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[Sounding Bored] Appraisal Pressure, Blog Motivation, October Research

February 20, 2007 | 12:52 am | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. This week I revisit what got me into this blogging gig (hint: appraisal pressure).

Back in August of 2005, I was fed up with the pressure myself, my firm and my profession was under to make the number “or else.” So I launched Soapbox. It seemed that no one really cared about ethics or the risk placed on banking system. Appraisers were fast becoming the enablers to fraud and a whole lot of “gray areas” that I wanted no part of. Blogging became a way to vent my frustration with the industry which didn’t seem to have much political clout in Washington to change policies that placed us in between a rock and a hard place. At one point I was even contacted by the House Ways and Means Committee in Congress to testify about the problem with appraiser ethics on a specific issue, but they had already inferred what they wanted me to say.

The bottom line?

Those whose commissions depend on “hitting the number” have become the appraisal order givers and quality, as they say, Elvis, has left the building. Appraisal management companies gained favor with lenders who didn’t understand the disconnect between real collateral values and loan needs. AMC’s pushed fees below cost (without taking ethical shortcuts) and required completely impractical turn time requirements for even reasonable research time. Gradually, once were good banking clients, began to disappear from the good appraisers.

After a short while, I realized I could rant and rave all I wanted but it wouldn’t change a whole lot as quickly as I wanted it to. The change had to come from within (no, I didn’t sell my soul). I had to change my client base and perhaps someday the lending community would come around and feel true concern about the value of their collateral and the regulators would begin to see the problem.

In the meantime, I needed to reinvent my practice and basically stop placing so much emphasis on on retail bank appraisal work, a previous mainstay. Whats sad, is the lending industry has already lost a significant portion of its collective appraisal experience to rely on. In other words, many of the talented valuation experts have begun to focus on other clients. But hey, the lending industry has plenty of form-fillers that can bang out 10 reports in a day and make 24 hour turn time specs to make their customers happy.

October Research, publishers of a series of smart publications including Valuation Review, broke the news to the world with their definitive 2003 National Appraisal Survey. The survey has been updated in 2007 which showed that:

  • 90% of appraisers reported pressure to adjust property values, up from 64% in 2003.
  • 71% of appraiser clients, specifically mortgage brokers and real estate agents have provided pressure, up from 60% in 2003.

Note: If 90% are feeling pressure and 71% are from mortgage brokers, then wouldn’t it be logical that a significant portion of the remaining balance is from appraisal management companies and banks themselves?

As an appraiser, ask yourself this question regarding any type of mortgage appraisals: “Does the person ordering the appraisal have a direct financial incentive as to its outcome?

I would guess the answer is yes more than 90% of the time.

The National Association of Independent Fee Appraisers has used the results of this study to launch a legislative initiative to stop this silliness along with other appraisal organizations. On February 6, 2007, the results of the October Research Survey were presented to the Senate Banking and Housing Financial Services Committee:

This week, NAIFA, along with the Appraisal Institute, the American Society of Appraisers and the American Society of Farm Managers and Rural Appraisers delivered a letter to Congressional Committee on Financial Services about the pressures appraisers face. The action was based on the recent release of the study by October Research Corporation that found that 90% of appraisers are pressured by mortgage brokers, real estate agents and others to raise property valuation to assist in the consummation of deals. The study also noted that 75% of appraisers reported “negative ramifications,” if they did not cooperate, alter an appraisal and provide a higher valuation.

Sadly, the results of the survey mirror the concerns you as members have raised. To address these concerns and others, NAIFA is encouraging Congress to hold hearings on theses issues and approve legislation that protects home buyers and the real estate financing process. Reforms should also be considered to Title XI, which has several shortcomings that contribute to mortgage fraud.

There are several appraisal reform bills at the top of the 110th Congress’ agenda, specifically, bills offered by Rep. Paul Kanjorski (D-PA) related to Title IV of H.R. 1295 and Sen. Barack Obama (D-IL) on S. 2080. These pieces of legislation would provide federal and state appraiser regulators more resources to conduct enforcement, ban inappropriate coercion, and promote professionalism of real estate appraisers among other things.

