it is a frustration and it is a, a huge aggravation when you are on the other side because you understand, appraisal is an opinion of value, right? So as a regulator I thought you’d never recorded come in over a $30,000 difference on about a $200,000 house and I thought Oh, one of these has to be wrong and you know what? Faith on the support given reports would seemed to be a credible report because you’ll know that there’s that much difference because each supported their value properly with all information that was necessary on the federal level. Now fast forward, if you get one of those, if you are, again, it’s making sure that you are looking at back and there is a difference between what someone is willing to pay and when a home his truly work.
Fritz: Right. Excellent Point.
Toni Bright: is all fine as an extremely emotional experience and we all think that what we are buying is the very best out there and we want everyone else to say it’s the dream home that they’ve always wanted, highly emotional, and as a result we ask the professionals, when we’re out a mortgage broker, a real estate agent, the appraisal management company, we have to maintain that professionalism and try our best to take the emotion out of it for ourselves. We have to acknowledge the fact that our quiet, the fire, the borrower, the recent answer, that they are frustrated that their hearts and so we have look at it from the fact and so we have to say, you know, Miss Mr bottleworks comments work more, but I won’t say who has a good real estate agent in a hot market. You are prepping your home buyer that there is a chance that they’re purchasing a home above value above, above purchase price. Excuse me, above purchase price. There’s a chance that the value ends up appraisal report. The opinion and how you may not come in to what they’re paying for it. I think that has a real estate agent. You have a due diligence to look to just tell your clients there is a chance that could happened because this is a hot market, whatever, but in the event that that happens.
Brian Coester: It was a real chance that could happen. Yeah.
Toni Bright: absolutely, and I think that it’s important to everyone from of the power point, that potential situation because then if it happens so you can go back, say, remember we had this discussion, this is now what we have to do and in in what they have to do is they have to look at at the market it legitimately, realistically as the professional and say, are there other homes out there in this area that could potentially be comparable, that could be used and they can’t submit a reconsideration, a reconsideration for other things, perhaps the square footage, they can go wrong. There is nothing in federal law. This has an appraiser cannot correct and appraisal report for air. However, no one under federal law has a 40 permission. Anything to actually demand that and a appraiser change the value or any other, any other opinion of their report. So as a result, it’s different. Very fine line. You have to deal with fat, you have to make requests to say, can you please explain why x wouldn’t use for, um, you know, could you use props? There’s, as a comparable options.
Brian Coester: So I always thought like when it comes to, to your point, right? So you’re a state regulator, you get a complaint, you get a value at 200,000 and a value to 20, you think one of these must be, right? Right. And then that is sort of like everyone’s first opinion and then you realize after doing it for awhile, well actually both seem sort of right in their own process. And as you know, obviously if you’re buying a house and the difference between 200, 220 is the, you know, the higher opinion, um, you know, it can be frustrating, but at the same time, you know, respecting the process is important in the sense of, of um, you know, those opinions are valuable right now. What do I need to put together on my side or the fans to make sure that when I do come back or, or, or if I do want to go back to my lender or realtor or appraisal management company or praise or what should I put together knowing that, um, it’s an opinion to try and say, hey, you know, I think the 220 all though the 200 is still correct. I think the 220 is correct or um, and would like to, to either change the appraisal or um, use that one per se.
Toni Bright: First of all, with what I would see him at the state level. It was often for refinance situation if that was the case where you had one that we’ve done a couple years before and it was higher than the current one or vice versa. But in this situation change occasionally on a purchase, we would see that kind of a situation where they work on play dot. It really is me as an ASC cannot make that decision. If they choose to order an appraisal that is letter division and they have to make, we cannot in any way encourage that because it less there has been a true the appraisals done in the first one as we know that there have been standards violated it upgrader which happened so. So once I as my youth percentage, I mean it’s not even a half a percent where that kinds of thing happened.
Fritz: Yeah Exceptional.
