Are they market value? Those Zillow purchases and now their sales of the properties they bought. There is a reason to ask. Recently, a state appraisal board took an appraiser “behind the woodshed”. Why? That state board sanctioned the appraiser for (among other reasons) using ibuyer sales and purchases as comparable sales. Really?! Yes! As the board explained, those sales did not meet the qualifications of market value. Why? because the buyers were ibuyers, not traditional purchasers. Yet the board did not explain the market evidence it used to reach that conclusion credibly. No bias there, right?

But, are they market value? After all, the ibuyers ballyhooed their purchase algorithm. They based their purchases on it. Not just Zillow, but all of the institutional ibuyers. And the sellers did not need to accept the offers of the ibuyers. They could have rejected them, right? They could have hired an appraiser to tell them their property’s market value, correct? Were there no brokers available to advise them on a reasonable listing price? So, to say the ibuyers took advantage of those sellers is an exaggeration.

But, again, are they market value? Did those sales meet the qualifications of the definition of market value? In this podcast, Tim Andersen, The Appraiser’s Advocate, examines this question and its possible answers. If they did, then that state board was wrong to sanction the appraiser. After all, the appraiser merely used credible comparable sales. And if those sales were too funky to meet market value? Then the state was right to sanction the appraiser. But who was right, the state or the appraiser? Could they both be right? Is it possible both were wrong? Tim covers these questions in a thought-provoking way. You may not like his answers. But at least you thought about the questions! Thanks!

USPAP and hot sauce? Really?! Yes, there is a connection. That connection is the basis of analysis. So, what is analysis? For appraisers, it is really just a side-by-side comparison. Comparison of what? We compare, side-by-side, attributes of properties. Which properties? What attributes? See, that’s the connection. How hot is a hot sauce? There is only one way to tell. You taste a bunch of them. This is that side-by-side comparison. OK, there is the Scoville scale. It tells you how hot a pepper is. But only you can conclude how hot is is for you! And you do that via a side-by-(painful?)-side comparison.

USPAP and hot sauce have other characteristics in common, too. If a sauce you sampled were seriously hot, you’d remember that, right? You’d have that experience stored in a memory bank somewhere. That way, you could access it the next time you tried a new hot sauce. This is also true for our appraisals and reports. We call that memory bank the workfile. There is a workfile for at least two reasons – one practical and one ethical. Both of those reasons are in place to protect us. Really! USPAP exists, in part, to protect us. What’s the practical reason? We can’t remember all the stuff that went into any particular appraisal. We we have a workfile so we do no need to remember. Everything we said, did, say, heard, smelled, etc. goes into the workfile. All those data and all that information are at are fingertips. And the ethical reason?

USPAP and hot sauce have share an element of comparison. We retain those comparisons in the workfile. But we also retain those comparisons to an indication we complied with Standard 1 in developing a credible value conclusion. And the other reason? Well, you make that discovery.

On widgets and doohickeys, you say? And old mother USPAP, too. What does all this mean? Well, widgets are made up of lots of doohickeys. We deconstruct that widget into its component doohickeys. Once we have them all on the workbench we have deconstructed the widget.

Is there more? Yes. Now we look at the component doohickeys. Why do they do what they do? To understand, we get another widget and reduce it, too. Maybe we get a third, a fourth, or even a tenth. But when we have reduced all the widgets to their component doohickeys, what have we discovered? Where and how all the doohickeys fit together! And once we have reassembled them properly, we have a widget!

So all this means exactly what? Old Mother USPAP, in her wisdom, chose not to define to analyze. She left us alone to our own devices. We did just that! Hooray for our side! So, what’s with the deconstruction analogy?

Comparable sales are widgets. We break them into their component doohickeys. Now we understand how the doohickeys function as part of the widget. And so it is with an appraisal. We start with the widgets of comparable sales. Then we deconstruct them. When we put the deconstructed doohickeys back together, we understand the subject widget and how it works. And in our case, what it’s worth. And what about Old Mother USPAP? She left us alone, remember? And in doing so, she left us alone to learn.

Think on all this when you consider the infinitive to analyze. It means to compare and contrast. You compare doohickeys to understand how the widgets work. Now, aren’t you glad she left us alone?

Are there really three USPAP secrets you need to know? What are they? Why are they secrets? Is The Appraiser’s Advocate website the only place I can find them? OK! Enough questions! What are the secrets about extraordinary assumptions and hypothetical conditions I need to know?

