My New Blog

Glenn Beck and the rest of the “Entertainment Media”:

“In my opinion, 70% to 80% of appraisals that were done during the housing boom are probably not worth the paper they’re written on because the appraisers…were rewarded with more volume…”

Jonathon Miller, New York Appraiser during interview with Glenn Beck

I am sure many of you watched the interview Glenn Beck gave to Jonathon Miller. When someone first told me of it my initial thought was to lambaste the appraiser. I have thought on it for some time now, and I realize that while the percentage seems high that Mr. Miller quoted; for me to say he’s wrong I would be just as unfounded in my opinion. I hope that the percentages are not that high, but I truly do not know. I do think it is unprofessional of Mr. Miller to throw out such an unfounded estimation.

I applaud his courage to step out there, but he tossed us all under the bus whether he intended to or not. Mr. Beck, like every other talking head out there grabs the first person spouting numbers that sounds sensational enough to draw ratings and he lets one nut job paint a bleak portrait of an entire profession.

Why is there not more coverage of this issue in the media and amongst the candidates for office? The simple solution really boils down to the pressure from the lenders. No appraiser woke up one day and said “Gee, today I want to eat breakfast and then go commit mortgage fraud before my 2 o'clock massage.” The fact is there are immoral appraisers, but the lending industry, mortgage brokers in particular, made huge profits by trolling for inexperienced or unethical appraisers. Their pressure and willingness to push for the sake of a commission is what caused this.

The interview and segment was not all bad, but it did paint some mighty big brush strokes. I know of many ethical and upstanding residential appraisers. Why does Mr. Beck and the rest of the “Entertainment Media” not focus on the issues that really matter, oops I forgot they are busy covering dead movie stars with fake breasts and their custody issues.

I mean here we are:  a state level official has decided to strong arm Fannie Mae and Freddie Mac into an agreement that will stall investigations into their failure to protect the public.  I may be wrong, but I thought that our Federal Goverment had oversight here and should step in to decide if a formal investigation is warranted.  I think Cumo is trying to do the right thing, however it looks like his proposal is full of loop holes.  These loop holes are not really benefitting the individual appraisers, or the public in general. 

I do toss out there that all “Entertainment Media” professionals to please hear the cry for you to shine some light on a real story that really matters. I am sure your ratings will not drop to the extent that you think to cover some news that impacts each and every American homeowner out there.

So what say you Bill O’Reilly, Sean Hannity, Anderson Cooper, and the rest of you folks who have glaringly over looked the Andrew Cumo led HVCC and subsequent IVPI proposal headed up by George Dodd and Pam Crowley? I think it is time for you to leave the un-needed concerns of the entertainment world and see that America is aware of something besides what jumps up ratings. I do believe that all of you are tired of being led by the hand to cover worthless topics. I would hope there are real journalistic principles in your collective and individual consciousness.

I would think that since many of you have reported on the sub-prime problems and how they have affected minorities you would think the possible changes news worthy. As appraisers we want the ability to fairly do our jobs so we can help honest Americans make sound decisions.

Anderson Cooper: http://www.cnn.com/feedback/forms/form5.ac.html?10

Bill O’Reilly: oreilly@foxnews.com

Glenn Beck: me@glennbeck.com

I wanted to follow up the blog I sent out a few days ago with some real information this time. 

As many of you know I work as a reserach fellow with A La Mode, which is the largest software company for real estate appraisers in the country.  I have just completed a new article regarding the field data gathering application called Da Vinci.  There is also a link there to a review of the Motion LS slate tablet that I have been running the prototype on.  If you have been in the market looking for a good tablet, you should check this out. 

You can link to it here: http://www.alamode.com/labs/articles/A030.aspx?ClickID=LABS1007&ClickThruEmail=woody.fincham@fmava.com&ClickThruCustomerNumber=0

I am very proud to be a part of this research project and I hope that you will take the time to read about what your friendly neighborhood appraiser is up to when he isn't appraising your files.  

Here's to a successful October to all of you. 

Woody Fincham

President

FM & Associates, INC 

Woe, what a time we are all having in the residential lending world the past couple of weeks.   With the shut downs, and closings of many mortgage companies, people are starting to get panicky.  Major companies’ stock values are declining and before we all know it many companies that are still here today, will be gone tomorrow. 

I feel sorry for the people that are loosing their jobs; they do have families (many with children).  It has been inevitable for some time though, with so many people becoming hires of the industry.  We will see many agents, loan companies, appraisal companies, and title companies be forced out of business in the next several months. 

Many folks jumped in thinking they would make millions by striking while it was en vogue to be here.  It is fine with me that the folks who are only interested in the money are leaving.  The folks that want this as a career will be here when it's slow, just as they have always been.

