Gratitude and Triumph: Celebrating Two Consecutive Gold Badge Wins in the Best of Westmoreland Contest!

At Town & Country Residential Appraisals, we are overflowing with appreciation as we extend our sincerest thanks to those who have supported us throughout our journey. It is with immense pride and joy that we accept the honor of being awarded the Gold Badge for the second time in a row in the highly regarded Best of Westmoreland contest.

Our success wouldn't have been possible without the support of our nominators and voters, the trust given to us by our valued clients, and the faith placed in our services by the community we serve. Your confidence in our expertise drives us to continuously raise the bar in providing exceptional residential appraisal solutions.

While this is only the 2nd year for the contest, it grew exponentially for 2023 and we faced formidable competition from six other distinguished appraisal offices. However, we secured our position as the reigning champions for both years.

Such a momentous achievement is truly a cause for celebration, and we couldn't be prouder to share this milestone with you all. It is a testament to our unwavering commitment to delivering accurate and reliable appraisals and a reminder of the exceptional team behind Town & Country Residential Appraisals.

Thank you for joining us on this incredible journey. Your continuous support and trust inspire us to reach even greater heights, and we look forward to serving you with the same passion and dedication for years to come.

We can’t say thank you enough.

Our goal is to continue providing the best in real estate appraisal services

throughout the entire County of Westmoreland.

Our services include appraisals for divorces, expert witness testimony, bankruptcy, estates, pre-listing, consulting for subdividing large parcels, pre-construction, renovations and lender work.

Choose the two-time Gold Badge Winner in the Best of Westmoreland contest for your residential appraisal needs, and discover the difference that sets us apart, where excellence meets recognition, results exceed expectations and as we say here “Where Values Matter!”

We Have Some Empty Seats on the Bus

Today, we want to share some exciting news with our readers.

If you're a certified appraiser seeking a dynamic and rewarding opportunity, look no further than Town & Country Residential Appraisals, the #1 Voted Best Real Estate Appraisal Office in the County! Our appraisal office is actively seeking an individual to fill the position of Staff Appraiser. We would prefer an individual who is already located in our market area but will consider someone who is willing to relocate.

Why Join Town & Country Residential Appraisals?

1. High Volume: At Town & Country Residential Appraisals, we're no strangers to a bustling workload. Our reputation as a leading appraisal office in the area has ensured a consistent flow of assignments. Our list of clients is varied and we also provide reports for a high percentage of private non-lending clients.

2. Full Support Staff: We understand the importance of a well-rounded team. That's why we've assembled a full support staff to assist our appraisers throughout the process. From administrative tasks to research and data compilation, our team is dedicated to providing an environment where the appraiser gets to concentrate on analysis and valuation.

3. Competitive Compensation: We firmly believe that your hard work should be duly rewarded. As a certified appraiser at Town & Country Residential Appraisals, you can expect a competitive pay rate and opportunities for growth.

4. Technology-driven Environment: Embracing technology is the cornerstone of our success. We have implemented cutting-edge appraisal software and tools to streamline the entire appraisal process. From gathering data and conducting market research to generating comprehensive reports, our advanced technology simplifies your workflow, allowing you to focus on what you do best— analyzing and reporting.

Who Is Our Ideal Candidate?

Our ideal candidate should possess the following qualifications and attributes:

1. Certified Appraiser: The candidate must hold a valid appraisal certification and have experience in real estate appraisal.

2. Strong Analytical Skills: Appraising requires a keen eye for detail and excellent analytical abilities. The candidate should be proficient in researching market data, analyzing comparable properties, and deriving accurate valuations.

3. Effective Communication: Clear and concise communication is essential in this role. Our appraisers regularly interact with clients, real estate agents, and other stakeholders. Strong verbal and written communication skills are a must.

4. Adaptability and Time Management: The appraisal industry can be fast-paced, and deadlines are crucial. The ideal candidate should possess strong organizational skills, the ability to work under pressure, and be adaptable to changing priorities.

How to Apply

If you're ready to take your appraisal career to new heights and join an exceptional team, we encourage you to apply. Please email your resume highlighting your relevant experience and a cover letter that includes why want to be a staff appraiser in our office to:

brianne@tncresappraisals.com

A Different Kind of Value

The staff at Town & Country Residential Appraisals wants to wish all of you a

We are thankful for each and every one of our clients who have placed their trust in us.

There is no greater value than that of building relationships with those you love, trust and enjoy.

Please take time to spend with those who have enriched your lives like you have enriched ours.

We are expanding again!

What do most real estate appraisal offices do when they are slowing down and scrambling to obtain more orders just to stay afloat?

We do the opposite of most….. we expand.

As the number one voted Gold Award Best of Westmoreland home valuation appraisal office, we are still busy and looking to expand our services.

Granted, order requests have slowed a bit which can be directly related to rising mortgage rates and that seasonal time of year when we traditionally slow down a little. However, this is the best time to reevaluate how we do business and take the necessary time it requires to train new personnel. Recently, we hired Meagan Connelly as a staff appraiser and we are actively recruiting more staff appraisers.

Meagan has proven to be a great addition to our team. She comes to us with 8 years of experience in appraising which is comprised mostly from commercial and non-lender residential work. Her commercial certification allows her to appraise any type of property. We are working to get her FHA/USDA approved and familiar with lender work. Her expertise coupled with her desire to jump right in and get assignments completed has added significant value to our already top notch service.

