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Op/Ed

The rocky road between agents and appraisers came to a head, can now be synergistic

There is an ongoing revolution between appraisers, lenders, and agents – this is a comprehensive overview of how we’re finally in a positive place.

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In the musical Oklahoma! there’s a happy moment when the cast dances and sings “The farmer and the cowman should be friends.”

Has the time come for the real estate agent and the appraiser to be friends?

Exaggerated valuations led to lawsuits

It’s been a lengthy estrangement that began in 2008 with an attempt to prevent abuses resulting from parties that had a vested interest in originating a mortgage but no risk — like real estate agents and mortgage brokers. They were allowed to select the real-estate appraiser needed for loan approval.

Because brokers only are paid when a loan closes, and the bigger the loan the bigger the payday, appraisers had an incentive to provide exaggerated valuations. The agreement settled a lawsuit brought by the New York State Attorney’s Office against the GSEs.

The compromise, called the Home Valuation Code of Conduct (HVCC), not surprisingly resulted in a rash of lower appraisals when it was enforced by Fannie Mae and Freddie Mac in 2009. A recent study by the Philadelphia Federal Reserve found that the HVCC led to a significant reduction in the probability of inflated valuations and an increased incidence of low appraisals: The odds of low appraisals among HVCC-covered transactions increased by 17.1 percent in the six months after the HVCC, while the odds of significantly high appraisals (5 percent or higher than contract prices) decreased by 15.3 percent.

Buyers, sellers, and real estate agents were unhappy

Among the people made unhappy by that development were home buyers whose lenders required larger down payments to cover the difference between appraisals and purchase contracts. Real estate agents and sellers also weren’t pleased when low appraisals started to tank deals that were five yards from the finish line. The most vocal opponents of the HVCC turned out to be traditional appraisers who were concerned the code encouraged lenders to use low cost appraisal management companies.

The passage of the comprehensive Dodd-Frank reforms in 2010 ended the HVCC but wrote into law the ban against broker and agent involvement with appraisers, who now report only to the lender that hired them. During the deepest depths of the housing crash, when values plummeted, appraisals still came in and brief periods of hope like short-lived boomlet caused by the 2009-2010 housing tax credit confused valuations even more.

Enter the recent turn around

Over the past two years, when national median prices have increased nearly 20 percent, complaints about low appraisals have actually decreased. In its February monthly survey of brokers, NAR found only 6.9 percent reported appraisal issues were major problems prior to settlement or contract termination. By contrast, in April 2011, 35 percent of brokers in the NAR survey had a contract cancelled or delayed as a result of a low appraisal, or had a contract negotiated to a lower sales price as a result of a low appraisal.

Quicken Loans tracks the relationship between contract prices and appraiser opinions and the results are remarkable. For the first time since August 2013, appraiser opinions fell below homeowner estimates in February by just 0.13 percent. Appraiser opinions remain higher than homeowner estimates in 18 of the 27 metro areas analyzed.

“While it’s significant that appraiser opinions are now lower than homeowners’ nationally, this minimal difference is unlikely to derail a refinance or cause headaches for the homeowner,” said Bob Walters, Quicken Loans Chief Economist.

So what has caused this dramatic turn around?

1. Transparency and Consumer Awareness. When their agents and mortgage brokers could “fix” low appraisals, buyers and sellers didn’t worry much about them. All that changed with the HVCC. Agents worked with sellers to counsel them on how to prepare for the appraiser and make sure he got documentation of improvements and good comps. An early outcome of the HVCC was the requirement that lenders send a copy of the appraisal when it was completed, or at least three business days before closing.

2. Appraiser Independence. Over the past three years, new laws, rules, and regulations have been implemented in an effort to protect the independence of the appraiser. Once an appraisal assignment is completed and sent to the client, appraisal industry standards prohibit an appraiser from discussing the results of the report to anyone but the client who ordered the appraisal, or parties designated by the client. In order to ask an appraiser to correct errors in the appraisal report, an agent must use the client, typically the lender, as an intermediary. The client may choose to provide additional data to the appraiser for consideration.

These include:

  • Consider additional, appropriate property information, including the consideration of additional comparable properties to make or support and appraisal.
  • Provide further detail, substantiation, or explanation for the appraiser’s value conclusion.
  • Correct errors in the appraisal report.

3. Quality of Market Data. One of the problems during the downturn was use of distress sales as comps. The appraisal industry has made progress in adapting to market conditions, expanding education and making adjustments for distressed homes used as comparables. The quality and variety of market data available to appraisers has mushroomed in recent years. More MLSs are making current data available and “big data” companies are aggregating data from appraisals, public sales, lenders and MLSs.

