All Forum Posts by: Account Closed

It takes me about 10 minutes. It's the inspection and report that takes all day. Mortgage reports used to be 6 pages, only two needed to be filled out and the rest was boilerplate language. Average mortgage appraisal today are 40-50 pages. Brokers are not required to support their opinion, which is why BPO's are a joke and why they are illegal for any other purpose than marketing in most states and at the federal level. Appraisers are required to support their opinion, which is not easy.

When was the last time you personally hired an appraiser as a realtor??? Or as a homeowner??? Then again, why would you? If you don't know what a property is worth as a broker how good are you at your job right??? Like you said, 30 minutes and done. LOL.

Here in WI the state has adopted boiler-plate real estate contracts to serve as the accepted default - most transactions take place employing those forms. The single family here is called the WB-11. All of the state-approved contracts have language in them that along with the language in the USPAP, serves to artificially keep prices increasing perpetually. The language in the WB-11 is this:

APPRAISAL CONTINGENCY: This Offer is contingent upon Buyer or Buyer’s lender having the Property
311 appraised at Buyer’s expense by a Wisconsin licensed or certified independent appraiser who issues an appraisal report
312 dated subsequent to the date stated on line 1 of this Offer, indicating an appraised value for the Property equal to or
313 greater than the agreed upon purchase price.
314 This contingency shall be deemed satisfied unless Buyer, within ________ days after acceptance, delivers to Seller a
315 copy of the appraisal report indicating an appraised value not equal to or greater than the agreed upon purchase price,
316 and a written notice objecting to the appraised value

What is unfathomable to me is that the State Of Wisconsin approves that garbage. Don't they have lawyers? Not very good ones. At what point did the parties in this contract ever obtain permission from the lender or appraiser to use the mortgage appraisal to satisfy the Appraisal Contingency in this contract? Never happened. This contract makes an assumption about other parties unrelated to the contract and by doing so, creates a the vehicle by which prices can artificially increase perpetually.

An appraisal contingency ought to be an agreement between the buyer and seller, where they agree that one party or the other or both will purchase an appraisal for the specific purpose of settling the matter of value in the agreement. Using the banks appraisal is a convenient way to save money and time and hassle, but it could not have more devastating consequences to prices paid and the housing market. This is because of the next language from USPAP, the Uniform Standards of the Professional Appraisal Practice, which all licensed appraisers performing mortgage appraisals must follow:

Standards Rule 1-5

When the value opinion to be developed is market value, an appraiser must, if such information is available to
the appraiser in the normal course of business:

(a) analyze all agreements of sale, options, and listings of the subject property current as of the effective
date of the appraisal; and

(b) analyze all sales of the subject property that occurred within the three (3) years prior to the effective date
of the appraisal.

Comment: See the Comments to Standards Rules 2-2(a)(viii) and 2-2(b)(viii) for corresponding reporting
requirements relating to the availability and relevance of information.

USPAP requires the appraiser to "analyze" any current agreement of sale (a pending WB-11 for instance) during the development of the valuation (called the Appraisal in USPAP, different from the Appraisal Report). This provision ought not be in there. It does not say only in cases that are relevant to the appraisal assignment. The Comment at the end refers to that, and directs the reader of the USPAP to seek other information concerning what needs to be reported and what doesn't, according to the relevance. Well, how is the purchase price of a pending contract relevant to an independent and unbiased valuation? It isn't. Now, if you're a bank, no big deal, you only lend 80% of the purchase price and require an insurance policy be purchased by the borrower naming the bank as beneficiary to cover the balance of the 20% - also known as mortgage insurance or PMI. If you are a buyer or seller, and may I point out I did not say borrower, the expectation of the valuation is in terms of only a few dollars, not thousands. I hope you can wrap your head around that, most people don't understand what I just said and how it affects the housing market.

What ought to be done is this, each buyer and seller ought to hire an appraiser on their own. The bank appraisal ought never be a part of the appraisal contingency. When the appraiser requests a copy of the purchase agreement as they are required to do so under USPAP, the buyer and seller should refuse to disclose it. An appraiser can still perform an appraisal without the purchase contract, but only after they have made appropriate attempts to obtain it. Finally, the appraiser would also have to explain to each party up-front and before they proceeded with the assignment, that appraisals are not an exact science, more of an art really, and that real estate markets are not as precise to the degree that buyers and sellers typically negotiate. At that point the buyer and seller would need to agree on an allowable variance, if the appraisal was to be expresses as a price instead of a range of value - 1-5% perhaps? Without this understanding, the whole thing is financially dangerous for all parties. It's how people get underwater on their mortgage. It's how housing bubbles expand.

The argument of if an appraisal is an art or science will likely never be resolved. There are too many valid points to argue on either side. But what is never in contention, is the appraisal is an opinion at the end of the day. This is why few to zero appraisers lose lawsuits in court when sued over a valuation. The other reason many lawsuits fail is the moment the judge looks at the part of the appraisal that reports the name of the client. When the judge sees it is the bank and not the borrower, and it is the borrower standing before them and not the bank, the case gets thrown out right there.

Does that count as a joke? I would laugh if I witnessed a case getting thrown out like that.