Appraisal survey teaser
To order the survey


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[Matrix Zeppelin Series: Readers Write] Thoughts About Trolling For Crazy Prices, Phantom Listings And Causation

August 9, 2006 | 10:11 am | |


August should be a slow month for real estate commentary as people take time off to relax, assuming they are not melting as the sun seems to be crashing to earth. Matrix readers however, have been cranking up their air condtioners and reflecting on housing related economic changes.

Throwing caution to the electric power grid, here’s a few notable comments from the Matrix Zeppelin:

  • When housing prices were going through the roof, the FED kept interest rates low, based on the fact that “inflation,” which uses rents as the basis of housing costs, was low. Greenspan and then Bernanke made the case that the FED should focus on inflation, not asset prices (like the price of owner-occupied housing). How that housing prices are softening, but rents are rising, it appears the measure of inflation is shifting to the former. Bottom line: policy is inflationary. Governments, households, and (if you include pension liabilities) businesses are deep in more debt than they can service. Those debts cannot be paid in today’s dollars. The options are a reduction in the value of the dollar, which is to say inflation, or mass default. The hope appears to be that inflation will bring nominal income up to the level required to support today’s housing prices and credit card debts. The problem: lots of the debt is variable rate. But someone seems willing to lend for 30 years for no more than the return on cash. Amazing.

  • …allowing for inflation and a weakening dollar just to rescue those who got into real estate over their heads. I’m not certain why anyone should feel responsible for their behavior anymore, if the government is just going to come in and clean up their messes for them.

  • I wonder if any meaningful proportion of the residential listings currently on the market are sellers who are not serious and/or are “trolling” for a crazy price. I know several people personally who have their apartments listed but whose selling is strictly optional (meaning, they don’t have to relocate, don’t need a larger space for more kids, etc.), and their pricing reflects their flexibility. They offer what they consider to be a “score” price, meaning if they sold it at that they’d be very happy with their returns. That might be one of several contributing explanations to the reduction in sales volume without a related reduction in prices, a phenomenon you’ve mentioned several times and this article [CNN/Money] reminded me of again.

  • One could hypothesize that there is currently a greater proportion of such listings in the total, due to the widespread perception over the past year that the “bubble” was peaking. That might account for a bit of “phantom” inventory in comparison to previous eras. One could then extrapolate that the inventory growth or level was somewhat exaggerated.

  • The WSJ journal incorrectly states that the boom began in 1991. However, prices in many places were in decline for several years after that. Their chart shows that the decline in sales activity stopped getting worse in 1991, but remained below the long term trend until 1998. I would pick that point as the start of the “boom.” Until then it was merely a weak recovery.

  • Your use of the term “stagflation”, two days in a row make me want to go out and find a used AMC Pacer to buy.

  • I believe between 2002-2004 we were all playing in a market that never really existed. With the correction of compliance over appraisals we are now starting to see who we can start pointing fingers at.

  • Low rates and exotic loans allowed people who could not purchase in the past the chance to buy a home. But eventually, prices (in certain areas) ran much higher than median incomes could afford. And now we have the market slow down and eventual correction. How the correction will play out… I really don’t know. I think many like to point to RISING mortgage rates (and will do so more and more) as the cause of the housing slow down, but I think it was the low rates (and exotic loans) that ACTUALLY caused it.


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No Smoking Gun: Appraisal Inflation Is More Widespread Than You Think

July 25, 2006 | 12:01 am | |

The Wall Street Journal does a brief piece on what will likely prove to be a significant issue for many property owners down the road (getting big air): inflated appraisals. Its encouraging only because its on the front page so hopefully it will get attention from the regulators. The article New Headache For Homeowners: Inflated Appraisals Rosy Valuations, Common In Boom, Now Haunt Sellers; It’s ‘Pay-the-Piper Time’ [WSJ] however, uses the same cast of characters in its coverage.

Here’s why the problem doesn’t get reported as extensively as it should: There is no smoking gun. 

Any new stories about inflated appraisals these days seem to originate from the National Community Reinvestment Coalition, a Washington-based nonprofit that supports low-income housing who last year came up with a novel solution to the appraisal problem. I have covered the efforts of NCRC before [Soapbox].

