The CRN Appraisal Reporting Summit addressed three main goals:
- Identify the changes that might be made to assist appraisers in developing a more credible appraisal report.
- Define what information lenders and the secondary market need to make better collateral risk decisions.
- Develop a set of recommendations regarding the content, format, standardization and long term vision for future appraisal reporting.
The CRN has attracted a very impressive roster of seasoned valuation professionals, policy leaders and technology experts. And, an initial set of questions were presented in survey fashion to both the CRN membership and the Appraisal Buzz mailing list. The Appraisal Buzz also ran a contest offering a free conference pass to those respondents with the best suggestions as selected by the editor.
Thank you to all who submitted suggestions! We have included those in the broader analysis and we have compiled a survey that puts in question form key suggestions. The survey can be found by clicking HERE
Here are the lucky winners and a brief recap of their winning suggestions:
Joshua Walitt – CO
Make the standard forms “modular” in nature and allow for expandable fields. Go back to having 1 standard One-Unit Dwelling form, rather than a manufactured, a URAR, a condo, and exterior forms. Include USPAP items such as intended user fields, certifications, exposure time, etc. so that USPAP compliance is built into the form, rather than being supplemental.
Larry Walsh – CA
Allow other trained help to inspect properties to provide the business scalability is needed to make an appraisal business profitable and fees need to be high enough so that trainees or other workers to get paid enough to make it worth their time. Appraiser trainees can measure, inspect and identify value issues better than most real estate agents and are just as good as most licensed appraisers.
Joe Harvard – CA
Allow data fields in a report to be dynamic rather than static, in other words they expand and contract based on the amount of data that is input. All of the data is transmitted electronically these days there is no logical reason that the data fields have to be a fixed and rigid size. If we allow them to be dynamic and expand and contract based on the amount of data input, data will more likely be placed in the correct place in the report, all of the data will be there in the order it is supposed to be included, meaning the reader is far more likely to understand the logic of the appraisal and not be hunting for relevant pieces of information somewhere in the nether reaches of the addenda.
Mike Brunson – NV
The current requirement for an appraiser to analyze the contract is an impediment to true appraiser independence and objectivity. One solution would be to eliminate the requirement to analyze the contract and make it an optional analysis. The contract price or the terms of a contract should have no bearing on an independent, objective and impartial opinion of market value. I have had some push-back on this concept from many appraisers - so allow me to pose a hypothetical (which may have impacted the results of this argument).
Bud Reeg Jr. – CA
Leverage technology such as Yahoo or Bing and other data sources so that when the subject address is presented, the entire appraisal report can be pre-populated with data for neighborhood, demographic, photos, plat maps, aerial maps, issued permits, historical data, etc. automatically so that the only thing for the appraiser to do is complete the valuation analysis.
CRN PROJECT UPDATE
The CRN Appraisal Reporting project employed a team approach to tackle key reporting issues in breakout sessions at their gathering in April. 150 people came together to brainstorm ideas in eight categories of appraisal reporting topics:
- Assignment Parameters & Scope of Work
- Property Detail – General, Land/Lot, Improvements
- Inspection, Condition, Quality of Construction
- Market & Neighborhood Analysis
- Approaches to Value
- Extraordinary Assumptions and Hypothetical Conditions, Final Opinion & Reconciliation
- Certifications and Limitations
- Supporting Services (maps, photos, addenda, data, etc.)
The participants were asked to focus on what should to be included in a modern appraisal report and why. Further, the teams were also tasked with using today’s process as a starting point and not a limitation. This technique is the foundation for bringing forward a series of business recommendations that can be acted upon by stakeholders, including solutions providers and regulators. This is absolutely essential to making the effort more than a grand experiment. Some of the highlights of the discussions from the session include:
- Engagement process should be standardized and transparent.
- Assignment conditions for engaging an appraiser should be specific to the subject property and transaction needs, expressed in a uniform language (as opposed to a catch all of every possible condition or requirement).
- Inspection role for the appraiser should be clarified for valuation purposes and the borrower should be given guidance that an appraisal is not the same as a home inspection.
- Provide more options for appraisers to choose from in reporting all topics and allow the appraiser to expand or contract the presented content based on what he identifies as value-related for the subject property and its specific market.
- Allow the appraiser to provide a rating regarding his confidence in the data available, market forecast and the durability of his opinion of value.
- Return the Income Approach to a trusted tool for providing valuable insights of “cost to own” rather than being construed only as a tool for investment properties.
- Provide better measures in the Sales Comparison Approach that are both qualitative and quantitative, supported by data analysis. Analyze prior sales transactions for the subject property and the comparable properties (versus just reporting the last sale date and price).
- Provide detailed market and neighborhood analysis including immediate, local and expanded areas of competition along with better details regarding general value trends, quality trends, land use percentages; better market segmentation (concessions present, distressed market competition, new construction, etc.).
- Reconciliation of all supporting facts to the final opinion of value should be relevant to the transaction, not boilerplate commentary.
- Items that are obsolete, overkill or redundant (to lender sourced information) in the appraisal file should be eliminated (invoice, flood map, title page, copy of appraiser’s license, resume, FIRREA addendum, sales contract, copy of appraiser’s E&O policy)
The CRN Project Team Leaders have compiled the suggestions and findings of the workgroup thus far into detailed working papers. The group plans to publish an executive summary and set of recommendations in the coming weeks. We hope to see new industry initiatives take shape that can leverage the recommendations and help usher in a new dawn in the advancement of residential property appraisal reporting and improve the outlook for all professional real estate appraisers and their clients.
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