Higher-Risk Mortgage Appraisal Documentation: This regulation establishes new appraisal requirements for higher-risk mortgage loans. Mortgage loans secured by a consumer’s home with interest rates above a certain threshold are considered higher-risk under the Dodd-Frank Act. Lenders making higher-risk loans must use a licensed or certified appraiser to conduct an inspection of the interior of the property and prepare a written report. The rule mandates additional valuations – at no cost to the consumer – if the seller acquired the property for a lower price during the previous six months.

4. Fannie Mae’s Collateral Underwriter. Fannie Mae has developed (and this year is using) a new risk assessment tool to help lenders manage appraisal quality. Called “Collateral Underwriter,” it’s not a substitute for an appraisal and does not give a “right” or “wrong” answer. Rather, it is a way to ensure that any appraisal submitted to Fannie Mae meets the GSEs high performance standards.

Appraisers will not have access to CU. The system will review an appraisal only after it is submitted to UCDP, which then triggers the model that includes appraisal data to perform an analysis. CU does not function as an independent property database that allows users to enter an address and receive associated data.

The takeaway

Better appraisals, better understanding of how to work with appraisers, and better consumer education when it comes to pricing, means that making offers should result in better deals where borrowers don’t get in over their heads and sellers get the price that their properties are worth.

Steve Cook is editor and co-publisher of Real Estate Economy Watch, which has been recognized as one of the two best real estate news sites in the nation by the National Association of Real Estate Editors. Before he co-founded REEW in 2007, Cook was vice president of public affairs for the National Association of Realtors.

Op/Ed

A guide on how to nail your next video presentation

(EDITORIAL) While the tools themselves tend to be user-friendly, preparing an online video presentation requires some extra steps you need to be aware of.

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Pretty much everyone who can work from home is working from home now, to stop the spread of COVID-19. It’s a good thing, but may take some getting used to. The learning curve can be steep. Working from home means using new tools and expanding their tech experience to include video calls or a video presentation.

Fear of public speaking is already a common anxiety. Throw in being forced to use new technology to create a video presentation, and the challenge grows. Never fear, though, because just like with any other type of presentation, following best practices and consulting helpful tips will make your presentation go more smoothly.

First, as with any presentation, the twin pillars of success are preparation and practice. Over-prepare everything, from your research to your outline, notes, slides, speech, and–very crucial–your technology and your team. Here are several more video presentation tips we’ve rounded up to ease your pain.

Tech prep tips:

  • Familiarize yourself with your video conferencing tool before the presentation. Most companies will have a mandatory tool they use. Popular options are Zoom, Skype, or Google Hangouts, but there are other options, too, WebEx, Join.me, GoToMeeting, or Zoho Meetings.
  • Make sure your audience or team is familiar with the technology tools, too, by sending out download/log on steps in advance of the meeting. Send the instructions out twice if possible.
  • Keep the visual aspects clean and straightforward. No Death By Power Point, please. You can keep your speech and/or notes on your desk during the actual presentation, so avoid overloading your slides (if using slides at all). Participants will want some documented key points, but save the supporting details for the spoken aspect of the presentation.
  • In an ideal world, you’ll have some help, a team member to serve as a moderator, recording the presentation and taking charge of the participants’ options. The “Mute All” button, for example, is a presenter’s best friend.

Setting the scene:

  • Find a quiet room, one that will stay quiet throughout the presentation. Ideally, you’ll have a door that locks (with TVs, kids, partners, and pets on the other side).
  • Check the lighting before the actual presentation begins. Harsh overhead lights cast a ghoulish light, while sunlight or otherwise bright backlights make you difficult to see. Do a practice run with a friend or colleague to make sure your lighting works.
  • Choose a clean, simple backdrop and verify that nothing questionable shows up. While a bookshelf may serve as a nice backdrop, try not to have the Kama Sutra or Lady Chatterly’s Lover prominently displayed. The same rule goes for background art–if you wouldn’t put it up in your actual office, then it doesn’t belong in a work video.
  • Better yet, if you’re using Zoom, you can choose a custom backdrop to avoid any overlooked, embarrassing personal objects in the frame.

Presentation day checklist:

  • Practice! Whether you do this the day before or the day of, you need to practice your presentation. Some prefer the mirror, others a real, live, accommodating person, still others a sofa full of stuffed animals. Whatever works for you, make sure you practice. It matters.
  • Wear something you feel powerful in. If you feel you look professional, you will be that much more confident when presenting.
  • Lock that door if at all possible. If you can’t, make sure other household residents know you’re giving a presentation.
  • Close out all unnecessary browser windows. Emails popping up in the corner of your screen are super distracting, and you have zero control over their content. I once was in a training where the presenter hadn’t closed his email, and a coworker emailed him complaining about the clients–to whom he was presenting. The email popped up on the screen for a second or two before he could close it. Disaster!
  • I said it before, but am repeating this, because it’s important. Double check that the participants are muted. The background noise of several people logging in is excruciating and wastes time.
  • Begin the meeting with a quick overview of the agenda. Participants need to know when and how they can ask questions.
  • Start the meeting on time. After the agenda, dive into the goals of the presentation and then the body of the presentation itself. We have to assume the participants are grown up and professional enough to call in on time. If they miss a point or two, they will have to figure it out. Plus, starting punctually lets your audience know you are aware and respectful of their time.
  • Similarly, finish on time. If you cannot answer all the questions during the presentation, assure them you’ll answer them afterward.
  • Let participants know you’ll follow up and how. Tell them how to reach you with questions or additional information.
  • Follow up as promised!