Why does the appraisal inflation issue get so little play in the media? Likely because most real estate mortgage industry people close to the issue downplay the problem since there has not been a quantifiable cost to be held accountable to. Here are samples of the typical mortgage industry response.

National Association of Mortgage Brokers, says brokers shouldn’t pressure appraisers to distort value estimates. But he advises appraisers to create and enforce their own ethical standards.

Their recommended solution of self-policing is a cop-out and rarely works in any profession. The appraisal industry is one of the most fragmented of all.

This don’t ask, don’t tell attitude has created the appraiser mantra -  Get work.  Hit number anyway you can.  Do it Fast.  Get more work. Talk a lot about servicing the clients needs. Repeat.  If the appraiser doesn’t take this path, then they need to find other types of clients.  A whole generation of experienced appraisers have been forced out of the business.  Its the era of the appraisal factory.  Inexperienced personnel cranking out the reports is the norm of today.  Some firms have appraisers that can generate 40-50 reports per week.  Think about the time spent coordinating the appointments, travel to and from the property, inspect, visit all comps, confirm data, write up report, review, deliver, follow up on client questions and concerns, field irate calls from clients or borrowers if the appraisal is too low to make the deal, re-work report, re-send new final version…times 40 in a week?

Lenders often play down the issue. Tim Doyle, an official of the Mortgage Bankers Association, says he sees no “broad” problem with inflated appraisals, outside of criminal rings engaged in fraudulent mortgage deals. Even though mortgage lenders typically sell loans to investors shortly after making them, the lenders have an incentive to ensure those loans are backed by property valued at least as much as the loan balance, Mr. Doyle says. Investors can force the lenders to buy back a loan if it goes into default and the appraisal was fraudulent, he says.

So the MBA is saying, if it becomes a problem, then leave the risk assessment to the buyers of the mortgages on the secondary market and then the lenders will reimburse them. However, if poor quality is so widespread, then how does this solve anything? The banking industry, at least at the upper levels, who tend to be detached from these sort of front line issues, like the way things are. Lenders will only start to complain when poor quality begins to affect profits or there are other economic incentives or federal regulations for enforcement.

To summarize the players in the appraisal process who are happy or at least satisfied enough to stay with the status quo with the process:

  • Banks/Mortgage Bankers – they want to keep costs down and as long as someone with an appraisal license says the value is ok, then there is nothing to worry about.
  • Mortgage Brokers – they want to continue to retain control over the appraiser, after all, mortgage brokers are paid only if the transaction goes through and this is a way to ensure that continues to happen. They say that appraisers should self-police themselves.
  • Appraisal Management Companies – The less quality concerns by banks there are, the more business they are able to generate, so of course they are happy with the status quo.
  • Many Appraisers (Usually large firms aka ‘Appraisal Factories’) – High volume appraisal firms are happy with the way things are and have figured out that the secret to additional revenue is simply volume with no problems for their clients to deal with. Its easy to find those appraisers – just look and see if their client base is nearly 100% mortgage brokers.

The WSJ sights the seminal October Research study from 2003 which says that 55% of appraisers are pressured to change a value. Of course that is a wildly conservative number if reality is factored into the process. If an appraiser refuses to change the number or bend, they simply don’t get work anymore and therefore the occurrence of the pressure goes away (if their appraisal practice doesn’t go away first).

There is virtually no appraisal oversight of appraisers on a state level (which is responsible to administer the federal law) because there is limited funds available for it and to make matters worse, many states take a portion of the revenue from licensing fees and allocate it to other purposes.

The notion that appraisal management companies (AMC) create a ‘Chinese Wall’ so the bank does not control the appraisal process is incredibly misleading and disconnected from the realities of lending. AMC’s are usually only able to attract the bottom of the barrel (my apologies to the few exceptions). They are the worst element in the appraisal industry because of the low fee structure and unrealistic turnaround time requirements. They have nurtured an army of form-fillers. AMC’s are only able to competently rate this vast army of form-fillers by how quickly their turn around time is. In other words, since these appraisers generally can’t afford data services or don’t use what is available, the AMC appraisers often rely on data from the broker involved in the sale – a tainted data source in lending parlance – to generate a quick value to get more work. If they do get data from public record, they are unable or simply do not confirm details like condition, view, concessions, etc.