Many of us are good at what we do and have a loyal following.  Many of us, us at FMA included, are still marketing and getting new clients, based on that following.  This weeding out period is healthy as an overall correction.  While being sad, it is a needed evil of economics.  I guess that is why they call economics the dismal science. 

We will all prevail through it, but don't let the down turn in the market persuade you to stop getting more education, more marketing done, and more shoring up of your position as a leader in your respective fields. 

 Friday, July 06, 2007

Nothing real industry related with this update, just a desire to wish you all a happy 4th of July week.  I realize I am posting this post holiday, business is still clipping along at a decent pace, so I am staying rather busy with everything. 

I was fortunate enough to spend a portion of my Saturday with some of the Nations finest and their families.  One of the young ladies that I coach made sure I got to attend a speacial sneak preview of Transformers. 

This being a story/toy line from my childhood, I was quite interested in seeing it.  The screening was at the Norfolk Amphibious Base, and considering that many of the guys that enlisted now, grew up as part of my generation, it was quite fun seeing the story brought to "real life", as it were.  I really enjoyed it, and many thanks to Chaya and her family.  I also have to say it was a true joy watching it, I felt like I was 10 years old again.

I also want to give thanks to the fore fathers that establishe an fought for this great country.  In that is also a very special prayer and well wishing to all the great men and women that have served, and those that do serve.  We all owe you our lives, alleigance, and respect.

Happy 4th of July!!!

Woody Fincham

 on behalf the Staff at FM & Associates Appraisal Services, Inc 

It is great to be back from Las Vegas.  I was there working a booth for the annual Wintotal, or a la mode software company.  I am a research fellow with that company, as I help them come up with new ideas for appraisal applications. 

They announced the new Da Vinci platform, which is a filed dfata gathering application athat allows appraisers to use tablet pc's to collect field data.  They also showcased the new Armstrong platform, which will eventually replace the current Aurora platform. 

It was an exhausting week for me, as standing on your feet all day is hard work, so hats off to you folks that wait tables, or work retail.  I enjoyed it, a sit allowed for me and the other Labs Fellows to meet and chat with appraisers from all over the country.  We were all moved by the strong showing of support for each of our individual projects. 

More on that later, but in the mean time you can see all the vegas info at alamode.com/labs. 

Woody 

We are looking to lease our facility on Lynnhaven Parkway in Virginia Beach. This is a great space for folks looking for prime commercial exposure for a small business. It would work well for a start up Mortgage Company, real estate office or even a virtual business that needs some staff space. There are 4 private offices, with a large open area and another office that is being used for a server/file room now. All infrastructure wiring for phones and high speed internet are in place in the current configuration. It includes five marked spaces for parking. The utilities and common area maintenance fees are divided amongst the tenants, and being that this is the smallest space it has the lowest fees. Don’t pass up on the chance to be in a great location close to major mortgage companies, attorney’s and the Lynnhaven mall shopping area.

The lease must be for the term ending May 1, 2009 and include a personal guarantee to take the space. 

The space is 1,182 square feet per land lord's sketch. 

It really is a great space, but we have decided to try and move to a more centralized location considering we cover the entire metropolitan area.

Please inquire with Woody Fincham 757-965-4903

Hey folks, sorry it has been a while since I've updated the blog.  I have been very busy with fee work, my coaching responsibilities and my a la mode projects.  I am happy as I am constantly occupied, I am always just a little short on time to get everything done.   

For the time being I am just going to provide two links to my articles with the labs project at a la mode.  Read them and let me know what you think.  My newest article will be up soon. 

http://www.alamode.com/labs/A001.aspx

Above is my first article.

http://www.alamode.com/labs/A008.aspx

Above is my second which expands on the first.

Before I jump on my soapbox, I do want to strongly make it known to readers of this article that I work with top notch professionals everyday. What I am writing about here is referring to an increasingly smaller amount of con artists that specialize in taking advantage of their customers, and the companies they work for. There are many people in this industry that do their job above beyond ethical and professional requirements. I consider it a privilege to work with many of them.

Once again I am reading articles regarding mortgage industry problems. This time through it is non-prime lending that is making headlines. For those of you outside of the industry reading this, on-prime or sub-prime loans are for folks with less than perfect credit scores. Like the last time there was a problem with mortgages, appraisers are taking a huge amount of heat. I will be the first person to say that appraisers deserve what they get when they intentionally lie or “massage” data to get pre-determined results. The root of the problem is not just appraisers who are in the back pockets of mortgage originators. The root of the problem comes from how mortgage companies do business.

