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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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home sales

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.

Op/Ed

6 questions to determine if you are exhausted and feeling burnout

(EDITORIAL) Six questions can determine your feelings of workplace stress and burnout, and knowing is the first step to curing the problem.

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man laying head on computer representing burnout at work

Everyone feels the stress of the job. Even if you are one of the lucky few who holds what they deem their “dream job,” there are days where not everything is picture-perfect. With the technologically based world we live in, it’s hard to deal with being constantly attainable. After we are through putting in our hours at the office, work continues to follow us home with every email that pops up in our inbox. The stress of not allowing yourself a significant work-life balance can lead to work burnout.

Burnout causes and effects

Studies in organizational communication have examined the causes and effects of workplace burnout. The causes are divided in dimensions of emotional exhaustion, lack of personal accomplishment, and depersonalization.

With emotional exhaustion, a worker may feel fatigued, frustrated, and fed up with their work. Lack of personal accomplishment leads to feelings of failure or incapability.

Finally, depersonalization causes a worker to feel like a cog in a machine, rather than a valued employee. As a result, they may begin to dislike coworkers.

The effects of workplace burnout come in the form of physiological, attitudinal, and organizational. Physiological effects may see spikes in blood pressure and heart disease.

Attitudinal effects see reduced job satisfaction and lower commitment to the organization. And, if burnout is continuously felt with a particular job, the organizational effect could be a high turnover rate.

Ask yourself these six questions

Dr. Steve Albrecht posed six questions one must ask themselves to examine their level of workplace burnout. He suggested that the questions will determine whether one’s workplace burnout is low, medium, or high.

1. What do I like about my job?
What aspects of the job help get you out of bed in the morning? Do you feel like you are doing something you’re good at? Do you feel valued? These feelings, along with tangible aspects, such as salary and benefits, are important for anyone in any job to consider.

2. What do I hate about my job?
Consider the hours, pay, people, responsibilities, etc. Are these items helping or harming you in the workplace?

3. What do my coworkers do that makes my job easier?
Colleagues can make or break a job. Many people often find themselves in workplace cohorts, as work is their main source of socialization. Are these people beneficial in that manner, in addition to being helpful with practical application?

4. What do my coworkers do that makes my job harder?
If you’re on the outskirts of the aforementioned cohorts, that can make the workplace less enjoyable. Are the people you’re working alongside unprofessional? Do they neglect to help with tasks?

5. What does my boss do that makes my job easier?
More so than coworkers, bosses have the ability to make or break the humanistic vibe of a job. If you have a firm, but caring boss, that can make all the difference. If your boss is someone you can go to with concerns, you may be less likely to feel stress in the workplace.

6. What does my boss do that makes my job harder?
Flip everything that was said in #5. If your boss is a nightmare, that is incredibly likely to lead to feeling unappreciated and ultimately stressed out with work.

Every job is situational, but it is important to be aware of the toll that workplace burnout can take on you. Life is too short to settle. I understand that it’s easier said than done, but if you are not happy with where you’re at in your career, never stop looking for other opportunities.

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Op/Ed

5 must-do’s if you want to come across as a great communicator

(EDITORIAL) When you communicate in business, you have to change your talking style to give infor without losing engagement. Here’s how.

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Being confident during a work presentation, using tips to communicate efficiently.

Mark Zuckerberg once said, “The thing that we are trying to do at Facebook (now known as Meta), is just helping people connect and communicate more efficiently.” One of my biggest pet peeves on social media is the post that goes on and on and on. I’d like to think that I communicate fairly well, but I do tend to verge into over-communication every so often. I’m not an expert, but I have learned – and continue to learn – a few things about talking and writing to other people.

1. Know Your Audience

At a board meeting of a local non-profit, I was explaining a repair project that we had to vote on. When I got finished talking about the quotes and the insurance claim and said that we will probably come out even, the acting president looked at me and said, “why didn’t you just tell us this to start out with?” I realized I had wasted about 10 minutes because I didn’t know the audience. Definitely a case of overcommunication. All he wanted was the bottom line, but I thought the board needed to know every detail. Chalk that one up to a lesson learned. When your listener’s eyes start to glaze over, you’re probably talking too much.