The person determining which appraiser gets the work, isn’t the one who has their collateral at risk – and aren’t those lending institutions the ones at risk, and aren’t they federally insured?  Licensing initiated in the early 1990’s after the S&L debacle has built an army of form-fillers who are simply rating on how fast they are.  Why? If you have a license, thats all you need to be in compliance. Speed, significant negligence and short cuts.  This system worked fine as long as the market was going up if you subscribe to the don’t ask, don’t tell theory.  Well, the market isn’t rising now, or at least not as dramatically.

_Conclusion_
The appraisal inflation problem is much more serious than reported yet it can’t be proven by stats since the market has kept rising, hiding the problems.  Most of the players connected to the process are generally happy.

The appraiser has no independence in the appraisal process, in any way shape or form. The entire structure of the mortgage appraisal system is seriously flawed. I find it absolutely amazing thats its been able to go on this long without some sort of regulatory concerns raised.

Are We Damned If We Do Or Damned If We Don’t? Cause It Seems Like Deja Vu All Over Again[Soap Box]


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[Fee Simplistic] Breaking The Housing Bubble & The Appraiser: A Chance For Radical Reform

July 24, 2006 | 12:01 am |

Fee Simplistic is a regular post by Martin Tessler, whom after 30 years of commercial fee appraiser-related experience, gets to the bottom of real issues by seeing the both the trees and the forest. He has never been accused of being a man of few words and his commentary can’t be inspired on a specific day of the week. In this post, he asks the profession to seize the day and take advantage of changing times by reinventing the services we offer our clients (not the wheel). …Jonathan Miller


If the art of residential appraisal is the application of  comparable sales to estimating value there is no question that we are always struggling to mirror the market with sales comps that are anywhere from 3-12 months old.  This poses a bit of a dilemma when we are on the cusp of coming out of one real estate cycle and entering another as with Federal Reserve Chairman Ben Bernanke’s recent Congressional appearance where he pronounced the end of the “housing bubble”.  Can somewhat dated sales comps reflect this evolving trend or are we forever going to be “behind the curve” instead of on top of it?  Perhaps this poses a unique opportunity for the appraisal profession to embark on uncharted but potentially lucrative waters.  

The answer may well lie in abandoning the writing of appraisals as we know it and replacing it using appraisal technique by embarking on a new process involving consultation on comparables.  Assume in this example that you are consulting to a seller armed with recent sales comps several months old where no downturn is yet evident but you know from professional/anecdotal feedback that a downtrend is taking place in the local market (lower listing prices, reductions, longer periods to closing, etc).  Your role would be to help frame a listing and taking price recognizing that your older comps may well represent the top end of the market.  The same process can be applied with a buyer in advising what similar homes had sold for in the past and framing an offering price.  The advantage that this has over retaining a real estate agent is that sellers are often “sweet talked” by agents claiming that they can get them a great price and thus obtain an exclusive listing only to then overprice the home and come back with suggestions on dropping the asking price or accepting offers well below the agent’s original number and hence a disgruntled client.  

For the consultant/appraiser, it frees them from filling out appraisal forms with old sales and, better yet, they do not have to worry about percentage adjustments open to second guessing of review appraisers and AMC’s.  No need to worry about USPAP as they are no longer estimating value and signing off with a certification but merely advising the buyer or seller on how the offer stacks up against similar recent sales. When a contract of sale is executed the assignment is essentially ended and a fee collected at closing.  The fee can be a fraction of a 4, 5 or 6% brokerage fee but it sure beats the miserly fees being offered by the financial institutions for written form appraisals.  This would mean a change in USPAP/FIRREA  as it would  allow the consultant/appraiser to use comps to advise his client.   Assuming that the buyer needs an appraisal for a mortgage the revision of USPAP/FIRREA would allow the consultant to then present the array of old (or newer) comps and the narrative sequence of offers and counteroffers by buyer and seller in arriving at a sales price.  This brief narrative report together with a physical checklist of the property would then comprise the “appraisal”.  

Voila-we have not departed from the definition of market value (i.e. buyer and seller still haggling to arrive at a mutual meeting of the minds). However, we have now escaped the miasmic gases created in Washington that sustain a vast bureaucracy disseminating pages of directives that are creating a new specialty in law schools across the USA.   Of course skeptics will say that if the consultant/appraiser’s fee is based on the sales price he will have a conflict because that is what USPAP and FIRREA preclude the answer is that it’s the sellers and buyers who are deciding and not the professional.  