First, the three USPAP secrets are not really secrets. They are there for anybody willing to do the research to find them. They are not even really hard to find. All you have to do is look! These so-called secrets have to do with their definitions, when to use them, and how to disclose them. For details, you’ll need to listen to the podcast. But it is possible to reveal that, by definition, there is no such thing as a generic extraordinary assumption.

Since the three USPAP secrets are not really secrets, why call them secrets? True, they are not secret. But appraisers use them improperly so much of the time, it is as if they were secrets. There are plenty of places to go for advice on appraisal questions and issues. But sometimes, old Mother USPAP is the best place to start. Start where? How about the definitions of extraordinary assumption and hypothetical condition. Then, how about SR1-2(f, g) for a description of the only circumstances you can use one or the other. Then, finally, SR2-2(a)(xiii) for proper disclosure protocols.

See! There aren’t three USPAP secrets. They are right there in the open. All you have to do is look for them. Thanks for listening!

What are four things the newbie appraiser must bring to the table? Really, what are four professional attributes the newbie appraiser must being to the table? There are more than four. But a discussion of only four of them will suffice here. OK, what are the four? You’ll have to listen to the podcast to discover those!

But, what do you think are the four things the newbie must or should bring to that table? To tell your potential supervisor you’ve had 75- to 100-hours of qualifying education is not an advantage. All appraisers must have those. Those hours, in and of themselves, are no qualification. In fact, if your supervisor is top-notch, s/he will have to unteach you all the barnyard groundcover you “learned” from those classes. In fact, here is a question you did not cover in your QE classes. “What is the construction model for a typical paragraph in English“?

One of the four things the newbie appraiser must bring to the table is a knowledge of construction. Another is a knowledge of marketing. How about a basic knowledge of statistics? Would it be an advantage to be a (candidate) member of an appraisal society? Maybe you could know and understand more about inconsistencies state appraisal boards constantly find in appraisal reports? Are you familiar with the mechanics of paired-data analyses?

Did you answer “yes” to one or more of these questions? Then you’ve got a grasp on some of the four things the newbie appraiser must bring to the table. Congratulations! You are well on your way to landing that first position as an appraiser!

Listen carefully! In this podcast, I’m going to share a Freddie Mac Appraisal Secret! If this secret gets out, it could mean the downfall of the residential real estate appraisal industry as we know and love it! I’m completely serious (not)! This secret is so applicable, so practical, you won’t believe you’ve never seen it anywhere else. And really, you haven’t. Such a powerful secret should be part of an appraiser’s QE and CE. But, as you are well aware, it is not! And that’s a shame, too! Since, when you learn it, and put it into practice, your life as an appraiser may get just a bit easier. Let me know in the comments, would you?

This Freddie Mac appraisal secret was not all that hard to uncover. Really! But, since we are all appraisers, and are all in the same boat, I figured, why not share it? As I just wrote, this secret is not part of real estate appraisal QE or CE. There are plenty of webinars and seminars out there that hint at this secret, true. But, insofar as I can tell, this is the only place to get this secret unadorned. You won’t find this secret rendered this simple, this straightforward, in any other place on the internet. You won’t find this secret in any real estate appraisal text. Not even in the Freddie Mac Single-Family Seller/Servicer Guide.

So, the Freddie Mac Appraisal Secret is out! But you won’t be in any danger if you choose to apply it. In fact, apply it! You’ll find that you life an an appraiser runs more smoothly. You’ll likely get fewer stupid stips from AMC reviewers. And your state appraisal board will likely stay off your case. Those sound like pretty positive benefits, don’t you think! But don’t tell anybody about the Freddie Mac Appraisal Secret. It must stay between us!

Yes, a highest and best use analysis is part of USPAP. So, that means each appraisal and report must have one. It is true, the archaic 1004 form limits this to a checkbox. That’s really dumb! If the GSEs are so hot about one, why not give us some room on the form to put it in? Don’t hold your breath, though! It ain’t happening! So that means we have to roll it over to the addendum. There’s nothing wrong with that, really. But it makes the appraisal report hard to read. But the GSEs blame us for that, not their damnable form. Go figure!

Therefore, how do we do about credibly reporting highest and best use? USAP makes it clear there are five (5) components to it. Because of this, a credible H&BU analysis covers all five of them. How? Well, the first step to credibility is simple. Get rid of the boilerplate we appraisers use so constantly! Yes, boilerplate saves time! But our analyses of H&BU must be property specific! If the subject site were vacant, what are the ideal improvements to put on it? Don’t know? Why?! That is part of what USPAP requires we tell the client!

