Matrix Blog

Posts Tagged ‘Jonathan Miller’

[Sounding Bored] Lessons From Cuomo: Don’t Dust Off (Or Add) Regulations, Build A Wall

August 11, 2006 | 1:03 pm | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. This week go apolitical (briefly) about the lack of understanding over what appraisers are supposed to do.

Well, not literally.

I heard Andrew Cuomo speak many years ago at an Appraisal Institute chapter meeting in New York 10-15 years ago where he was discussing his innovative HELP Homes project, a nonprofit development company, Housing Enterprise for the Less Privileged where he built subsidized housing and had met with great success. His father was governor and Andrew had an impressive presence. I thought to myself, this guy is going places – he’s sharp. This was confirmed when he was appointed Assistant, then Secretary at HUD.

But it would seem to be all downhill after that. Here’s the perspective of conservatives which is not too flattering.

While he was in office, he created the Appraiser Watch Initiative which tied mortgage defaults to appraisers, as if appraisers were responsible for whether a borrower makes their mortgage payment or not. While I understand what he was trying to accomplish, (getting rid of appraisers in collusion with property owners and developers), the reality is that appraisers do not look at the credit history of the borrower as part of their valuation expertise. The initiative angered many in the appraisal profession. The disconnect between reality and government in this example was no less than amazing.

At the same time, HUD seemed to be trying to make appraisers into home inspectors.. Even more amazing.

Fast forward

Cuomo was the keynote speaker at a recent appraisal convention and seemed to say all the right things. There is a certain irony here.

I remember ranting about this HUD stuff to quite a few of my colleagues at the time as a typical example of the disconnect that exists between the purpose of the appraisal function and the constraints appraisers have to work within.

Cuomo’s handling of HUD as it relates to appraisers and the rampant fraud that came with the lack of oversight on his watch has become a campaign issue in the New York’s governor’s race. The article Integrity and Reforms v Fiasco and Embarrassment [NYO] summarizes the politcal battle nicely.

Its reminds me of the advent of appraiser licensing. It was a noble attempt to clean up the profession but a dismal failure. Everyone wants to control and regulate the appraiser.

Controlling appraisers doesn’t solve the fundamental problem.

You need to protect appraisers from the lending industry they work for and depend on. Create a wall of independence so the public is protected, by keeping the appraiser’s judgement influenced by being pressured to survive.

If you don’t keep the appraisal process pure and keep the pressure away from the appraiser, they are unable to deliver an unbiased report. Its against human nature.

The good appraisers are disappearing fast and there’s no way to regulate that.


Tags: , , , ,


[Sounding Bored] Getting Shamelessly Aggressive

July 26, 2006 | 7:11 am | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. This time I wonder what is in a name.

The other day, I was doing research about the appraisal profession in response to the WSJ article on Saturday that covered appraisal inflation. My post No Smoking Gun: Appraisal Inflation Is More Widespread Than You Think [Matrix] covered a lot of issues regarding the problems with the current state of the profession.

In the process of researching that post, I came across an appraisal firm I am not familiar with and have no firsthand knowledge of their quality and reputation.

I was only interested in the selection of their company name: Aggressive Appraisals -(scroll to bottom of their page).

One of the basic rules of USPAP is not to mislead the reader. I suspect that includes the name of an appraiser’s firm?

The term “Aggressive” suggests Of or relating to an investment philosophy that seeks to achieve above-average returns by accepting above-average risks. From the definition, the name could suggest that they take above average risks to benefit their client’s return.

hmmmm…

Read the marketing copy on Aggressive Appraisals site:

  • 24-Hour Turn Time! – How much research can be done in 24 hours considering that the inspection would likely be the day after the report would be ordered from the bank.
  • Additional Bank Conditions Usually Done Same Day – They must get a lot of addenda requests since it is featured in their advertising so prominently. This also illustrates how the review function is now fairly mechanical and doesn;t have a lot to do with the overall quality of the report.

This is the direction the residential appraisal profession seems to be going in.


Tags: ,


[Sounding Bored] I See The Lending Universe And Its Full Of SPAM

July 18, 2006 | 11:08 am | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. This week I launch into the lending universe.