Shifting gears from an office environment to a home office takes some adjusting. It can be tricky, as shown by Poor Jennifer and others. Adding video conference tools into the mix is not everyone’s cup of tea. However, with some preparation, practice, and consideration of the above tips, we can all ace our video presentations. Break a leg!

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Op/Ed

Governors fail renters miserably, a 90-day rent freeze is the only option now

Independent contractors whose only sin is renting instead of owning, are facing evictions even as Governors put tiny bandaids on the situation. A 90-day freeze is the nation’s only option to avoid mass migrations or spikes in homelessness.

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New York Governor, Andrew Cuomo announced Friday the state would observe a 90-day moratorium on commercial and residential evictions to give residents and businesses a break after so many have been ordered to halt operations during the COVID-19 global pandemic.

Various states are debating moratoriums on mortgage payments, and for those that aren’t, banks are frequently tweeting that forbearance options are available and reminding property owners of the allure of current refinancing rates.

Several states are announcing similar moratoriums on evictions, but in some states it’s a ruse.

For example, Texas Governor Greg Abbott issued an emergency order to suspend all residential evictions (barring criminal activity) through April 19th. But what the press releases don’t include is this is business as usual. Not only can evictions still be filed for April rent, many counties in Texas accept filings and set court dates around the 19th already. The only relief this ruse of a suspension offers is people being evicted for failure to pay in March.

Other states are renter-friendly and a renter can be months late – in Texas, landlords can issue a 24-hour notice to vacate on the 4th and file for eviction on the 5th, get a hearing roughly two weeks later, and an immediate order for the renter to vacate the property. Many other states are also fast to evict like Texas.

One renter opined, “Yeah sure, once evicted in April, I’ll just take my zero thousand dollars and put a rent and pet deposit down on a new place, buy packing supplies, and then hire expensive movers to take me to my new imaginary home that doesn’t exist because you can’t rent ANYWHERE if you’ve been evicted here [in central Texas].”

Meanwhile, landlords, especially multi-family properties, are able to refinance their holdings at historically low interest rates or negotiate forbearance options on their loans. This is welcome good news for landlords that own one to four units and rely on rents as their primary income. If they can all hold off payments for 90 days, the hit isn’t as devastating, plus they don’t have to turn those units at a cost.

In the meantime, national relief efforts have stalled. Senators are battling over the stimulus package (Phase 3 has failed to pass as expected today) as their political war wages on. Americans hold out hope that three weeks after being announced, a few cash money dollars might still eventually make it their way.

If you’ve spent any time on Facebook or Twitter, you’ve probably seen petitions in your state demanding a rent freeze, and you might have rolled your eyes. At first, I did too, because I secretly love the beauty of capitalism and typically balk at government intervention into much of anything.

But take a moment to think about a 90-day rent freeze.

This isn’t about empathy, it’s about an imbalance in the marketplace where some are favored over others and our government is picking winners and losers. It’s about business and the shortsightedness of this situation, particularly the willingness to get rid of renters, carrying the cost of a makeready and marketing and staff to refill those units which will be wildly difficult with so many new evictions on peoples’ records.

We spoke to several multi-family property management companies in Texas, and universally there is no plan to suspend rents owed, waive late fees that keep accumulating, or halt evictions.

One landlord told us that for his two properties, he is asking people to pay rent as they can, but as most of his tenants are freelancers, he says it’s unlikely, but he’d “rather keep them in their homes and eventually collect rent, as opposed to coordinate a makeready in this environment, not to mention the fact that no one wants to move to a new place right now when they’re told to shelter in place.”

That takes us to today in politics. Let’s say the Senate passes the wildly expensive relief bill and businesses can make payroll, and families get some money. That’s great. But what about the millions of independent contractors in America? Freelancers, Realtors, stylists, and millions more didn’t lose a traditional job, they’re not on payroll and they don’t have staff on payroll (therefore don’t qualify for most disaster assistance) – many just lost everything with no promise of a future income, tossed into a situation they have no control over.

Many of these folks are renters. And they’re screwed. Why is multi-family the only sector of the economy protected right now? They’ll get funds to make payroll, they’ll be able to skip paying their loans for a few months, but there is not a consensus in the industry that they should extend that grace to option-less people they rent to.