FHA and Storage Tanks

As most know, FHA follows the guidelines set forth in the HUD Handbook 4000.1 which includes the MPR’s (Minimum Property Requirements) that we have to follow when appraising a property that is being insured by FHA financing. Over time, these requirements are revised and if not fully aware, one might not realize that these changes can affect a property’s ability to qualify for this type of financing.

One of these changes that took place is in regards to storage tanks that contain hazardous or flammable materials- such as propane, automobile fuel, oil, natural gas, etc.

Prior to this change, it used to be that if a property line were within less than 300’ of a property that contained underground storage tanks with a capacity of at least 1,000 gallons of such material, the property did not qualify for FHA insured financing. In some of our towns with corner convenience stores that included gas pumps (such as Greensburg), this meant that any property within 300’ of this did not qualify.

However, HUD has chosen to change the language and now only states that those properties within 300’ of a property with above ground storage tanks do not qualify and has deleted the words “under ground”.

(7) Stationary Storage Tanks

If the subject property line is located within 300 feet of an aboveground, stationary storage tank with a capacity of 1,000 gallons or more of flammable or explosive material, then the Property is ineligible for FHA insurance, and the Appraiser must notify the Mortgagee of the deficiency of MPR or MPS.

So this is good news. It appears that those properties within 300’ of a gas station that contain underground storage tanks for their fuel now qualify, whereas once they did not.

The Best Real Estate Appraisal Office in Westmoreland County 2022

Town & Country Residential Appraisals would like to thank you from the bottom of our hearts for voting us the #1 Real Estate Appraisal Office in Westmoreland County for the year 2022!!!

For over 13 years we have prided ourselves with providing the best in service and the highest quality professional independent reports. Now we have been recognized and couldn’t be more grateful.

The Best of Westmoreland is a contest that was organized by Renda Broadcasting Corporation through WHJB 107.1 out of Greensburg. The station opened up nominations on March 17, 2022 and these nominations ended about 3 weeks later. The voting was then opened up on April 13th and was kept open for a little over 2 weeks. I had never heard of this station nor was I aware of the contest.

I was contacted in May by Lora Kay, the station’s morning on-air personality to let me know that I had won Gold for the category of Real Estate Appraisal office. At first, I thought it was a scam and was suspect that this was even a true contest. After I looked into it and confirmed this was a real contest, that Lora was a real person and in fact, I had won, I was speechless. It has been hard to keep this a secret. We had to sign a Non-disclosure agreement to keep it under wraps until todays announcement at noon.

Please keep us in mind when you are needing to have an appraisal completed. While we provide many reports for the common purchase and for refinance loans which are not directly ordered by the borrower, we can help you with your other valuation needs such as assessment appeal, divorce, estate planning, estate taxes determination, private purchase, pre-listing and bankruptcy. Whatever your need for an independent certified appraisal report, when you choose our office to assist you, you can be confident that you are choosing the #1 Real Estate Appraisal Office in all of Westmoreland County.

Our Team Has Expanded

We are excited to have expanded our team after about 2 years of limited growth. Christopher Ronallo is going to be assisting our staff appraisers and in the process, will be working to obtain the experience necessary to transition from his current position as a Licensed Appraiser Trainee to a Staff Appraiser. We are hopeful that this process will take about 16 - 18 months.

Chris came to us having had some experience as an appraiser trainee from a few years ago. In 2018, circumstances beyond his control led to him to needing to find another supervisor. This proved to be difficult and ultimately, he was not successful. He found employment in a different industry but the experience within the appraisal profession left him with the desire to return to appraising.

He started with Town & Country Residential Appraisals in June 2022 and has been working with us behind the scenes getting up to speed with our digital processes, working with the support staff to learn our systems and has now been assisting out on the road with our Senior Staff Appraiser for about 4 weeks. As you can see, in the office he is getting his own assistance from Ninja, the resident office cat.

Ninja assisting our newest team member, Christopher Ronallo

Chris holds a Bachelor Degree in Accounting from Washington and Jefferson college. Prior to appraising, he had over 20 years in accounting with experience in all facets of the business world including an accounting manager for a large company, CFO for a non-profit organization and Controller for a senior living community.

When not working or studying for his appraiser tests, Chris says he leads a boring life and spends most of his free time with family, reading and listening to a variety of podcasts.

We are very pleased to have another team member that will be able to help us continue to provide you with the best appraisal services in a competent and professional manner. If you see Chris, welcome him into the profession and help us wish him all the best in success as he continues on the path to being a Certified Residential Appraiser.

Let The Nurse Take Your Temperature

How many of you go to the doctors office and refuse to allow the nurse to take your temperature or blood pressure? In reality, you are ultimately there to see the doctor. To allow someone who is not the doctor to take your temperature, blood pressure, weight, list of symptoms and medications is not what you paid for, right? You pay for the doctor and you are going to insist that the doctor do everything that needs to be done including everything that the nurse typically does. Let’s face it. The nurse doesn’t have their level of expertise or education, so why would you have someone who is not the doctor do anything for you while in their office? When you think about this scenario, it does sound a little absurd. Most of us don’t even think about it let alone question it.

 Doctors are not the only example. Most professions have multiple levels of expertise that ultimately assist the highest level within the organization. Lawyers have paralegal personnel. Plumbers have apprentices. Professors have graduate students. Coaches have assistant coaches. Presidents have Vice Presidents. Real estate brokers have real estate sales persons.

Well, in our profession, APPRAISERS HAVE TRAINEES.