Where do we go to learn more about highest and best use? All of the major appraisal societies offer seminars on it. Don’t know how to write a credible H&BU analysis? Don’t understand how to tie H&BU and your value conclusion together? What to keep your state appraisal board out of your back pocket? There are consultants out there who will be glad to help!

Really, when it comes to any confusion over highest and best use, there is a place to go for help. Thanks! My Best to you and all of yours!

Want to know how a proper reconciliation keeps your assets out of a sling? Unfortunately, it is too easy to find them in one. Too many people want your assets on a tray. Did you “kill” a deal? That real real estate broker wants your assets in a sling now! Does that homeowner think you did not give enough credit to that poorly-built wood deck in the back yard? She wants your assets in a sling! Your state appraisal board? It thinks appraisers can’t do anything right! So, stay off the state’s radar!

This podcast shows you five (5) ways a proper reconciliation helps keep your assets out of those slings! What’s just one example? Your reconciliation process forces you to go over your appraisal and report at least one more time. Maybe you’ll catch an error as your consider your reconciliation. Maybe a flaw in your logic and reasoning will stand out! Is there a convoluted sentence? A review prior to you reconciliation may help your catch it, then re-write it!

A proper reconciliation gives you a chance to fly your own flag, too! Don’t tell the client the sales in the report are the best around! Face it, if they weren’t, why are they in the report at all? Rather, explain why, of all the sales there were, you chose these as comparable and competitive substitutes for the subject. Your client knows you made adjustments to the comps. You don’t need to state that. It’s obvious! Instead, in the reconciliation, explain to the client what the market told you. Why and how did the market tell you the GLA adjustment was $93 per square foot? Detail how you coaxed that $6,300 garage-stall adjustment out of a rapidly increasing market. Chronicle to your client your extensive comp search.

Why are neighborhood boundaries so important? Simply put, the concept is one of influence. Whatever influences value is the subject’s neighborhood will also influence the subject’s marketability. They will also influence the subject’s market value. And an appraisal is all about market value, right? It is important, though, to remember that market value does not exist by itself. Market value is the result of a combination of factors. One of those factors is the risk of investing in a neighborhood. We help the GSEs to measure that risk. How? By informing them about what influences marketability and value in that neighborhood.

Want a deeper understanding of neighborhood boundaries and the value influencers in them? This podcast will help! While USPAP does not use the word neighborhood anymore, It expects to see an analysis of supply and demand factors. This is part of SR1-3, USPAP’s Market Analysis and Highest and Best Use standard. Why (or why not) are buyers demanding housing in a particular neighborhood? Are builders meeting that demand? Why or why not?

Do you know what Fannie Mae looks for in your neighborhood analysis? This ebook will help you understand! Need some help with adjustments? Click here to get it! Thanks for listening!

In real estate appraisal, there is no standard definition of a comparable sale. There is no formal definition in the literature. Nobody has a practical definition, either. USPAP does not have one. Fannie Mae just assumes we all know what one is. But we don’t have a standard definition. That does not make sense, does it? So, what do we do? Do we invent our own definition? It is not that easy!

Since we do not define a comparable sale, what are we appraisers to do? About the best we can do is go with what we have. And what we have is, at best, a description. OK, a description of what? A description of the characteristics of a comparable sale. Fannie Mae, bless her bureaucratic heart, offers that description. She says a comp has the same legal, physical, and economic characteristics as the subject. Really clear, fight? NOT! But we go with what we have since we have nothing else.

Fannie says a comparable sale has a site similar to the subject’s site. That means they are highly similar when it comes to exposure, frontage & depth, access etc. In addition, a subject and a comp have similar room counts and a similar GLA. Their architectural styles and modes of construction are similar, too. Finally, the subject and its comps are in generally the same condition. Clear as mud, right!?

You know what’s silly? There is no definition of a comparable sale, but all the AMCs know when you picked the wrong ones! And do you know what’s even more interesting? The comps you should have chosen just happen to make the deal work! No conflict of interest, no subjectivity there, right! Yep, the appraiser is always wrong and the AMC is always right! Yes, the AMCs always choose the correct comps despite the fact there is no formal definition of a comparable sale!

But doesn’t Fannie Mae give the appraiser the discretion and choice to select a comparable sale? Yes, she does! This responsibility falls on the appraiser’s shoulders, not the AMC’s.