Toni Bright: Yeah. I mean that’s. So we will not get involved in that situation. I’ll be half my power with our client wants to come to us and asked them if they feel that with slow, we’re more than happy to walk them through a value reconsideration process. Every pool management company handles those differently. We have a process in place that protect us and our lender clients. The attempt of undue influence on an appraiser. We certainly tried to make sure that that never happens up. We don’t want that to happen. We want the true. I’m biased. Opinion of value to be rendered by our appraisers and see results. I’m principal at an earlier and it is very, very true and appraiser can say no to an assignment up until the day that they’re completely done with that assignment and they filed it higher appraisal, no one file if any point, feel pressured in any way.
They have the legal right to walk away so you never want to make an appraisers feel as if they are being pressured for that you are making an ultimatum or that you’re threatening them in any way and I processes are designed to protest on Friday to protect on lender clients and be able to walk them through that process. We also only allows one lender, clients appraisals, reconsideration request. No. There might be other revision requests that come in that has to be dealt with on a. We only allow the lender to submit a reconsideration of values with additional information and so definitely we have some great market leader as a great relationship managers of walk our clients through how to do that if they don’t know how to do it or if they have never used before.
Brian Coester: Yeah, and that’s always been a tough. Now Fritz, you have dealt with this in a completely different capacity because she’s been on an underwriter or a process or originator, you know, all of that in between and you know, and then on this side, you mean these come to your office, you know, every day. So, so what have you seen be effective and not effective in this?
Fritz: So the most important thing, um, that you need to do if you’re doing a reconsideration is first of all, respect the fact that you only get one of these and understand what that means because people tend to, when they have one shot at doing something, they tend to take a lot more seriously than if they get to just go over and over and over and over. Okay? So the reason you have only one shot, one chance is because past that it starts, it becomes an issue of, well, when do you cut this off? What do you say? Enough’s enough, right? Because you’re not supposed to be trying to influence the appraiser in any specific way, but if you’re coming back to him over and over and over again on the same report with new comps every, you know, every week, that’s a clear attempt to influence, right?
So you only get one shot. Make sure that you’re looking at the data that you’re submitting. Make sure that, first of all, make sure the data that you’re submitting is accurate. That’s the first thing. And also make sure it’s appropriate if the subject property you have is a thousand square feet of a sale, that even if it’s down the street that’s 2000 square feet and Goa is not a comparable sale. Okay. So you know, know that and know that if the appraiser sees that and sees that giant Berenson gala is going to dismiss that, he’s going to dismiss that as, that’s why I didn’t use it. You know, it’s interesting, for instance, to that point.
Brian Coester: the number of times, like I was doing appraisals in Virginia and I was doing a condo in Virginia. Nice condo. Ah, actually, yeah. Nice condo. And, you know, I had four or five sales in the project in Virginia that would look just like it and the value came in low. And so the person goes to another building in DC says, hey, use these three, right? Just think to yourself, well, I have three in the building, right? Right. Like I couldn’t use like, it’s comparable. So the most similar, you know, would, would, would get used not just the one that would hit the value and a lot of times and just sort of, you know, knowing this or when the other side of the fence, um, as an appraiser from my side, what I would do is on the mls software, when I start to do my data research to find me the comparables, I would actually remove the value element from the, uh, columns right on the spreadsheet so that it’s sort of like you got square footage, you got a picture of the house, you’ve got acreage, you’ve got, um, you know, garage, you’ve got lot size, you’ve got general characteristics and you got the photos. And I would go through those, narrow them down to 10 or 15 from the hundreds, right? Uh, in the market or in the general market, depending on, on how I was doing a search. And it’s amazing how close she would come in value. There would not be a big rain and I would use that as sort of like my baseline to say, okay, you know, this is a great way of starting that process, right? These are the houses that I feel like are similar, um, and really has nothing to do with value.
Fritz: Well, and, and, and the reason that that works.