Real estate appraiser requirements have significantly advanced over the past few decades with increasing educational requirements and a few revisions to the experience process. However, one thing remains the same- you have to be a “trainee” under the supervision of a qualified certified appraiser for a period of time before you are able to fulfill the requirements to become independently certified. I put the word in quotes because, honestly, I don’t like the word. The word “trainee” seems very unprofessional as a term and would be best served to be replaced with the word Intern, Assistant or Apprentice. In essence, when you compare the requirements and process to other professions, that is exactly what they are. They are no less of a professional and are fulfilling the necessary requirements to be fully recognized as a qualified professional.

To find out more about the requirements for the state of Pennsylvania, click here:

PA Real Estate Appraiser Requirements

 In the past, I have trained multiple Appraiser Trainees who are successful independent Certified Appraisers today. Over the years, I have encountered a lack of confidence by clients and/or other parties to a transaction when a trainee is involved, especially when it comes to the portion of the process that is the observations of the actual real estate. It is possible that this is most attributed to the fact that this is the part of the process that is most in view of the general public. At the end of every on site appointment, I tell the person I meet at the property that this is the easiest and least time consuming part of the appraisal process. The portion of the process that no one sees, is the market data analyzing, the report writing and the overall analysis of the property in relation to value. This is the part that takes the longest amount of time, the most experience and the most amount of training.

 Most states have very defined laws as to whether or not a trainee can be at a property without their supervisor. In Pennsylvania, after a trainee has accumulated a minimum of 300 field hours and the supervisor deems them to be competent to complete the inspection independently, they do not need the supervisor on site. Even when the trainee views a property without the supervisor, this does not mean that the appraisal was completed in its entirety by the trainee. At the very least, the supervisor needs to review and attest to the final report even if they were mostly not involved. Typically, the supervisory appraiser has been involved in the comparable selection, the analysis and the final estimate of market value.

 So if you find yourself having an appraisal performed by my office and, as the supervisory appraiser, deems it legal and appropriate to only send the trainee to collect the real property data, just like the nurse in the doctors office, you can be assured the trainee is competent to collect the property data alone and the final report has been thoroughly reviewed, approved and signed by myself.

Stay tuned for next weeks post where I introduce our newest member of the team, Christopher Ronallo, PA Licensed Appraiser Trainee.

What is Appraiser Blacklisting?

The role of the appraiser is to be an unbiased objective party within the many facets of the lending process whether it be for a purchase, home equity loan or refinance. In the case of a home purchase where the borrower is using a bank loan to assist with the purchase, there are multiple parties to the transaction who have an interest in and are financially dependent upon the consumation of the sale. The buyer and seller might have opposing Interests but they equally desire for the sale to close. The buyer obviously wants to have ownership of the home and the seller would like to, for whatever the reason, no longer own the home and either pay off their existing loan and/or walk away with some cash. The agents who are representing these two parties also would like for the sale to close because they don’t get paid until it does. Their commission is not only dependent on the sale being completed, but also on the amount of the sale. Which leads to the added layer for agents- the higher the sale, the higher their commission. Last but not least is the loan originator and the lender. Their main interest is to make loans and the originator gets a commission which does not get paid until the loan is closed. As you can imagine, each of these individuals have very specific special interests that are contingent upon the completion of the transaction. All but the buyer, also have the incentive to have the sale price as high as possible because they will ultimately end up with more money in their pocket.

That leaves one party in which there is no incentive because they get paid a flat fee regardless of price or a closing… the appraiser. Their fee CANNOT be contingent upon meeting or exceeding a specific value. The appraiser agrees to uphold the code of ethics as established by the Uniform Standards for Professional Appraisal Practice, also referred to as USPAP (You’s-pap). The Ethics Rule within USPAP states that appraisers are to be impartial, objective and independent to the transaction. In other words, the opinion of market value cannot and should not be influenced in ANY way by the parties to the transaction or the sale price. Illegal pressure and influence on the appraiser should be prevented and is the responsibility of all real estate professionals to uphold, with the appraiser being the one that should safeguard it at all costs. This illegal pressure and influence can also be levied in the form of blocking certain appraisers from completing assignments due to a prior “low value”.

Recently, there seems to be a trend amongst the parties that have a special interest in a transaction to thwart the Appraiser Independence Requirements (AIR) as set forth by the Home Valuation Code of Conduct (HVCC) and overseen by the Consumer Finance Protection Bureau (CFPB). This trend is being seen in the form of complaints that there is a “Conflict of Interest” between who is the assigned appraiser and one of the parties to the transaction. The “conflict of interest” is code for “this appraiser completed a prior report that was lower than I would have liked so I no longer want that appraiser completing future assignments for me”. Somehow they feel that they are minimizing the risk of another appraisal “coming in low” and hoping they get an appraiser that will “hit the number” for them.

The complaint comes most often from the agent, but recently I had one where once the agent complaint of a conflict of interest was not validated by the lender due to no actual conflict of interest, the seller then somehow stated that they also had a conflict of interest with the appraiser. The seller wasn’t even represented by the agent who stated the original conflict of interest. The seller conflict of interest was due to a supposed donation made by the appraiser to a non-profit organization they were a director for. After discussions with the lender stating this was not the case and it was clear that no such donations were ever made to the organization, the seller then refused to allow the appraiser entrance into their home. Let’s be clear, the complaint of conflict of interest was not substantiated or valid from either the agent or the seller, but once the seller refuses to allow entrance to their home, there isn’t much the lender can do other than reassign. This example was a clear egregious illegal effort by the agent to influence who completed the appraisal.