Semper Fee Simplistic

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[Fee Simplistic] Since Reality Has Left The Profession, Why Not Make A TV Reality Show?

July 19, 2006 | 5:18 am |

Fee Simplistic is a regular post by Martin Tessler, whom after 30 years of commercial fee appraiser-related experience, gets to the bottom of real issues by seeing the both the trees and the forest. He has never been accused of being a man of few words and his commentary can’t be inspired on a specific day of the week. In this post, he oozes sarcasm with a way to capitalize on the lack of reality in our profession. …Jonathan Miller


The travails of the industry: AMC’s, appraisal layoffs, fee squeezing, ever shortening deadlines, the latest mind-bending epistles from USPAP and the Appraisal Foundation, admonitions from Chief Credit Officers that their cadres will have to get serious about appraisal quality, etc. etc. When is this all going to end? Well kids, I doubt if it will. So what is one to do if there is no light at the end of the tunnel? Why not reinvent ourselves into the pop culture rage of the times-?

CELEBRITY APPRAISALS:A REALITY SHOW.

One of the advantages of being domiciled in New York City is that we have no dearth of celebrities, celebrity neighborhoods and celebrity apartments.

Hollywood, Broadway, and TV stars, star Chefs, Artists, Singers, Rappers, Moguls, Millionaires, Zillionaires and last but not least Celebrity Felons-you name it and we have them here. No doubt the appraisal world has been invited in to appraise many of these properties that have been bought by the celebs so why not feature them on a celebrity appraisal reality TV show?

Ethics and the right to privacy would prevent the identification of the owners of course but the fun would come in having the viewing audience guess whose condo, co-op, or townhouse is being featured. The country would not only be playing the latest real estate game craze of “how much is it worth” but the added attraction would be to guess whose property it is (Brad’s JLo’s, Jennifer’s etc.). And that’s just for Manhattan – think of the fun we could have in the Hamptons, Hollywood, Aspen, Vail, Sun Valley, Big Sky Montana, and the latest hot shot emerging neighborhood yet to be discovered (which could be a complete other show-“UPANDCOMINGPROPERTIES”).

The AMC’s will never get a foothold in this venture and USPAP may even turn into a rating agency for TV viewership.

Semper Fee Simplistic


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[Sounding Bored] The Power of Yes! WAMU Pulls The Plug On All Residential Appraisal Department Employees

July 12, 2006 | 2:03 pm |

Sounding Bored is my semi-regular column on the state of the residential appraisal profession. Today I discuss the massive layoff of the appraisal department by WAMU effective September 12th.

Effective September 12, 2006

Washington Mutual Bank, affectionately called the bank of last resort by its own employees (making fun of its Power of Yes ad campaign), told its employees today that they are discontinuing the in-house appraisal department. Going forward, all residential appraisal functions will be managed by First American and Lender’s Service, two appraisal management companies. (Disclaimer: My appraisal firm has worked for WAMU since the early days and choose not to work for the AMC’s.)

This action finally puts the issue to rest.

The appraisal department had been one of the few remaining of the national lenders that actually looks at the reports that come in, to assess the collateral for their loans. Its been an automated slow bleed after the last two series of major layoffs.

Things were never the same after upper management botched the installation of their in-house appraisal management system called OPTIS VALUE, that never really worked. OV was the in-house back end version of AppraisalPort (which worked fine). Most upper management associated with the decision and implementation effort were purged.

The last 5 years has been a clerical nightmare for all. WAMU could never figure out how to make it work effectively. It looks like they admitted it was a failure.

The appraisal staff that currently works at WAMU are good people given limited resources to review the heavy flow of reports that come through their pipeline.

Its absolutely amazing that a federally insured financial institution could be allowed to let an appraisal management company handle the appraisal function. AMC’s are a low margin business who rely on appraisers who generally work for less than half the market rate and therefore can not afford data sources nor the time to verify information. They are essentially there to fill out a form for the file and are rated for turn times, not quality. I have opined about this on many occasions.