Toni Bright: You forget your phone again, excuse me. You’re both very metropolitan areas and we forgive our Iowa oriented. Sometimes it’s in the midwestern areas where we have very rural.
Brian Coester: That’s true. That’s true. True.
Toni Bright: Yeah.
Fritz: Yeah. Every market is different and every market’s gonna have its own challenges. But when we got to wrap it up here in a minute, but, but here’s, here’s what I want to say, and this is the reason why I say that this is a, that’s a really a better way to approach it. And I would actually recommend that for appraisers. I, I hope that, I think that that’s the way most appraisers do it because if you’re looking at, you know, if you’re looking at what makes a comparable, the one thing that you’re not really going to look at as an appraiser is what the current value is or what the expected value is. Because that doesn’t matter. It’s the same bedroom count. Is it the same Gla? Is it the same age as it roughly the same finished construction quality. Okay. All of those other factors. That’s hard data that doesn’t change. Okay. The value changes depending on the market, the characteristics of the property do not change obviously, unless there’s a renovation or what have you. But. And that’s why when you start looking at this is why I say look at your data, focus on data. So that’s why you have to, to look at it in there.
Brian Coester: Absolutely. Absolutely. Yeah. And Tony, you still there? Nope, I think we’re disconnected actually. Sorry. No, it’s no problem. It was fantastic by the way. I mean, Tony, Tony’s always a great guest. She’s a great case and this is going to be great content for the blog to make sure that this. I’m going to call back in real quick while you’re, I’m gonna. Make sure this specific video gets uploaded.
Um, no, that was good. That was good. That was good.
Fritz: We’re still on Youtube, right? Yeah. No, we’re still alive. We’re still alive. We’ve got three people watching. Just let’s, let’s just wrap it up then for the youtube audience and we’ll deal with the blog stuff after the fact. But um, but yeah, this is the whole point of, of making the decision based on the data. Okay. And to your point, if an appraiser is approaching their comp selection in that way, you know that they’re getting the best comps because they’re looking at what’s relevant. Again, there is no emotion involved with how many bedrooms you’ve got.
Brian Coester and Fritz: Correct? Correct. And I think, uh, same can’t be said for the expectation of value, correct? Correct. Correct. And I think, you know, again, if I’m a lender, um, what I would do is really just focus on really looking at the appraisal. First of all, find an appraisal companythat that would work with your work with allied health. I mean you shouldn’t be on your own completely about this, but then also talk with the real utter, just setting realistic expectations as far as that it is a independent assessment that more normally than the appraiser is in the best interest of the bar or um, to have, uh, the appraiser is most accurate unbiased opinions. So we want to make sure that that’s really in the forefront, but then also realize that a very small percentage of these actually happen, so it’s less than three to five percent of purchases. So when it does happen, just realize it’s only every now and then and a lot of it’s market driven. So a lot of times you’re in a situation where the market is changing and it’s going to happen more consistently necessarily in your market or not at all because of the market conditions and it’s and its timeline. So it will be a period of three to six months to where it happens very frequently. And then for the next year, you might not have it happen at all because market conditions.
Fritz: As he just, they’ve up, the data’s called, right, it’s caught up.
Brian Coester: in sometimes. And just last point, because I know we’ve got to wrap up, is that sometimes it’s a good thing and more often than not, we run in the purchases that, you know, there’s multiple offers. They’re way above the actual real value of that house. They’re just trying to get the contract in. So, uh, the appraisal coming in low is not always. And you’ve seen that, right?
Fritz: Oh sure. Absolutely. I mean, look, I’ll tell you right now, if I’m buying a property and the appraisal comes in low, I’m excited. That’s my opportunity to renegotiate myself a better deal. And that’s what borrowers and homeowners need to keep in mind. That’s particularly borrowers who are purchasing. Okay? Typically on a refi, you already own the property. You want it to have that higher value because that means you have a better equity position to better position a better rate usually. But if you’re doing a purchase, particularly if you’re the borrower or the realtor and you’re helping someone do a purchase on a property and the and the appraisal comes in low, you know, I understand you want to scrutinize that to make sure that it’s accurate, that’s fine, but that’s actually a benefit to your, to your borrower, because that means they’re gonna pay less for that, uh, for that property.