 While there are definite situations that could be seen as a conflict of interest, many of these instances are nothing more than one of the parties trying to influence the appraiser assigned to value the property. Some of these instances in which I have declined to proceed with an assignment due to a conflict of interest is when I have a personal familial relationship with either the buyer or seller, when one of the agents representing the buyer or seller is an employee of mine or when I have completed an assignment on the property for a different purpose that would be in conflict with the current assignment request.

The perceived “conflict of interest” being complained about recently is nothing more than a disagreement with the value of prior assignments in which it has affected either the outcome of the sale price or possibly even affected the closing of the sale. This is not a valid or substantiated conflict of interest. In the world of real estate, there is bound to be a portion of the appraisals that do not meet or exceed the agreement between the buyer and seller because it is our job as the appraiser not to rubber stamp this number but to truly analyze the market in relation to the property. To allow this to alter the appraiser assigned to complete the valuation is to interfere with appraiser independence and “blacklist” the appraiser they don’t like. Anyone who uses this tactic is not only breaking federal regulations, but agents who use these tactics are also in non-compliance with the National Association of Realtors (NAR) Code of Ethics, the Pennsylvania Association of Realtors (PAR) Code of Ethics, the code of ethics within the local Realtor board they belong to and are also subject to a formal complaint with the state real estate commission and the banking commission. This is very serious and is not be taken lightly. The role of the appraiser is extremely important and without our independent, unbiased and objective opinion, human nature would take over and the process would run amuck with underhanded dealings that benefit those who would monetarily gain from this behavior.

For more information regarding Appraiser Blacklisting, click on this link to the article prepared by Working RE through OREP insurance by Isaac Peck.

https://www.workingre.com/how-to-fight-blacklisting/

Do you know the size of your home?

Fannie Mae started requiring appraisers starting on April 1, 2022 to measure all single family homes and condominiums using the ANSI Z765-2021 standards. According to FNME, this policy was instituted in order to standardize the method used to measure, calculate and report the GLA (gross living area) and non-GLA areas within the appraisal. It should be noted that this standard only applies to those homes being appraised for loans being underwritten by FNME and only for those properties that are considered single family or condominiums. Other forms of property types and appraisals for private purposes, in house lending and those insured by FHA, USDA and VA have not yet adopted these standards.

In order to create less confusion and advertise the correct square footage, prior to listing your home, have an expert measure your home. There has never been a greater need for accurate reporting of the gross living area than today. Many other market areas in other locations around the country tend to sell properties and make offers based on the price per square foot. Unfortunately, we live in an area where most owners and agents don’t know the size of a home. This should soon be changing as measuring standards apply to all locations.

While appraisers are now required to use these standards, there are other real estate sectors in which there is no reporting standard. This includes real estate agents, county assessors, MLS systems, online public records and other sites that are often relied upon by the public for a resource of property information such as Zillow. In fact, our local MLS system doesn’t even require the GLA field to be filled by the agent. When they do opt to include a number for GLA, they can site 3 different sources for obtaining that GLA and these sources do not have to be verified for accuracy.

Since these standards have been instituted, there is going to be a period of time needed for adjustment. Why? Because when you look at your appraisal, you will find that the GLA reported might be considerably different from what you thought, from what you were told by your agent, from the assessment records or even possibly prior appraisals performed on that same property prior to the standard. Many times the assessment record is wrong and most real estate agents in our area have not been instructed on how to accurately measure a home for the purpose of calculating the GLA.

We have trained professionals here in the office that would be able to assist you so that you can accurately advertise the size of your home.  We offer two services, Basic Home Measurements and Detailed Floor Plans, that will allow you to know the accurate gross living area of your home which could help sell your home.

Once you have these tools in hand, it will give you the edge to help expedite the sale of your home and give your potential buyers an accurate measurement and/or floor plan of your home.

I'll Tell You What I Want.... What I Really, Really Want

If you found yourself singing to the title of this blog, then you understand why I titled it the way I did. If not, then you might be a bit younger than me.

The path to becoming a certified appraiser involves a Supervisory Appraiser being a mentor that educates and oversees an individual who is an Appraiser Trainee for a period of time to ensure that they become a qualified Certified Residential Appraiser. If you need more specific information regarding the specific requirements, check with your state licensing boards for those qualifications.

As an established residential appraisal office for almost 13 years, I have taken on the responsibility to mentor the next generation of real estate appraisers several times. It is often difficult to find a mentor that is willing to take on a trainee, however, I find deep fulfillment passing along my passion and knowledge to someone who has a sincere desire to become a certified appraiser. Some of those candidates are successful appraisers today.

Recently, I have been seeking to add to my team someone who has a sincere desire to become a residential certified appraiser. Over the past two years, I have hired 2 individuals at separate times with no lasting success. Both were released from employment within a short period of time for various reasons of which I will not get into for privacy purposes. Lets just say they didn’t cut the mustard.

What is it that made those who I have let go not be qualified to continue and what is it that made those who are successful today get to where they are? What is it that I really, really want?

1. Be proactive- There are prerequisite educational classes that need to be taken which include proctored exams before you can obtain your trainee license. Having your education and exams completed will only make you more appealing to a supervisor. The trainee license is necessary to allow you to work for a supervisor and start accruing field hours towards your certification. Knowing that you are not expecting the supervisor to front the money for your classes because they are completed will make you a more viable candidate for this position.

2. Be teachable- Understand that there is a lot you don’t know. Even if you have some real estate experience, the discipline of appraising is very unique to the real estate industry. A trainee has to log on-the-job-training field hours with a supervisor for a very good reason- you need to learn by doing and there are so many aspects that it takes years to accumulate the knowledge you need.

