ASK DAN: Answering the Exposure Time Question

By Dan Bradley, SRA, CDEI

Question: Dear Dan, can you please shed some light on the concept of exposure time, and the USPAP requirements that relate to it?

Answer: A lot of appraisers have questions about exposure time. You are certainly not alone. Exposure time is defined in USPAP as:

EXPOSURE TIME: estimated length of time that the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal. Comment: Exposure time is a retrospective opinion based on an analysis of past events assuming a competitive and open market.

Exposure time is an opinion, developed by the appraiser. How do we develop this opinion? Statement on Appraisal Standards Number 6 (SMT-6) in USPAP provides guidance on exposure time.

SMT-6 states:

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Fannie Mae Updates Its Selling Guide

By Daniel A. Bradley, SRA, CDEI

Fannie Mae recently announced changes to its Selling Guide by issuing Announcement SEL-2011-11 on October 25, 2011.

Most of the changes outlined in this announcement pertain to loan documentation and delivery issues between originating lenders and Fannie Mae, and are not important for appraisers. However, there are three appraisal-related changes to the Selling Guide that will change the way appraisers prepare reports for Fannie Mae lenders.

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Real Estate Appraisal Named a Top Performing Industry for 2011

Dan’s Take: Low Barriers?

By Dan Bradley, SRA, CDEI

Recently, Inc. Magazine’s online site published an article titled “6 Top Performing Industries for 2011”.  The article lists “Real Estate Appraisal” as one of six industries with a bright outlook for 2011. Quoting from the article: “Looking to launch a business in 2011 but not sure where the best opportunities for success lie? IBISWorld has targeted six industries heavily concentrated with small- and medium-sized businesses that are poised to grow in the year to come.”

I like reading positive information about my chosen profession (BTW – it’s a profession, not an industry, but I won’t quibble over semantics). With all the doom and gloom that we hear all the time about being replaced by AVMs and having our profession co-opted by lenders and AMCs, it’s refreshing when someone sees a light at the end of the tunnel and doesn’t hear a train whistle.

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Dan’s Take – The Customary and Reasonable Mirage

By Dan Bradley, SRA, CDEI

I like to think of myself as a realist, as opposed to being an optimist or a pessimist.  For me, the glass is neither “half full” nor “half empty”; it contains approximately 6 ounces.  When it comes to the issue of customary and reasonable fees, however, my take is that not only is the metaphorical glass half empty, but the beckoning oasis that has been promising to fill up the glass is merely a mirage.

When the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law, mandating that lenders and AMCs pay customary and reasonable fees, appraisers everywhere stood and applauded (some quite literally!)  The Act did not specify exactly what was customary and reasonable – instead this responsibility was delegated to the Federal Reserve Board.  In late October 2010, the FRB released an interim final rule for implementation of the Dodd-Frank Act, and it appears that customary and reasonable has been defined to mean essentially whatever an appraiser is willing to accept.  Allow me to explain…

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ASK DAN: Feeling Pressured in the Midwest

Dear Dan,

I need to know how to file a complaint against a real estate agent for appraisal pressure.  If you can, would you send me or call me with that information on how to achieve that?  Thanks for any and all assistance in this matter.

….Feeling Pressured in the Midwest

Dear Pressured,

Thanks for placing your confidence in McKISSOCK to answer your question.   Unfortunately, there is no single entity to turn to in filing a complaint of this type.  One of the components of the HVCC was to be the establishment of an Independent Valuation Protection Institute. The (IVPI) was intended to be an entity to which complaints such as yours could be addressed.  Alas, it is apparent now that the IVPI will never be created.

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My Take: Dan Bradley, SRA, CDEI

There was much to be gained from the Association of Appraisal Regulatory Officials (AARO) conference which was held in May in San Diego.  I mean, when you put several dozen appraisal regulators, representatives from appraisal organizations, AMCs, attorneys, and appraisal education companies all together in the same room, you’re going to get magic. (Okay, in fairness, you’re going to get a lot of hot air, also.)

One of the particularly enlightening speakers was Barry Shea, who is a current member of the Appraisal Standards Board (that’s right, the folks who are responsible for USPAP).

Mr. Shea provided an interesting take on the new 2010 USPAP requirement that an appraiser must disclose to a prospective client any prior services provided by the appraiser relating to the subject property, and must provide an additional disclosure in the certification.

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MY TAKE: An Appraiser’s Response

(Note from Dan Bradley, McKissock Chief Appraisal Officer: I received several responses to my editorial comments regarding the HVCC, Freddie Mac, AVMs and appraisal quality in the Winter 2009 issue of the McKISSOCK Quarterly. One of the best and most thoughtful responses came from Lou Shepherd, a certified residential appraiser in Orlando, Florida.  He makes the following observations.)

I agree with your opinion on the recent HVCC statement made by Freddie Mac.

The system is broken. The residential appraisal office business model is no longer viable. Over a short period, the service concept has been distilled down to a product. The marginalization of the appraiser’s role is due to efforts of AMCs in commoditizing appraisals. The nomenclature has been changed to reflect something less than an appraisal. The language has changed. The term “valuation product” is a systemic antidote. In the residential mortgage arena appraisers no longer provide a service. They provide a product, which can be delivered utilizing a least common price denominator. The most egregious of these “products” is the Broker Price Opinion.

Most of us are aware of physicians complaining about the impact HMOs are having on the practice of medicine. There is a direct parallel between the Insurance Company/HMO/physician relationship and the Lender/AMC/Appraiser relationship. HMOs and AMCs share similar commoditizing goals of professional services to their benefit. There are no safeguards for the physician or appraiser. There are no benefits to the patient or borrower.

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