And more importantly, most importantly is you don’t want them overpaying for that home. Okay? You’re not going to get referrals if you’re the guy who’s over selling, if you’re putting, if you’re, you know, people are paying too much for the properties that you’re helping them purchase. You’re not gonna end up getting referrals because people are smart. They’re going to figure out that they overpaid for that property and they’re gonna figure it out really, really quickly. So it’s in everyone’s best interest to make sure that we’re dealing with what the data actually provides, what the market actually shows and look, in some cases that means like Brian said. So usually it’s minor. It’s usually about three to five percent because for the most part, you know, realtors know how to evaluate the market conditions and they understand where the market is and they, and they do a good job of setting pricing. Um, now that being said, yeah, about three to five percent you’re looking at a variants, but understand where, if that comes in low, it actually can be a benefit to you and to your borrower. It doesn’t necessarily have to be.
Brian Coester: Definitely. Well, thank you so much. <Unk>. I know we have had multiple issues. I think we’ve got it figured out, but we will be uploading a version of this on a youtube channel, shortened, uh, and then you can always watch it on a blog talk as well. So thank you so much.
Fritz: Well, no, we’ll just, we’ll see you guys next week. We got a lot of exciting guests coming up. I can’t wait and we’ll be putting out some more information on this upcoming year.
February 26th, 2018
This episode of Coest2Coest we sat down with Jared Preisler from DataMasters.
- General Market outlook for 2018. view clip
- The aging appraiser population. view clip
- The use of MLS photos vs. Original Photos for comparables. view clip
- The three approaches to value – Cost, Income, and Sales Comparison approach. view clip
- The full episode can be found on our Youtube Channel. Please subscribe!
3 Approaches to Valuation:
- The sales comparison approach is the foundation for the real estate professional’s CMA, Comparative Market Analysis.
- The cost approach is a real estate valuation method that surmises that the price a buyer should pay for a piece of property should equal the cost to build an equivalent building. In cost approach appraisal, the market price for the property is equal to the cost of land plus cost of construction, less depreciation.
- The Income Approach is one of three major groups of methodologies, called valuation approaches, used by appraisers. It is particularly prevalent in commercial real estate appraisal and business appraisal. The fundamental math is similar to the methods used for financial valuation, securities analysis, or bond pricing.
About Jared Preisler:
Jared Preisler is an entertaining, dynamic and knowledgeable speaker that never fails to deliver. A combination of years of real estate experience as an appraiser, realtor, and investor, coupled together with a ‘No BS’ attitude to getting things done, Jared is as energetic on stage, as he is empathetic towards realtors and other real estate professionals in general. He is the CEO of J. Leland & Company which has been serving the greater Wasatch Front since 1996. They provide accurate, objective analysis, professional service, and communication at reasonable rates. Services include: current, prospective and retrospective valuation of residential properties, vacant land and building lots for use in Estate and tax settlement, Primary and Secondary Lending markets, FHA, Divorce, Bankruptcy, Investment. We also provide consulting and litigation support. Education and training DataMasteUSA.com has over thirty years’ experience creating appraisal software for the real estate industry. Our revolutionary system helps real estate appraisers save both time and money by completing real estate appraisal forms quickly and easily — without mistakes.
Coest2Coest is the weekly live broadcast with Brian Coester and Fritz Schaper, discussing all things with all people! See you in the Lions Dens Fridays at 2:00 pm EST! Please Subscribe to the Youtube Channel and Catch the full episodes and clips.