3. Think long term- This is not a sprint, its a marathon. Once you obtain your certification you will still have a lot of learning to do. Plan on it taking a good 5 years before you feel fully confident enough to face most scenarios (after 20 years I still consult more seasoned appraisers for those rare complicated cases). Also, the trainee compensation will typically be a much smaller percentage than your potential as a certified appraiser but it is temporary.

4. Put your mentors needs above your own- When you find a quality mentor, maintain an understanding that they are, in essence, doing you a favor. As of the writing of this blog, you cannot become a certified appraiser without them. They are giving you the opportunity to have a long term fulfilling career and give you an income while doing it. It is an apprenticeship type position and while you are definitely adding value to the supervisor at some point along the way, that value needs to be apparent to them so that it is a mutually fulfilling symbiotic give and take relationship.

There are some things in life that are worth putting in extra effort in the short term for the long term benefit. Becoming an appraiser is one of those opportunities. To make yourself more appealing to the potential supervisor appraisers that you seek out for a possible mentorship, keep these principles in mind and you might find that you will have an easier time making it happen. I know that if someone came to me with their classes complete, with a teachable spirit, willing to make real concessions for the benefit of receiving not only my knowledge but a paycheck, and be willing to do whatever it takes to plug into my office as a valuable member of the team, it would be difficult for me to tell them no.

How to spot a bad appraiser.

Wouldn’t it be nice if “bad guys” all had mustaches like they did in the old black and white movies?

They ask you at the inspection “So, how much do you need this to come in at?”

That’s a step towards mortgage insurance fraud and a lost license. An appraiser’s data, reasoning and final opinion should be credible, reliable, independent, impartial and objective. The financial collapse of 2008 was a prime example of what happens when various parts of the real estate machine stop functioning objectively and begin to “make deals work.” We occasionally still hear reports of agents and lenders telling homeowners to try to influence the appraiser’s opinion. Make no mistake - these individuals are trying to shift the liability for mortgage fraud from themselves to another party.

The overall health of the real estate market relies upon all parties acting in an ethical fashion, and as a consumer, you have a part to play in that. If you ever experience this from an agent, feel free to call the Pennsylvania Association of Realtors and report an ethics violation by clicking here. If you ever experience this from a loan officer, feel free to report this behavior to the CFPB here. If you feel that an appraiser has artificially inflated a market value opinion, report this behavior to the PA Appraiser Board here.

They hide material defects in their reports.

After nearly 20 years of appraising, we’ve seen some weird things. Wells in living rooms, septic tanks in basements, bomb shelters, and we could go on. An appraiser who runs across one of these items knows that they are in for a long couple of days. Wouldn’t it be nice if they just… left it out of the report? No, that’s fraud.

Appraisers appear before the state board annually who attempt to hide material defects. Perhaps it was because they were lazy and didn’t want to deal with it, or they wanted the deal to go through and knew that the high tension power lines overhead would be an issue. Whatever the reason, these add up to fraud and can have serious penalties.

There are two ways to take a picture of the front of the home above… one hides the defects, and one shows that the property is built between powerlines, next to a highway overpass and across from a storage facility.

They always come in at exactly the contract price.

If agents have done their job, then the contract price should be close to the market value. In an ideal world, both agents fight for the interest of their client (whether the buyer or the seller) and this results in a market value sale. However, the agent has a financial incentive to see the price be as high as possible… because that’s where their commission comes from. We know that most agents don’t allow this to affect them consciously, however, the statistics show that it does have an effect across the country. If an appraiser only even “makes the deal work” then they are not doing their job to protect the interest of their client, who is most often the lender.

They offer to talk to you about everything.

This one is hard to understand. Uniform Standards of Professional Appraisal Practice (USPAP) requires that appraisers maintain confidentiality with their clients, and their client is the entity who contracts them to perform the appraisal. In mortgage transactions, this is almost always the bank OR another third party, and almost never the homeowner or buyer. This means that an appraiser following the standards of the profession can not talk to you… even if you paid your bank for the report.

We know that this is frustrating, however, it is the rule that governs the profession. Sadly, to get your questions answered you can not go directly to the appraiser, but rather must go to your lender. If an appraiser says, “I wish I could talk to you, however, you are not my client,” they’re not giving you the run-around, they’re doing their job right.

They “just make it work.”

This is code in the industry that usually means, “We don’t care about a credible report, just put something together that allows us to close this loan!” We’ve addressed above how this can happen in the value or in material defects, but sometimes it has to do with the whole process.

What happens when a property is truly a white elephant? Strange from top to bottom. The appraiser has 0 comparable properties after going back 10 years. The property is so unique that the appraiser fears there isn’t a market for the property (making even the cost approach to value non-credible). Hard work and a lot of research will sometimes reveal credible data with which to make adjustments, but sometimes, there just isn’t data.

Good appraisers at this point turn the assignment down and walk away. Bad appraisers stick their finger in the air and make something up.

NEVER refinance your home this way!

In the lending/appraisal world there is something called a “Drive-by” or “exterior only” appraisal. These are performed on a 2055 FNMA form and have a scope of work that is limited to an inspection “from the street” only. According to the scope of work, the appraiser then assumes that the interior is consistent with the exterior of the home (in condition and quality).

There are times where these are needed - pre-foreclosure is the most common need. The bank can’t gain access to the home, but needs to know the value of the home to make financial decisions.

“REFINANCE, much less a FULL REFINANCE should NEVER be performed based on an exterior-only report. You are asking to go under water if you allow your bank to do this to save $100.”