2. Be Intentional – AKA Don’t Go Down Rabbit Trails

When I’m with my friends, I love just letting the conversation take us down whatever path. In business, I want brevity. I’m kind of a TL;DR person. Even though I want to make sure that people have enough information, I just want the bottom line. When you’re communicating with a co-worker or boss, don’t let your message get hijacked by taking a fork in the road. You’ll lose your audience.

3. Avoid the Obvious

I hate it when people regurgitate information or tell me what I already know. Call it mansplaining or just being thorough, but it’s annoying on the listener’s side. Give information that serves your audience, not your ego.

4. Don’t Assume

I could write a dissertation on assumptions. We all know the saying, “when you assume, you make an ass out of u and me…” When you’re communicating, find a balance between stating the obvious and assuming your listener knows what you’re talking about. The simple question, “do you need more information” can be a place where you can find out what your listener needs. But I’ve also learned to avoid assuming someone’s emotions or attitude about what you’re saying. Read their face, but know that confusion and daydreaming can look similar.

5. Good Communication Improves Productivity

When you’re an effective communicator, it directly impacts your effectiveness in the workplace. You get more done because you’re not going back and forth answering and re-answering questions and providing information. There are times when you do need to provide lengthy emails or have detailed meetings. Knowing the difference keeps you from being boring and long-winded. Take a few seconds (or even minutes) before sending that message or talking to a colleague about a project. You’ll be a better communicator.

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Op/Ed

What life-lessons college taught me both in and out of the classroom

(EDITORIAL) College teaches you some things that you will (and won’t) find in a textbook but it sure comes at a hefty price.

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People meeting with laptops in a college classroom

I walk the fence when it comes to a college education. It works for some and maybe not so much for others. It’s the whole “well-rounded” education thing that bothers me: First there’s 12 years in elementary and high school learning things that, even if you never use the information, it’s important to know. I get that.

After a lifetime of education

But when you go into college why repeat the process all over again? Why not focus on a career track? Learn and do! Get into the trenches! Where the heck are/were the survival skills you need to make it in the real world? Instead you get two more years of general education requirements! Really? And that’s going to make me a better “xx?”

I chanced upon a great editorial that touches on these same questions. And it got me to thinking: A college degree makes for a perfect world and on paper it looks good. Everyone with a framed BA or two would rule the world and help consumer trust levels, but I don’t believe it would actually make for better X’s (fill in the space with the career of your choice).

The big picture

I had a moral sense of needing to graduate so my folks, bless ‘em, would have the satisfaction of seeing their kid accomplish something they never did, but in the bigger scheme of things what was the purpose of Astronomy 101? Geology? I wanted to learn how to make movies and write scripts and I couldn’t even take a class on Film Theory until my junior year? NASA we have a problem.

Lesson Number One: What I learned fast is that college is a business. If the business can make more money in four or five years instead of one or two, of course you want to drag it out and milk it for all it’s worth. What’s the rush on graduating? Relax! Kick your feet up! That was a problem back then and I still see it as a problem now.

Fear: An incredible motivator

Instead of feeling like I was in the comfort zone of the universit,y I felt like the clock was ticking. Those first two years taught me that I needed to get out of that environment. THAT much I learned! I didn’t know what was waiting for me on the outside but some internal clock kicked in and I went from 12 hours a semester to 20 or whatever the maximum was that you could take with the Dean’s permission.

Lesson Number Two: The unknown is scary. It keeps you up at night. Ties your stomach in a knot. It almost makes you do things you might not ordinarily do. I graduated in three and half years and not four or five like many of my friends because I was scared shitless. Without even realizing it, by wanting so badly to get out of school, I was learning things that would serve me well in life: Goal setting, time management and speaking before a group.

I made a short list: a) See the world. b) Get paid to write about what I saw. c) Don’t look back. I graduated on a Friday and walked into a recruiter’s office on a Monday. I should have done that a few years earlier, but it didn’t matter. Within six months I was in Europe.

The ensuing 20+ years serving all over the world is a story for another time. I wish I would have started that odyssey a few years earlier.

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