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Jared Priesler and Brian Coester – Coest2Coest Automated Transcript
There is some fear of interest rates going up, and you know, it’s those impact, most, most of the buyers. There are qualifications contingent on interest rate and that that could affect, especially later towards the end of the year. The other exciting trend, not necessarily a market trend, but we’re starting to get a lot of questions about bifurcated reports, about somebody else doing the inspection company and then the appraiser doing some desktop. You know, we get invited to be on a lot of different panels. We have appraisers that participate in a lot of events, and they’ll call us to see what our take is on that. The market’s been good for awhile. As a lender, I think investors are getting more comfortable with, with something a little bit less than a full 1004. As the market changes that might change too.
Got it, I remember back in the eighties, GE (General Electric), was trying to do this. But there’s a difference with FNMA (Fannie Mae) trying to do it, it’s a little different, right? Because it’s not, it’s an independent company.
My personal opinion in regards to the home inspection companies going to inspect the house and the appraiser’s not going to the house. I mean, what they’re really talking about is the old trainee model. Most appraisers had two or three trainees that were run out there doing inspections, and he was, either writing up the report, assisting the write up of the report and supervising it. And that’s where this sort of hybrid approach is coming from.
Brian: And I’m just thinking to myself like, is it more practical, as an AMC, let’s just say for us to go and hire some home inspector or some real estate agent or some certified inspector to go out and inspect this property. And then have us assign it to an appraiser to write it up or more practical for the appraiser to have a local trainee going out there doing the inspection and then turning it in after the appraiser reviews it? A lot of independent companies have designed a new form, and they got the desktop form, but other than in the secondary market, I don’t know if anybody’s using. Other than a default servicing or REO situation. Even the companies and banks that we know that do home equity lines of credit, they get Drive-By of Full 1004 appraisals still, you know?
Yeah. I’m not sure. I know that there’s a, there’s a group that is doing the home inspection where it’s a non- trained valuation professional that’s doing the inspection side. I know that in there, I don’t know what they’re using those for those reports. So I used to have a home inspection company. One of the things I would be concerned about is what looks average to the home inspector might be very different than what’s average for the appraiser and indeed what’s a C4 or C3, to Fannie and Freddie and, and where, how do you, how do you determine what that, that connection is and the consistency we’re being held to a consistency standard that home inspector might not wondering. You might say, hey, this is average condition. I’m in a neighborhood of, of, you know, $500,000 houses and granite countertops is very average and the next time he’s in a $200,000 neighborhood and Formica countertops are very typical and says, Yup, that’s average for this area also. So the appraiser gets that and sees, oh, average, and now we’re very different.
Yeah. And, and I think to that point, so appraisers average, uh, it’s, it’s one of the things, I mean, you see Moody’s a report that they downgraded
a headline for it. I didn’t, I didn’t have a chance yet to dig into the report, but yeah, I saw that headline.
Yeah. And so, I mean, the, the gist of it is, is, is Moody’s is, came out and said there’s additional risk associated with nonappraisal based on the alternative evaluation. I mean, that’s the gist of it, right? Which I think everyone would agree with. Um, and it’s interesting because it’s, you know, personally, right? Like when you think about, you know, am, right? So that’s one end of the spectrum, right? And then you’ve got the full appraisal, which is the, the, the, the, the other end of the spectrum, the desktop version. And desktop appraisal is a nice, let’s say, median, right?
And by the way, leave populate those desktop forums. If you got an appraiser out there, this hates typing those in a call us, we can help them customize those forums as well.
No, I think everyone, I think every shameless plug. Exactly, exactly. Hey, I was actually going to say that, but I didn’t, I didn’t want to say that. Hey. So yeah, exactly, exactly. But then there’s no issue with that. I mean it’s, it’s, it’s, there’s a huge benefit to it. And I think, I think there is something where I’m the desktop full and let’s say Avm, there is a need for like, like just common sense would say there is a need for alternative products, right? Like the [inaudible] and just-just having the [inaudible] just like when you just think, forget about appraisal valuation of collateral, right? Like the appraiser side is just wanting the idea of just having an arm and full appraisal, widely used is not really practical, right? The idea of saying, okay there’s arm, and then you’ll have your desktop valuation, and then you’ll have your full appraisal.