We can not say this strongly enough. Please, ask your bank what kind of appraisal they are ordering, and demand a full appraisal to save yourself thousands. We ran across a case recently that illustrates the dangers of using the wrong type of appraisal:

1. In 2016 we performed an exterior-only appraisal for a lender. The home had been fully updated on the exterior. We were asked to not contact the homeowner in the engagement letter. Therefore we complied with the required scope of work and appraised the home under the hypothetical condition that the interior matched the exterior. The final opinion of value was $105,000.

2. The bank then made a loan on the property based on a 90% loan to value ratio: $94,500.

3. Now in 2019, we were asked to perform a full appraisal on the home. The exterior is still in very good shape… but stepping through the front door is a journey back in time. Well maintained, but nothing updated since the 1970s. The value of the home now: $85,000. After three years of mortgage payments, the homeowner is now $3,000 in the hole.

How did this happen, did we perform a bad report? We immediately double-checked our work and found that the report was a credible appraisal of what we were asked to appraise. However, the lender should NEVER have been allowed to write that loan based on that appraisal (that’s a FNMA, federal lending regulations issue).

We close this blog with a warning from the past about the cost of liberty. We might insert the phrase “financial liberty,” here to emphasize our point. The borrower must educate themselves about the loan process in order to not be taken advantage of by those whose financial interest is not concerned in the slightest with their own. We write these blogs for anyone involved in real estate in hopes that a more educated populace with lead to a more financially free populace.

Lead Based Paint

The classic cracking/scaling pattern of lead based paint. If you see this, there is a high likelihood that your home/structure has lead based paint.

Since the ongoing crisis in the Flint Michigan water supply, lead has been in the news nationwide. Lead is one of the most destructive substances to childhood development as it attacks the brain and central nervous system, and at highest levels can cause coma, convulsions, and death.

“At lower levels of exposure that cause no obvious symptoms lead is now known to produce a spectrum of injury across multiple body systems. In particular lead can affect children’s brain development resulting in reduced intelligence quotient (IQ), behavioural changes such as reduced attention span and increased antisocial behavior, and reduced educational attainment. Lead exposure also causes anaemia, hypertension, renal impairment, immunotoxicity and toxicity to the reproductive organs. The neurological and behavioural effects of lead are believed to be irreversible.”

— World Health Organization

With such horrifying effects, it is no wonder why the FHA / USDA and VA will not underwrite a loan unless Lead Based paint is properly treated. Today we will tackle some in-home investigating and treatments that you can perform to keep your family safe:

Investigating Lead Paint - excerpts taken from House Logic

The EPA has recognized the following in-home tests for discovering if your home has lead paint present:

For wood and metal surfaces: https://leadpaintepasupplies.com/lead-test-kits/

For wood, metal, drywall and plaster surfaces: https://www.esca-tech.com/ProductDetail.php?category=2700&productnum=LPTK

These tests work in a similar fashion, in which a swab of the surface is taken and a chemical reaction takes place in the presence of lead in order to reveal a color indicator.

Please note: While these tests may give you peace of mind, they will not suffice to exclude your home from needing larger remediation in the case of FHA/USDA/VA financing for a loan. The level of testing that would be required by federal guidelines is usually far higher than the cost to encapsulate any supposed lead paint.

Remediating Suspected Lead Based Paint

HUD/EPA’s policy infers that there is a high likelihood that any home built prior to 1978 has had lead-based paint at some point, and so all homes built before this date MUST have all chipping and peeling paint remediated by the following methods:

1. The surface must be scraped to remove all loose and peeling paint. Those chips can not be left on the ground however, as this is a risk to the ground and water being contaminated with lead.

2. The surface must then be painted to encapsulate the remaining surface.

Dust is the primary means that lead can enter the body, so this process should be performed carefully. HUD provides extensive guidelines for the entire process, available here.

Information

https://www.who.int/news-room/fact-sheets/detail/lead-poisoning-and-health

https://www.hud.gov/program_offices/healthy_homes/healthyhomes/lead

https://www.epa.gov/lead/protect-your-family-exposures-lead

https://www.webmd.com/women/lead-paint#1

Treatment

https://www.health.ny.gov/environmental/lead/renovation_repair_painting/encapsulants.htm

The Downsizing Trend: A Path to Wealth.

As the largest generation in 100 years comes into retirement, they are following the general trend - downsize. However, the younger generations are not following the historic trend of increasing the size of their homes. As supply rises and demand falls, there can only be one outcome, price declines.

““Big houses are a waste. People are still in a mode of thinking about houses that is kind of 19th century. As we modernize, we don’t need all this space,””

— Nobel Prize-winning economist and Yale University professor Robert Shiller

Big homes have large open to below spaces (heating empty air), larger lots (with more maintenance), exclusive neighborhoods (with HOA fees and regulations), and there appears to be a generation who isn’t interested in any of these things. What was once seen as a status symbol of success is increasingly being seen as a liability that keeps people from doing the things that they want to do.This is consistent with the data that shows that the fastest growing part of the market inventory is the $750,000 range nationwide, and that the market needs 15% more in the $100,000-340,000 range to achieve equilibrium (read here for more information). If this trend continues we expect to see increasing declines in higher end homes over the next 20 years, and there may be evidence that it has already begun in our areas. Indiana County has been experiencing property median price declines for the past 3 years, and, higher quality homes do not appear to be immune. However, the area of Monroeville has seen pockets of increase over the last 3 years, yet higher quality median home prices appear to be declining.