Some will say that putting a 90-day halt on evictions helps, but at the end of June, those people owe 3 months worth of rent or they’ll be immediately evicted. Some believe putting off the inevitable at least keeps these people off the streets. Local news is outlining resources, including motel-vouchers for the newly evicted.

How condescending, insensitive, heartless, and insulting to American renters whose only sin was renting instead of owning.

Right now, President Trump appears to be in the mood to empower governors, so governors must step up and order 90-day suspension of all rent and accumulating rent fees – landlords can’t be the only exempt entities in the nation.

Multi-family property managers will eventually get funds to cover operations and along with landlords, most will be able to take advantage of refinance and/or forbearance options, and while some states have attempted eviction freezes, nothing short of a 90-day suspension of rent (including removing all potential predatory late fees and penalties), both residential and commercial, will help the millions in America who will still be facing eviction at the end of the existing moratoriums.

We MUST take action. Local petitions are floating around, so sign and share them.

But the most powerful thing you can do right now is to send this story to your local representative – you can enter your address here and get the names, Twitter accounts, and Facebook Pages of every politician that represents you down to the local level.

The only way renters (especially independent contractors) will be treated like the rest of the nation is for people like you to speak up – tweet this and tag every one of your representatives. Then do the same tomorrow. And the next day. And the next. And don’t stop until change has been made.

Otherwise, landlords will enjoy a mass migration of family evictees come May 1st, while politicians can scramble to address spikes in homeless populations nationwide.

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Op/Ed

COVID-19: How to cope in your new home workplace (and keep it clean)

(EDITORIAL) Having a clean workspace is important while working from home, If you have to work remotely because of COVID-19, here are some tips.

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As a freelancer who has worked at home since about 2012, I know how hard it is to work out of your home. I have it even harder in some ways, because I live in an efficiency. My workspace is also my living room, kitchen, dining room and bedroom. If you’re trying to work from home during the pandemic, you may not feel as productive as normal. These are troubling times, so it’s understandable. Give yourself a break. Here are some things that I’ve learned to help maintain some semblance of normalcy without an office outside my home.

Keep distance between home and work

When work invades your home, it’s hard to have a good work-life balance. Get into a routine, preferably the same one you had when you went to work. Get your coffee and breakfast. Dress for work, maybe not as much as you might if you were going into the office. Brush your hair. Tell yourself you’re starting work. Wipe down your workspace with cleaning wipes before you start. Take breaks during the day. Eat lunch away from your workspace. When you’re done with work for the day, close the door to your office, either literally or figuratively.

Declutter your workspace

Seriously, you’ll work better when your desk (or kitchen table or wherever you’re working) is clean. Harvard Business Review makes a good case for keeping your workspace clean. Don’t think that you’re going to spend a day cleaning and be ready to work the next day. If you haven’t decluttered in a while, you may need to tackle the jobs one at a time.

First, get your desk cleaned off. If your employee expects you to work from home, you need to be productive. Take 10 to 15 minutes to deal with the clutter on your desk or workspace. Start the day out with a clear space. At the end of the day, clean up again. Wipe your desk down with Clorox wipes. Use this as your mental commute. Make a list of what you need to start on the next day. Leave work at work, even though you’re home.

Take the tortoise approach to organizing. You can’t completely undo days of clutter in just a few minutes. Figure out which places are the priority. Cleaning off your kitchen counter can immediately make your home feel tidier. Tackle those chores in 10 to 15 spurts. Do what helps you work. For me, I need to have the floor vacuumed and swept. I take 20 to 30 minutes before I sit down to work and do some clean-up. When my dishes are done before I start work, it’s easier to get lunch ready and get back to work quickly.

Don’t just veg out in the evening. Spend 30 minutes cleaning up and wiping down surfaces. You’ll be less distracted the next day when you can go into your bathroom and not feel as if you need to clean up. Do laundry and other chores in the evening to leave your day free to work.

Dealing with cats

My cats constantly walk on my laptop. They would sleep on it if I let them. Instead of closing it every time I get up, I place an upside-down laundry basket on my laptop when I’m just going to be gone for a few minutes. I also make a point to play with them every couple of hours. I put a basket on my desk for my cat to be close to me without being on top of me when I work. Beyond that, they’re just annoying sometimes. Even when it’s not cold and flu season, I wipe down my desk with cleaning wipes because my cats are a mess.

I don’t have young children, so I’m not even going to try and offer any help there. All I can say is that we’re all making sacrifices during this pandemic. Your job may have to understand that your kids are home with you. Your kids may have to entertain themselves for a while. Try to find something to laugh at each day. Even though we’re social distancing and sheltering in place, find ways to connect with your loved ones. Just don’t forget to clean all surfaces with Clorox wipes. Wash your hands.

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