Speaker 2: 06:51
And then the desktop valuation with um, some sort of inspection is, is a safer bet. But then the full appraiser, a getting the appraiser to go out there and do it himself. His is the most kind of, let’s say I’m the safest, most accurate bat. And I just wonder. So it’s the kind of like paper, right? So when, when, when the computers came out, let’s say the 19 [inaudible], when I went back in the seventies, I remember this when the computers came out, um, you know, everyone thought the paper was going to go away, right? But it actually, the reverse happened. Now it’s starting to get paperless. But the reverse happened. I mean, they had paper for everything. Everything needed a printer and a cop. And by the way, we’re paperless now because of smartphones on the cloud, not because of computers. Correct. Correct. Correct. Correct. In the scanners and all these other things.
Speaker 2: 07:41
And so there’s a part of me that thinks that with this desktop and alternative evaluations in multiple products being offered by an appraiser, number one, you have more to sell, which is important, right? But number two, that, you know, with a lower price point or with a different turn time with a different product offering me, you know, you’re going to, you, they’re going to be able to, uh, collateralize a lot more things, right? And then a negative example, right? Where like bitcoin and the blockchain technology has enabled, like in countries like Egypt, right, where people have owned the land for a thousand years, and everyone has a house, right? Just they don’t, like everyone has a house with people or what, what blockchain technology has been able to do is they’re able to call [inaudible] the government. There is no record of who owns the land. There are no deeds.
Speaker 2: 08:37
This is thousands of years passed down generation to generation hieroglyphics, summer, right? For summer. Um, what has been able to do with block chain is use that to collateralize a, the house meaning like there’s a record associated now so they can get a loan on it. Well, something like if you’re gonna applies for a $50,000 line of credit at your bank and you’re gonna do it all online, you’re gonna go to ABC lender dot. Well, I mean, you know, to your point, speed is important. It is important. It’s a factor with, with loans. If you want to buy a house, I mean if you want to get something, well, having a desktop valuation offering to where you can get it relatively quickly and is accurate, I think is going to enable more appraisals to be ordered at some level. Right? Just different types. I
Speaker 1: 09:33
think when you have an appraiser touching it.
Last week’s guest was Dale Gallant, Division Vice President at Alterra Home Loans. Dale who has been in the mortgage industry for over 20 years has done all types of sales. This episode covers how he goes about building his business, forming relationships with realtors and gives tips on how he got started in the industry.
Dale Gallant: Tips for Originators
Dale Gallant on Coest2Coest – Full Episode
About Dale Gallant:
Dale Gallant has over 20 years of experience in most facets of the mortgage business and is a well-rounded professional in the industry. From starting out as a loan officer to owning his own successful mortgage brokerage firm, he has worked hard over the years and knows what it takes to succeed in this business. His wealth of industry knowledge and experiences that he has accumulated throughout the years has enabled him to become a successful industry executive and will help to navigate the future of this ever-changing market.
About Brian Coester:
Brian Coester is the founder and CEO of CoesterVMS, a nationwide appraisal management company that designs, implements and oversees a full range of services and technology solutions for the mortgage banking industry. CoesterVMS currently serves 10 of the top 20 mortgage lenders in America. CoesterVMS has been named twice to Housingwire’s top 100 Tech Companies and three times to Inc 500/5000 fastest growing companies in America.
CoesterVMS combines proprietary and compliant technology with the best customer service to offer the most streamlined process to our appraisal partners and lenders. This approach helps us reach our ultimate goal of delivering the most accurate appraisal reports within the time frames of the mortgage transactions. CoesterVMS provides clients the tools to navigate the valuation process in an evolving lending environment. Through innovative technology and customized service strategies, our mission is to serve as the engine that runs the real estate valuation industry. We are your partner for success.
You can listen live by following http://go.pardot.com/e/310061/