SPAM is a fact of life and accounts for more the 50% of all email on the Internet these days. I rely on email pretty heavily (400 real emails per day). So thats more than 400 SPAM messages per day. Much of this gets filtered and I have accepted it as a way of life.

The one email SPAMMER that I can’t seem to filter is Lending Universe. They are an appraisal directory that offers a free listings and premium memberships that provide more opportunities to reach out to clients.

A number of years ago, I went to the site and logged in and registered for my free membership. I had a lot of problems with things working with the registration process – it was buggy – but I was able to communicate with them via email. I couldn’t properly select my territory so I gave up and never went back.

I immediately noticed an up tick in SPAM from them. I naively requested to be removed from their list (the person I dealt with originally) and they said they would take care of it. This is usually a BAD idea because you simply validate your email address to the SPAMMERS but since I had dealt with someone, I took a chance.

Yet SPAM keeps coming. I get 2-3 SPAM messages from Lending Universe that is not caught in my filters. Who knows how many slip by. Not a big deal relative to my total amount, but annoying nevertheless for its duration. I have seen appraisers request feedback from other appraisers in blogs and message boards asking if LU are worth subscribing to and paying for a premium.

The opportunity is ripe now for appraiser SPAMMERS as appraisal business slows and appraisers are looking for new ways to keep the volume up.

Here’s a recent email from Lending Universe:

Get more appraisal requests by registering on LendingUniverse.com’s high-traffic appraiser directory.

We have been in business for over 6 years, generating and selling mortgage leads to brokers and lenders. As a result, we have over 14,000 registered on our site. We promote our Appraiser Directory to our registered members as well as on regular internet search engines, giving Appraisers valuable exposure to clients who will give them repeat business.

Free memberships and premium memberships are now available at: http://www.lendinguniverse.com/appraisers.asp

This offer has been extended until July 30th, so act now!

· Lending Universe Inc. · 5002 Strohm Ave. Toluca Lake CA, 91601 US · 818-766-7977 · appraisers@lendinguniverse.biz

This email is directed to appraisal professionals only. This email is sent in compliance with strict anti-abuse and in accordance with federal law S.877 (CAN-SPAM Act of 2003). Further transmissions to you by the sender may be stopped at NO COST to you. If you would like to be removed from this list, please write, “remove” in the subject line and return.

Don’t you just love their removal message? You can request to be removed at NO COST to you!

On their web site, they are linked to the Better Business Bureau and are rated “A” with no real complaints. The owner reportedly has a valid California salesperson license. This company remains a mystery to me.

  • First, if this firm was truly in business to help appraisers generate business, then why would they SPAM the real estate community to such excessive levels?
  • Second, if I was registered intitially, then why would I get so many emails?
  • Third, what reputable lender would send their business through a business that sends high volumes of SPAM as part (I assume) of their business plan?
  • Conclusion They are appear to be more of a SPAM vehicle than an appraisal directory. I know if someone sends me several unwanted emails every day for years, I would NEVER consider doing business with them. They seem to want to get you to sign up for their premium membership.

If anyone has any experience with Lending Universe, please clue me in. Its been nothing but aggravation.


Tags: ,


[Sounding Bored] Lender Honesty Required: Appraisal Reports Are: (A) A Collateral Assessment Tool (B) Paperwork For File

July 10, 2006 | 9:18 pm | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. With the holiday behind us, I will get back in the saddle. This week I point out the limited choices that bank Chief Credit Officers have to reduce their mortgage lending risk.

Lenders don’t know how to face the new market reality. In a market that has begun to cool, the call is starting to go out from the Chief Credit Officers to their minions to “be more conservative” and to “really review” the appraisal reports so the lender is not vulnerable to market swings.

We have mentioned before that mortgage brokers have provided similar comments [Matrix] to us along the lines of “lenders are actually reading the reports now so we have to get a real appraisal done.” This generally doesn’t mean more appraisal review, but rather greater hesitation to grant exceptions to underwriting policies.