Many appraisers were very worried after 2008 when FNMA initiated it's buy-back program. FNMA went back and did a forensic review of each and every failed loan they had on their books - thousands and thousands and thousands of them. They had the money to do this because the United State Government had taken them over, which is still the case today I believe (not sure on the last bit). Of course countless appraisals were identified as flawed and the originating bank was forced to buy the loan back for violation of the Fannie Mae Selling Guide, which serves as a contract between originating lenders and FNMA - these were all contract-law cases.

The really interesting part about that whole thing is not one appraisal was identified as flawed because of a bad valuation alone, or for all sorts of things a person might assume would qualify as a flaw. What they did is identified occurrences where the appraisal did not meet the guidelines set forth in the Selling Guide, and once they established that, they hired an appraiser to go back and do a retro-active field-review of the original appraisal. If the original appraisal was non-compliant and if the value from the field reviewer came in at least 10% less than the original appraisal, they would make a case in court for a buy-back.

Want to know how many appraisers got sued for having an appraisal identified as flawed within the FNMA buy back? Zero. FNMA did not file a single case. We are talking billions and billions of dollars here. Chase, I believe, was the only originating lender to attempt to go after appraisers, and they lost every single case that went to court (I believe they were able to settle with some E & O insurance companies). This is for two reasons. For starters, an appraisal is an opinion, it's art. Second, it was not the fault of the appraiser, it was the fault of the underwriter/originating lender, who failed to deliver a loan to FNMA that met the contractual guidelines.

Mortgage appraisals are submitted to the originating lender and what they do once they have it, is go over it to make sure it is complaint. They could care less what the value is. This is why you see really strange things in a mortgage appraisal, like really insane comparable properties selected for the sales grid. The originating lender does not have to accept any appraisal ever, it is buyer beware. Nobody is forcing them to write a loan based on a "bad" appraisal. A better term than bad is weak.

Until appraisers organize in a fashion similar to the NAR, all these problems with the appraisal profession will continue. For now, the United States Government has taken on that role of organization, and they allow the banks to have a say. Because of the way politics works, appraisals, and the entire appraisal industry as a result, are exactly as the banks would have them.

With this rating system being proposed in this thread, for starters there already is Yelp, and for seconds you would be complaining about a service you did not receive. That would be like going on Yelp and complaining about the food eaten from the customer in the next table when you didn't even take a bite, though maybe you picked up the bill.

A lot of talk has been made here about methodology. The first thing to set straight in that category of discussion is the concept of expectation. It is the foundation of all appraisal work, the very first thing that must be established when a client contacts an appraiser to hire them in all cases for all appraisals. Without that established context of expectation, the appraisal client would not get what they were hoping and paying for. Without understanding what that that context is, anyone reading the appraisal report who is not the appraisal client would not understand the appraisal. That's what happens with mortgage appraisals. They are the banks appraisal, not the borrowers, so the borrower often fails to understand the appraisal.

Does that count as a joke?

 Sorry. This topic is personal for me. I'm like a dog chasing a squirrel with this stuff. If you think I went-off here, you aint seen nothin'. I attempted to get my appraiser peers organized to fix all the things being discussed here for years and it went nowhere. I had to leave the profession because of it. I thought I would retire as an appraiser when I started doing it. It still makes me furious. I dunno. Maybe what I really need to do is to take the medicine your offering here!?!?

So here's my joke and it's a really bad one because I can never remember a joke so I just made it up - but sort of appropriate to what I'm attempting to say.

How many appraisers does it take to change a light bulb?

Never more than one.

 An excellent question. Maybe you should ask your lender next time they ask you to pay it. It wasn't always like that. Before 2008 it was common for the loan officer to foot the bill and if the loan went through, the fee would be rolled into the closing costs - zero fee from the applicant borrower up-front. This arrangement happened about 50% of the time. This is an example of market economics. Maybe when people realize that some banks are skimming the appraisal fee too, they might even refuse to pay it any other way than at closing, or at all. But that of course comes down to how bad someone wants to get a loan. It's a gamble really - my term for it is the CGT - the Consumer Gambling Threshold - That is in fact the force that sets the appraisal fee, not the appraiser. How much is a potential borrower willing to pay up front and potentially lose before they will no longer apply for a loan??? I promise you your banker knows the answer to that question, or at least the people that own the bank do.

 If you are good at pulling comps, what you could do is present them to the appraiser when the appraiser comes to do the inspection. Any good appraiser will welcome more data coming their way. It will also give you a chance to tell the appraiser why the property is valuable to you. Too many people think they are forbidden from having a conversation with the appraiser - not true. What the appraiser is forbidden from doing is disclosing confidential assignment information - in other words it's the banks appraisal - so the conversation will be one sided. With the last flip I invested in, the "easy-to-find" market comps dropped about $10k from $130k to $120k within the time I was flipping (an anomaly) - not a ton of money but very significant for a flip when we were already over budget and I was definitely planning on $130k or better. I did some deep diving on comps and found some, then presented them to the appraiser and explained my property was a flip and that FLIPPERS DO NOT HAVE A TYPICAL MOTIVATION TO SELL AND SO HOMES SOLD AS FLIPS MAY NOT REFLECT MARKET VALUE - The house got sold for full asking and I never heard another word of it. This is a roast of crappy appraisers right? A crappy appraiser will over-look the part I capped and so a smart investor will remind them of that. Mortgage appraisers don't get paid to make sure a loan goes through. What they do is provide a cheap and fast product that gets the job done and on to the next. Sometimes the seller would be wise to do some of the appraisers work for them.