The timing for WAMU couldn’t be worse. The real estate market is softening and the pressure on appraisers to make the number is stronger than ever. I think I’d sell their stock if I had any.

I was hopeful that upper management would “get it” when they took over, but it looks like they don’t. I wonder what all those secondary market investors are going to think about the quality of WAMU mortgage portfolios going forward.

I’d call that the Power of No!

UPDATE: All vendors are being turned off on July 31st. The work will move to the AMC’s (40,000 appraisals per month). Can you imagine the deterioration in quality for investors thats going to happen right away? Rumor has it that WAMU is being prepped for a sale to another lender and another 6,000 layoffs are planned. Citigroup has been in the rumormill as a takeover candidate for the past several years. Since Citi uses these AMC’s, it makes sense.

UPDATE 2: Here’s a t-shirt link for those affected sent by a number of ex and future ex WAMU employees [Warning – may offend].

UPDATE 3: WAMU Thanks All Their Residential Appraisers For Doing Such A Great Job And Now Will Let Them Spend More Time With Their Families [Soapbox].

UPDATE 4: According to American Banker, WAMU had 30,336 employees as of March 31, 2006, up 10% from the prior year.


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Bank Mergers Increases Need For Moral Flexibility

March 20, 2006 | 12:02 am |
Source: NYT

Floyd Norris’ column asks: Do big bank mergers lead to more crime? And is that a reason to toughen antitrust enforcement? [NYT]. His article is based on a study published in the Journal of Finance: Bank Mergers and Crime: The Real and Social Effects of Credit Market Competition

The study uses micro-evidence that:

Neighborhoods that experience more bank mergers are subject to higher interest rates, diminished local construction, lower prices, an influx of poorer households, and higher property crime in subsequent years.

A First-Hand Appraisal Professional Testimonial

We can see this specifically within the appraisal profession. I have been talking about this for more than a decade. The wave of bank mergers has removed local oversight from the appraisal review function. In other words, appraisers that are morally flexible have been able to thrive because of this disconnect.

Large bank mergers generally result in a system of central controls and as a result, national vendors get appraisal contracts over locals. The irony here is that the national venders, known as appraisal management companies (AMC’s), track appraisers based on speed and whether they have a license, with a fee structure that is half the going rate.

Guess what happens? AMC appraisers can not afford to purchase reference materials and data. But it doesn’t really matter since they are only worried about turn times.

The pressure on reputable appraisal firms remains incredible.

If this is what happens in a fairly cut and dry scenario, I can only imagine what happens in more complex financial transactions.


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With A Flag, An I-Beam and a Christmas Tree, The Party Is Just Getting Started

February 27, 2006 | 12:06 am | | Milestones |

Ever since I was a kid, I remember seeing and reading about Christmas trees on top of buildings under construction but they were not quite finished. I also remember seeing an American flag and there was usually a ceremony of some kind that was covered in the newspapers.

There has been a tremendous amount of construction in recent years and I started thinking about topping out ceremonies:

What is this all about? Why a tree?, and Why was I looking up instead of watching where I was walking?

According to Modern Steel Construction / December 2000 [pdf]

When or how it started, but the tradition of ‘Topping Out’ has become a cherished custom of Ironworkers whenever the skeleton of a bridge or building is completed. Topping Out is a signal that the uppermost steel member is going into place, that the structure has reached its height. As that final beam is hoisted, an evergreen tree or a flag or both are attached to it as it ascends.

This tradition of ironworkers is most closely associated with the International Association of Bridge, Structural, and Ornamental Ironworkers union in Washington, DC.

“Topping out” is the term used by ironworkers to indicate that the final piece of steel is being hoisted into place on a building, bridge, or other large structure.

The project is not completed, but it has reached its maximum height. To commemorate this first milestone the final piece of iron is usually hoisted into place with a small evergreen tree (called a Christmas tree in the trade) and an American flag attached. The piece is usually painted white and signed by the ironworkers and visiting dignitaries (figure 1). If the project is important enough (and the largesse of the contractor great enough) the ceremony may culminate in a celebration known as a “topping out party” in which the construction crews are treated to food and drink.

For those who are into Scandavian mythology here is the History of the “Topping Out” Ceremony [Columbia University] via The Ironworker magazine.