Of course, the housing boom, which began circa 1998, has made this change in attitude increasingly more difficult. Lenders have largely eliminated the in-house appraisal department function, and have shifted all review functions to appraisal management companies or other third party review firms who operate on very slim margins. As a result, they aren’t able to manage quality because they don’t have a high calibur of qualified personnel. Its basically a sham on a breathtaking scale.

An entire generation of review appraisers have been put out to pasture with the new generation not being trained and nurtured. Why review when you can make more money as a fee appraiser? The lenders never viewed the appraisal department as a revenue department, only as a cost center, no matter how much window dressing is placed on it. The boom created the need for speed and all other issues didn’t really matter.

The skilled appraiser has been reduced to dealing with a 19-year old clerk who has no idea what an appraiser does but wants the report in on time or he/she will give it to someone else. Besides being dimeaning and disheartening, its also very negligient to the shareholders who own stock in these institutions.

In order for the banks to tighten the screws on lending irregularities today, there are only two choices that are available to them, and neither is attractive:

  • Raise mortgage rates faster than they are already rising to reduce volume.
  • Create an in-house appraisal review function to separate the appraiser from those whose compensation is commission-based.

Appraisal review needs to happen sooner rather than later or lending institutions simply need to be honest with banking regulators. Is the appraisal report merely a doc for the file or is it a tool to assess the collateral for a mortgage?

The time is fast approaching where its going to actually matter what the appraisal says. Lets try to be honest about this starting…now.


Tags: ,


[Sounding Bored] Appraisers: Relax, Everyone Already Knows The Number

June 20, 2006 | 12:45 pm | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession.

This week I discuss the concept of “everyone knowing the number” and how the days of “form-fillers” may be numbered on our other blog Matrix: Appraisers: Relax, Everyone Already Knows The Number.


Tags: ,


[Sounding Bored] Appraising For Fools Gold: California Appraiser Ranks Swell As Real Estate Market Peaks

June 7, 2006 | 12:01 am | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. This week I discuss the appraiser license bubble in California.

Currently there are 20,000 appraisers in California and just like real estate brokers, thats simply too many. The low barrier to entry is one of the reasons for the increase after a pronounced 5 year housing boom.

This year’s total is a record [RISMedia]. This phenomenon is being seen in many other states as well, as the total number of licensed appraisers in the United States is approaching 100,000 (80,000+ in 2004).

The build-up of appraisers is likely to be more painful than in prior years as mortgage and refi volume has fallen off sharply. For experienced appraisers, the new supply reduces the amount of available work but as in other down cycles, the oversupply will likely correct itself.

Hopefully the cream rises to the top and the ‘form-filler” appraiser types will diminish in numbers, although I don’t plan to wish too hard about this or I won’t have enough energy left to make the mandated turn times of several of my retail banking clients.


Tags: ,


[Sounding Bored] Appraisers Make Mistakes

May 31, 2006 | 12:01 am | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. I explore how to get an appraiser to re-consider the error of his or her ways.

Appraisers are human, well most of the time. One of the rights of passage for a real estate broker is to deal with the fact that on occasion, the appraiser is going to disagree with the sales price of the transaction.

A wise appraiser once told me: Everyone in the sales transaction is smarter than the appraiser because they already know the number. The real estate listing broker and selling broker, the mortgage broker, the lender and of course the buyer and seller all know the number. The appraiser is the last one to the party.

But sometimes it happens and when its does, life can be difficult for the appraiser. The buyer and seller threaten to sue, the mortgage broker may never use the appraiser again, same goes for the lender. The real estate brokers may never refer the appraiser their clients again.

So why would an appraiser want to go through this? Because its their responsibility, their job as an appraiser to estimate the value of the collateral (in a mortgage appraisal assignment).

Appraisers aren’t perfect, but they have everything to gain by being thorough, accurate, and honest. Encouraging an appraiser to engage in illegal activity in this era of widespread mortgage fraud could lead to a sanction against you and even to criminal prosecution for you and the appraiser. No transaction is worth that.

But what if the appraiser meant well, but either made an error or just didn’t understand the market?

The NAR in the latest issue of REALTOR Magazine provides the best way for a real estate broker to handle the situation and understand the appraiser’s position. Actually, the method they present is respectful to the appraiser and the process should only be engaged if the broker truly believes a mistake was made.