Like many businesses in the United States, the mortgage industry relies heavily on commissioned employees or commissioned sub-contractors to sell their products, in this case, originate or bring in clients to apply for loans. That’s all fine and well and on paper it looks like it is a workable concept. It does run into some inherent problems, most of which revolve around human nature.

Whenever the general public does business with an unregulated business, there are all kinds of things that can go wrong, and often do.

Wait!

Put on the brakes!! The mortgage business is regulated isn’t it? (It is, but it isn’t, and I can speak of the State that I work in, Virginia, with some authority, but the remaining country I am not well versed on. So some of this will apply to many of the states out there, but some of it may not.)

Most states require that to do business in their borders you have to work for a licensed company. Now in Virginia, there are lenders and there are mortgage brokers. In the lender realm you have mortgage companies, banks, credit unions, and other types of companies that underwrite process and originate their loans. The mortgage brokers are generally sort of like a middle man that acts as an originator, but is actually brokering the loan to a secondary lender, or private investment company that is actually lending the money.

Many of the larger companies Like National City, Countrywide, Wells Fargo, and many, many more companies are very good about training and making sure their originators are pretty much staying within the applicable laws to lend money. These companies are very heavily policed, and do their best to make sure they can keep lending money. That is why these companies are well known for their prime lending, or loans that are available only to those with good credit.

Most of the big mortgage companies will not lend their own funds to non-prime borrowers. They do broker most of these products to other lenders, as their corporate structures do not like the risk that less than perfect credit lending can have. From what we are seeing now, I can’t say that I fault them.

Mortgage brokers, are often times, small companies that live or die by whether or not they can make a loan close. Most of these companies make no money, if they can not close a loan. They are not a division of a bank, or other related fields, so lending fees are important to them. There are very large mortgage broker companies out there that lend money to many states, most of which they do not actually have offices in. They work from a central location(s) and receive most business from cold calling, mail solicitations and print/internet ads.

So far it all sounds pretty harmless, doesn’t it? Well it would be if that were the end of the story, but it isn’t. When these companies are trying to get approval for the loans, they have to of course make sure the borrowers meet minimum criteria, or the Underwriter is going to say no, and that customer goes from being a possible stream of income to a waste of time for the loan officer.

Underwriters want each loan in this non-prime category to basically be a round peg that fits into a round hole. The loan to value ratio should be promising, the borrowers income is outstanding, the borrowers look to be moving in the right direction every where, and of course they are not buying beyond their means.

The appraisals that are performed for these types of mortgages are very important. Normal appraisal guidelines are often not as stringent as the requirements that are placed on sub-prime loans. As an example, if I need to go to another neighborhood to find a comparable for my subject, and this is normal for the area and the comp is a perfect match to the subject, many sub-prime underwriters will not accept it in the report. They will ask for additional comps, preferably from the neighborhood, even when they are not available. They will put so much emphasis on the appraisal report, that if they are not satisfied that home is worth what the appraiser says, and that the report he sends in does not meet the checklist of requirements they want met (no matter how irrelevant they can sometimes be) they will either deny the loan, ask for a second opinion or review, or they flat out deny the loan based on the appraisal. I totally agree that they should put merit to my report, even more so when there is a higher probability of foreclosure.

It still sounds like everything is just fine doesn’t it? Well let’s get just a little deeper, and we will see where the rabbit hole leads to…

This is where things get a little hairy. Many loan officers, when they don’t work in an area very much, will canvas appraisers within the local area of their borrower’s home. When I say canvas, I mean canvas like they are expecting certain criteria to be met. I bet you guys can’t guess what the main question is on the request when they solicit for appraisers. If you guessed turn around time, license status, price, resume type qualifications, or ability to perform the work competently, you would be wrong. The most requested thing they want to know is, my borrower thinks that their property is worth x, can the property make that value, or higher? This is called pre-comping a property.

It should be noted that it is illegal for an appraiser to provide an estimate of value, without performing an appraisal. In the state of Virginia, oral appraisals are considered to still be a binding report. In order for an appraiser to provide an opinion of value, he/she is supposed to perform a number of required practices to arrive a supported value opinion.

Once more, I have to re-iterate that I have done business with many of the companies that lend money as mortgage brokers and as lenders, and most of them are very ethical and do what they are supposed to, at least from my perspective.

Many appraisers are very small businesses, such as a one man to two man operation. They end up being in the same boat as many of the mortgage brokers: no work, no money!

Some appraisers, especially right now, are literally at the point of saying “if I don’t give them what they want, then I am going to go bankrupt.” This is a situation that is dangerous for both the lender and the borrower. I am seeing reports all the time now that are estimated at higher amounts than what could realistically be seen in a sale on the open market.