"The key to wealth building is to live in a home that one can easily afford," Sarah Stanley Fallaw, the director of research for the Affluent Market Institute, wrote in her book "The Next Millionaire Next Door: Enduring Strategies for Building Wealth." Stanley Fallaw studied 600 millionaires and found that most of the them had never purchased a home that cost more than triple the amount of their annual income.

While home ownership is a great possible part of building wealth, the old conventional wisdom that property values only ever go up, has been proven to be broken. THE ONE sure fire way to build wealth is to live well below your means, and that includes where you decide to live.

For more on the topic, read these articles:

Yale economist says large homes are a waste of money.

The growing trend towards downsizing.

A loan is not a right

The United States banking industry is stuck in a cycle:

1. Lend on very good homes, to very good creditors, for low interest rates

2. Lend on average homes to average creditors for average interest rates

3. Lend of bad homes to bad creditors for high interest rates

4. Watch as the financial system collapses

5. Rinse and repeat.

Right now we’re somewhere around stage 3, as lenders find fewer and fewer individuals of good and average credit scores with healthy assets to lend on. Unless we change our thinking in this regard, it is our fear that history will eventually repeat itself.

A part of breaking out of this cycle is to understand the idea that a loan is not a right. A right is a moral or legal entitlement to a thing. None of us have the moral or legal entitlement to someone else’s money- that is called theft. Rather, we do have the right to be viewed equally within the process of attempting to obtain a loan (this is why discrimination on the basis of race, religion, etc is illegal). However, it is important to understand that that equality of examination may still result in some not obtaining a loan.

1. Some will not meet income guidelines

2. Some will not meet down payment guidelines

3. Some will not meet asset guidelines - the home will fail to qualify

We might agree that individuals in the greatest country on earth should have the ability to access the dream of owning a home. We might agree that “something” needs to be done. However, reducing the qualification of the above is a direct path to cyclical financial collapse. The issues that keep some from home ownership are far deeper than a few regulations and banking policies. They stretch back 100 years to immigration laws, red lining, the antebellum south’s policies, the great migration, and others. There are very real injustices that have affected generations. Recently, in a House committee meeting a few congress persons suggested that appraisers were to blame for the injustices in the data. This is deeply disturbing. Ryan Lundquist has written an informative article on the topic that we hope you will take time to read:

Click here to read more.

In short, appraisers have a public and fiduciary trust to report the real property conditions and market value of a property - not produce reform one property at a time. This would betray the principles of the entire profession. Loan officers/Underwriters also have a trust to write good loans. Congress too has a trust, to ensure that the playing field is level for all participants and to discipline those who tip the scales. Appraisers have been inaccurately blamed in the past (our lobby in Washington is nonexistent, so we’re an easy scapegoat) but power rests in the hands of many others to produce solutions to these looming issues.

Property Inspection Waivers: Who is going to be sued?

Fannie Mae is attempting to speed up the closing process by removing measures to ensure that properties have enough value to cover their loans… what could possibly go wrong?!

In markets where regularly see Original List to Sale Price ratios of 120%+, without an appraisal, its very possible that borrowers will be underwater once they close of there isn’t an independent, third party examining the property to determine market value. And if this is the case, who will the borrower come after when they find out 6 months later that they’re underwater?

Fannie Mae - has the backing of the government and enough money to pay for lawyers.

The bank - has no legal requirement other than the FNMA requirement.

Who is the only party in the transaction who is legally required to act and advise the best interest of the borrower? Who is the softest target to get the difference of sales price and market value from? The answer is the same: the buyer’s agent.

Appraisers nationwide realize that in years to come PIW will be a source of legal fallout, and are preparing to do retrospective valuations of properties for borrowers who were injured by the negligence of this FNMA policy. Don’t put yourself in a position that could cost you tens of thousands of dollars in years to come to speed up the closing by a few days now. ALWAYS advocate for client’s interest to know the market value of their home by an independent third party.

Hypothetical houses and hypothetical markets

Appraisers evaluate hypothetical houses every day - let me explain. Here are some of the examples:

1. New construction - we appraise what the home will be worth upon completion as if it was built at the time we write our report, using the data that is given to us. Without this valuable tool, banks wouldn’t be able to make informed investment decisions and homeowners would be left at the mercy of overpriced builders.

2. Exterior-only appraisals - everyday appraisers are on the streets inspecting properties from the street, or “Drive-bys” as their called for short. These are most often used by lenders considering foreclosure. They want to know if their asset is still in good shape and worth enough to cover the remaining loan. In this instance, the appraiser assumes that the interior of the home is in similar condition/quality to the exterior. We then use public records, prior multi-list data, and other sources to determine the value of the hypothetical house that all of that information tells us.

3. Regular appraisals - even when the appraiser has all the facts, and inspects the property themselves, there are things that the appraiser has to assume. We assume that the couch in the living room or the bedroom dresser isn’t hiding a gaping hole - we never move the furniture to check. We assume that what we see is consistent with what we can’t see.

All of these have their place, and are needed - but they also have a risk. An appraiser is always evaluating some degree of a “Hypothetical House,” the house that they can see, and assuming the rest. What if the assumption is wrong? Of the above, the most likely to be incorrect as to the real value of the “Real Home” is the drive by - the more assumptions that have to be employed, the more potential error is inserted into the system.

Appraisers play a part in the overall health of the real estate system.

1. Real estate agents - help to inform and educate buyers and sellers

2. Loan officers - help to ensure that the borrower is fit to secure a loan

3. Home inspectors - help to ensure that the property is safe and secure

4. Appraisers - help to ensure that the dwelling is fit to lien for the loan

Take any cog out of this machine, and the overall health suffers. But that is exactly what we see beginning to happen, and all in the name of making more money, faster.