You never want to demand or coerce an appraiser to revise the appraisal. There must be a reason for the appraiser to reconsider an opinion of value other than “This is what we need to get the deal through.”

I have to say that I was impressed by their tact.


Tags: , , , ,


[Sounding Bored] Using The Pool Cleaner To Get To The Right Price For Your Property

May 30, 2006 | 12:01 am | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. We will have additional columnists soon (and frankly, as the webmaster, I got jealous of all the cool graphics my colleagues get to use with their posts). This week I discuss whether appraisers are the right choice to help sellers price properties for sale.

Well, not really. Without a real estate broker or real estate appraiser doing the analysis, who else is available to the seller for help pricing their property?

In Doug Heddings recent post, Pricing: Why Not Just Hire an Appraiser? [True Gotham] he argues against using an appraiser for pricing a property. He says:

In theory, that’s a great idea. But over the last seven years, as the market has been rising, appraisals have often fallen short of conditions on the ground–meaning that you’re leaving money on the table if you leave the pricing to an appraiser.

He suggests sticking with a good real estate broker. But what defines a good broker if you are new to the market? While I would recommend Doug as one of the top brokers out there, what if you didn’t know that?

His post was inspired by a recommendation he read in Marshall Loeb’s Marketwatch column Price Your Home Right To Help Speed a Sale.

Doug makes the argument that, since so many appraisers in New York rely on brokers for listing information, why not go to the broker first? Listings are an important component for pricing, especially now with marketing times expanding. However, some appraisers have access to the same listing information (ie, me).

I actually, agree with his argument against using typical appraisers, espcially those that came out of the wordwork during the recent housing boom, but its based on the same argument that could be made against relying on a real estate broker for pricing which, like his anti-appraiser argument, is based on dated stereotypes.

Even Marshall Loebs comments are dated. The idea that we look at 3 or 4 “comps” in the area in the past 6 months is just silly. We look at sales, contracts and listings in the immediate area – properties that would have or will compete with the subject property. Often we have access to more accurate information than the broker does.

I teach real estate appraisal classes to brokers in a variety of venues and I am always struck by the impression our industry makes on real estate brokers. To most brokers, their only interaction with an appraiser is made during a sales transaction, when the bank sends the appraiser, often from outside market areas because they are cheaper, can crank out the report fast, etc. In otherwords, most of the appraisers that brokers interact with are simply form-fillers [Soapbox], and not true appraisers. I sound a bit harsh on this type of appraisers, but this has been a sore-spot of mine for the past decade.

So the bottom line is that all comes down the the individual real estate professional to provide pricing advice. Here are the arguments:

  • Use a broker for pricing – they have an inherent bias toward selling the property built into their relationship with it as a commissioned agent. They are paid only if the property sells. Sellers are often uncomfortable with this fact, whether unfounded or not, for the particular broker to be able to provide unbiased advice. Plus, they may not specialize in a particular market area that they are asked to sell. _Therefore it all comes down to the skills of the individual broker for pricing._
  • Use an appraiser for pricing – many are simply not competent in the particular market they are asked to perform an assignment for. They may not know the individual market as well as a particular broker who specializes in it. When our firm performs appraisals for relocation assignments, in the past we have been rated and +/- 3% of the final sales price even though our results are affected by competancy of the brokers that are asked to sell the property. _Therefore it all comes down the the individual appraiser._

Go with who you think is the most competent and who you feel comfortable with. Both Doug and I are not being self-serving here, because there is no right answer.


Tags: ,

Get Weekly Insights and Research

Housing Notes by Jonathan Miller

Receive Jonathan Miller's 'Housing Notes' and get regular market insights, the market report series for Douglas Elliman Real Estate as well as interviews, columns, blog posts and other content.

Follow Jonathan on Twitter

#Housing analyst, #realestate, #appraiser, podcaster/blogger, non-economist, Miller Samuel CEO, family man, maker of snow and lobster fisherman (order varies)
NYC CT Hamptons DC Miami LA Aspen
millersamuel.com/housing-notes
Joined October 2007