Topping Out Bear Stearns NYC

Mohawk Indians are the most well-known ironworkers and are close associated with topping out buildings.





Here’s a sampling of local coverage for a typical event:

Topping Out at 7 World Trade Center
Topping Out At The Ukrainian Museum’s Top Project
Topping Out the Blanton: That tree on the roof? Means the new museum is A-OK.
Vought-Alenia plant to be topped out

but its not limited to the US…

New unit at Northwick Park Hospital finished [UK]
New home to help juveniles re-integrate [HK]
TIOGA DOWNS PLANS MAY OPENING [NZ]


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First American Buys Majority Share Of CASS To Spend More Time With Family

December 5, 2005 | 12:01 am |

In other words, having an inhouse AMC is probably not working out for Citi.

First American acquires majority share of Citigroup’s Chesapeake Appraisal and Settlement Services [Valuation Review] Reportedly the split is 51/49.

CASS is an appraisal management company and the purchase of this interest will help First American stay competitive with Fidelity. Speaking from personal experience, First American has the worst customer service of all of our vendors, probably because of their monopoly of services in our market.

Our appraisal firm has received many requests by CASS to join their appraisal panel with their callers basically apologizing for their unreasonably low fees (about half of market rate fees, in our experience) and 2-3 day turn times (3x faster than the norm). To get quality appraisers on their lists in certain markets, they say they will pay market rate fees and accept normal turn times. We have remained skeptical and have opted not to join the fray.

We have had the pleasure of reviewing many reports completed by their approved vendors and found the quality of the appraisal reports to be awful (The reasons could fill up another post). With low fee and fast turn time, the reports must be viewed by CASS as compliance documents rather than a tool to assess collateral. A factory, as you will. Remember, CASS is the firm that outsourced appraisal reviews to India to save money [SF Chronicle].

Actually, I have always wondered how an AMC owned by a lender can actually provided unbiased service to competing lenders.


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Appraisal Pressure Applied By Unwitting Clerical Staff: Appraisers Are Seen As Snails

November 18, 2005 | 10:51 pm |

Today we got an email from a client contact that read:


From: ############
Date: November 17, 2005
To: XXXX@millersamuel.com>
Subject: RE: Status

why does it take your office  1- 1 1/2 weeks to write up a report!?

This email was sent by an appraisal management company, who took over a long standing account that handles high end properties. They have been mandated to use our firm. Of course, you have to remember that we provide our service in a market where 80% of the housing stock is not a matter of public record, and we have no MLS system. To my knowlege this AMC does not review quality (or at least substantively) and simply track their vendors by turn times.

Its an ongoing battle with this client and eventually, the original bank’s loyalty, which has protected us from the AMC’s pressure, will fade as time passes since the original client doesn’t interact with us directly anymore.


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Centralized Underwriting: Locational Disconnect

September 16, 2005 | 8:27 pm |

For years, national lenders have been moving towards centralizing the review and underwriting function. This has also brought in appraisal management companies, whose sales pitch is primarily convenience and cost savings. I have always maintained that these centralized operations cause the lender to lose touch with their local markets. Every market has certain housing characteristics and quirks.

Angelo R. Mozilo, the Chairman and Chief Executive Officer of Countrywide Financial Corporation who was interviewed on 06/03/2005 by the NYSE made specific references to the practice of centralized underwriting.

Our competitors have decided that the most efficient way to operate is to centralize. So if you buy a co-op in Manhattan that loan may be processed in Des Moines, Iowa. If you deal with Countrywide that loan is processed pretty close to where your co-op is in Manhattan. We believe that our operation should be local even though we have national power and national strength. All of our operations, they’re very localized. Because each of the communities in The United States, whether it be Manhattan, New York or Manhattan, Kansas are very, very different in their needs. And house values are very different. Cultures are very different. And we want to make sure that our operations matches the needs of the community.

[Soapbox] The beginning of the end, or how this mess got started.
[Soapbox] Outsourcing Codeword: AMC


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#Housing analyst, #realestate, #appraiser, podcaster/blogger, non-economist, Miller Samuel CEO, family man, maker of snow and lobster fisherman (order varies)
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Joined October 2007