The current trend is towards appraisers not inspecting the property at all. They are being given a report prepared by another party, without any necessary education on how to inspect a house. Appraisers are then expected to make value determinations based on that information. Can they produce credible results? Only as credible as the inspection, but yes. If this is the move that is coming to the real estate industry, then these inspectors need to be held to high standards. An appraiser trainee must train for a minimum of 300 hours and have 75 hours of education before they can inspect a home on their own, and only with the permission of their mentor. With this new move, a dangerous step is being taken back towards the early 2000’s where appraisers only had to inspect from the street… and this had a direct contribution to the housing collapse of 2008 (along with massive mortgage fraud on the part of the banks pushing for more money, faster… does anyone hear an echo?)

The further appraisals are removed from “Real Houses” and pushed towards valuing “Hypothetical Houses” the further we will move from actual “Real Estate Markets” and further towards “Hypothetical Real Estate Markets.” When these two collide, trillions of dollars go up in smoke in an instant.

Risky buisness: Property Inspection Waivers

While Property Inspection Waivers (PIWs) are rare in the Pennsylvania, and will likely remain so for some time to come, however it is vital to stay informed about this “product” in the coming years. PIW’s advertise that they will speed up the closing process, however, at what cost? In many cases the buyer is still charged for a full appraisal, however the home they are potentially purchasing is not appraised by a real estate professional. Instead the property is “valued” using an algorithm used by Fannie Mae or Freddie Mac. So, while faster, there is often no financial savings to the consumer. Further, the borrower is then placed at risk of purchasing an overpriced home.

PIW’s use data available from the local area (which we have witnessed over the past 3 years is often wildly inaccurate) to choose similar properties (again, we have seen these are often horrible comparables), based on public records (which are often suspect) to attempt to place a value on the home based on multiple regression (which according to the work of mathematician Dr. Jason Osbourne of NCSU is not reliable except in the most cookie cutter of home plans).

So…

1. Bad neighborhood definitions

2. Bad comparable selections

3. Bad public records of those bad comparables

4. Bad analysis based on all that information… WHAT COULD GO WRONG!!!

“This is essentially an arms race between Freddie Mac and Fannie Mae on who can do the least amount of care. Competition between Freddie Mac and Fannie Mae should not result in a race to the bottom on due diligence, especially while the agencies remain in conservatorship. ”

— Virginia Coalition of Appraisal Professionals

Who will borrower’s be suing for giving misleading valuations? An algorithm? The government sponsored entities of FNMA Freddie? No, their first and easiest target will be the individual charged with representing their interest… their Real Estate Agent/Broker.

Some words of advice to brokers and agents:

1. Protect your buyers - you have an ethical charge to represent your buyer’s interest, and in no way are their interests protected by a Property Inspection Waiver. Would you urge your buyer to “waive” a home inspection because the rest of the homes in the neighborhood look ok? Would you “waive” a septic inspection because the neighbor’s septic works fine? NO.

2. Protect yourself - Fannie Mae/Freddie Mac has billions of dollars to protect itself with, making it a hard target. Protect yourself by always recommending that the borrower receive a professional home valuation which can only be provided by an appraiser.

The Housing Crisis: 10 years later (part 5)

The prior 4 articles were written through our Facebook page prior to October 2018. Now that we are 6 months on from those posts, we want refer you to some great information written just after our series. In the prior posts we looked at the lessons learned, patterns and warnings of the 2007-2008 housing collapse. The previous reporting that we shared showed that many of the dangers that caused the 2008 collapse are still in place, and that many of the safe guards against it happening again have been slowly dismantled. While this has occurred, other portions of the market (consumer debt, student loans, international market weakness, and growing national debt, rising interest rates) have shown increasing weakness, beyond that seen in 2007. There are many factors that represent a head wind to the US economy and housing market in 2019-2020. If 2007 warns us of anything, it will be to watch out for increasingly unethical strategies by the banks to attempt to protect their bottom lines.

Housing starts have slowed in 2019 Q1, Days on market have increased, and price appreciation has flattened in the growth season nationwide. All while consumer confidence is falling, and jobs increases were lower than typical for the last 5 years.
https://www.cbreglobalinvestors.com/insights/americas-watch-april-2019/

Since our last post, numerous high end markets have seen significant downturns nationwide.
https://www.wsj.com/articles/wealthy-greenwich-home-sellers-give-in-to-market-realities-11555348468

40% of commercial real estate executives (owning a total of 2 Trillion dollars in property) believe the commercial market has peaked and plateaued. With market confidence falling 5% year over year. http://www.rer.org/Q1-2019-Sentiment-Index/

Canada’s housing market showed a 30% decline year over year. THIS is a brilliant analysis of the current market forces that are facing the US economy, and how higher Dow Jones levels are not the only thing to be watching:
https://seekingalpha.com/article/4240221-housing-market-crisis-2_0-jury-2018minus-2019

Since our last post, “the yield curve” has inverted (a historic measure of the difference between the 3 month and 10 year Treasury yields). This has been a historic indicator of recessions. https://www.advisorperspectives.com/articles/2019/04/01/a-historical-perspective-on-inverted-yield-curves

The current macro real estate market has significant signs of weakness that should not be ignored. Previously “Hot markets” (read also, “overheated”) will likely see the impacts of such corrections. Pockets of the greater Pittsburgh area, specifically higher end new construction, and areas that have experienced explosive growth of development, are likely most vulnerable to these trends if they become more wide spread.