Tough one. For starters it's your neighbor and you want to maintain good relations. On the other hand it's a rental and you don't have to see them everyday - lol. Certainly option #1 is always preferred if possible.

Most parcels of land at the street are actually owned by the city, even though the adjacent property owner (you) is responsible for the upkeep. A good example of that would be an area that might contain a sidewalk. You may be able to very easily see if this is the case using an online GIS mapping system that nearly all states and cities use today. It will allow you to view all sorts of property information, usually lot lines. You will be able to determine very quickly how much of the street and sidewalk you own vs how much the city owns - you might be surprised how much of "your" property is not actually yours!

What I'm getting at here is if these 24 inches in contention is actually city property, your neighbor does not have rights to force you off of it, especially during an instance when it's the city requiring the connection for all residents. And further to that point, there may already be rules and laws in place that govern the project that pertain to your issue - I promise you are not the only person to have this issue. So, call the city and see what they say about it.

Finally you want to get all this done as politely as possible of course, I know you do, and those southern charm skills will come in handy to make it happen!!! 

Good luck!

 Sounds to me like they are testing the waters. Check your lease for language concerning the amenities, as well as language concerning Acts Of God and how these apply. As far as clogged sinks and toilets, around here it is city ordinance that tenants not clog toilets and sinks! Of course a law isn't going to stop that stuff from happening anyways.

I would tell you what I would do, but I already did it, and most people think I'm nuts for doing it, which is to waive April for all tenants.

I think the decision of what to do depends on how many units you have to manage, what your financial position is, and what your typical tenants financial position is likely to be.

I think they slipped you a fast one by referencing the maintenance. They are actually addressing two separate issues at once in the same written, not verbal, letter. Here in WI, real estate is being deemed an essential service and therefore, landlords can go to units and make repairs. However, that does not align with the national and state efforts to stay in place we are all attempting to adhere to as much as possible does it!!! And so therefore, I would definitely call this person on the phone and inquire what the deal is with their sink and toilet. It may be you have a multi-family and a different tenant has clogged the system causing it to back-up in other units so, I would refrain from jumping to any conclusions over who caused it. Then I would act accordingly, if the building has an issue I would address it immediately and if the issue is isolated to the unit, I would see what the tenant wants to do. Obviously each of you risk infection if you enter and fix the clog.

As far as the rent reduction in amenities? For me that's an easy and hard no off-the-cuff answer. It's an Act Of God, times are tough for everyone. I would let them sue me for it, unless of course my lease language had a course of action and I would then take that!

However, what might be the case is the tenant can see they are going to struggle to pay and are further struggling to communicate that with you. This might be their round-about way of letting you know all is not well with them. You can choose to handle this possibility proactively or take a wait-and-see approach - landlords here have done all of the above. I might just nip it in the bud and tell them no on the amenities and then bring up the issue of full rent still being due right there, along with what you intend to do about it if they come up short. I tend to take the straight-forward approach in all cases, because even though this is a business and we have to play coy occasionally, we are talking about a persons living situation, so it's rude to not be up-front, IMO.

I hope that was helpful. Good luck, be well and welcome to BP.

Did you really do that for 137 tenants? Or are you poking fun at people like me who actually did??? LOL.

I'm very curious, as I've been wondering how an operator with lots of units might have responded. I pretty much expected the big boys and girls to adopt a wait and see approach. I'm thinking I probably would have if I owned that many - I dunno - I only have 4 units with 3 tenants so, not the same comparison at all.

100% waived, 100% collected - lol. I'm still ok with that. I'll be honest with all of you in a few months if I consider myself the biggest idiot ever for doing it. I already know most of you think I am now - lol - and I'm ok with that too. For reference, I have 4 units and 3 tenants.

Six pages in two days! What a thread. I did not read it all, but read the beginning, middle and end so far.

I've found it fascinating that not only have most landlords collected 100% of April, it was collected earlier than usual in many cases.

Now we shall see what May brings!

Jay, I hope you start a new thread in May.

Here is the letter I sent for any curious:

"Notice: Necessary Action Concerning Your Lease Has Been Taken Due To The Corona Virus Outbreak

Hello All Tenants,

As I write this letter in terrible times, I hope it finds all of you and your loved ones well. May we not forget those of us who have nobody to rely on. God help us all.

I was glad to have spoken to all of you either in person or on the phone last Friday, March 20, 2020, and then again today, Saturday March 28, concerning the situation of the world at present.

Verbal action requiring written notice took place concerning your lease on March 20th when I verbally expressed that rent for the month of April 2020 is waived. Keep this letter with your lease documents as your written record of that event.

Seek government if you need further assistance.

Be well.

Sincerely,

Merritt"