I really want to pound on this fact: I abhor lying appraisers; they should be sought out and removed from the business. In all honesty many of these appraisers are on their way out anyway, due to the downturn in business volume. Many of these folks got into the business as a quick way to make money, and that train has left the station.

These unethical appraisers are directly linked to the loan officers that seek them out. These types of loan officers are not interested in what is best for their client. Their interest begins and ends with the maximum commission they can get from the product they want to use. They are not interested in an appraiser that will help the borrower make sound financial decisions; all they are after is the biggest value.

My state’s board for mortgage lenders, The Bureau of Financial Institutions, has proven to me they are not set up for fraud like this. I contacted them regarding this type of practices on a lender that not only asked me to promise a value, but also was very nasty to me when they were told we can not do this. This loan officer had also canvassed about 20 appraisers from what I would tell from the cc line in the email.

The board contacted me and explained to me that there are no laws in Virginia that are set up to handle complaints from appraisers. Essentially the only people who could complain were consumers. That blew me away, and it still does 4 months later.

The mortgage industry, HUD, VA, and all sorts of industry giants all consider the appraiser as the “lynchpin” in the transaction. Meaning that we have the power to see that a deal is ethical or not, and our involvement with it is a matter of professional ethical conduct that is directly related to the appraisers professional obligations to the lender, the borrower and the community at large. So why does my own state refuse to act on what is obvious coercion from the lenders?

That is a question that only they can answer. I refuse assignments when they are directed at harming the borrower, and when I am expected to do things that are not on the level.

I see the Federal and State levels will pretty much handle this similar to how they handled the S&L crisis in the 80’s. In that debacle appraisers were required to have licensing and certification requirements that revolved around minimum education requirements and such. The appraisal industry will be going into it’s second increase in competency and education requirements on January 1, 2008. There will actually be a college degree required to get a license, and the appraisal education hours will significantly increase. This will exclude many un-qualified folks from becoming appraisers, but does little to influence currently licensed folks.

The next logical step in this process is to require Loan Officers to undergo similar education and licensure requirements. Some states already have some, but they should be put to task just like the appraisers. They should also be put under investigation whenever a complaint is received at the state level. As an appraiser people can complain anonymously against me and the state board still has to validate the grounds for the complaint. I can be found guilty in such a situation, and so should any other licensed professional.

Will licensure clean up practices? Perhaps, but it is a step in the right direction. Appraiser licensing has helped some, but it is still an industry that could see more regulation.

Appraisers are to blame to a degree with the sub-prime fall out that we are seeing now. In my opinion, this problem would be reduced by a large degree if the loan officers, who are vastly unregulated, were regulated and licensed. The dis-honest folks who are loan officers would have no choice but to either start doing right by their clients or do something else. I really think the industry as a whole has more egg on it’s face then does any appraiser.

Tax Assessments in Hampton Roads

By Woody Fincham

It is very likely that, living in Hampton Roads, that your tax assessment for real estate has gone up quite a bit in the last few years. I know mine has, and the local paper makes it’s job to present the situation as sensational as possible.

The mere fact of the matter is that the cities have been playing “catch up” with the market. Very likely, at least in most cases, the city is still behind in actual market value for your home. In the case of tax assessments, the assessor never walks onto the property. It is done via “mass appraisal technique”, and it generally is lower than what an actual appraiser would report as value.

I discussed this with a Norfolk assessor this past St. Patrick’s Day weekend. He told me that in several cases that he gets phone calls from citizens who are complaining, and insist that the city lower the taxes. He then tells them he would be happy to come out and do a full property inspection on order to clarify the situation. Upon arriving he usually sees things that are actually not included in the current assessment, and it makes the assessment increase.

That does not mean the assessor does not make mistakes from time to time. I have performed a couple in the last 18 months that have actually been higher than I could prove with comparables from the neighborhood. I am sure the folks we performed that report for immediately asked for their taxes to be fixed.

More often then not, I see mistakes in the way the property features have been reported. I won’t mention any names of the cities that do this, but as an example: the square footage is wrong, and often higher than what is there. I have seen this many times, and it can only result in the city having taxed the owners more than they should have. This often is prevalent in older areas, where the cities were using arcane methodology, and for some reason they haven’t gotten around to fixing it yet.

Now, there is a huge myth that I hear very often: “if you value my house at $100,000, and the city is supposed to be 20% under that, then my value should be…”. The honest answer is that is a complete waste of logic. Our cities and counties here, from what I know of them, try to establish market value. Remember that they are always about a year behind, and that in the market we are in, with the ebb and flow, values are subject to rising and falling some.

Hiring a fee appraiser, or independent appraiser such FM & Associates, can help you gather a piece of mind without initially involving the assessor’s office. If they do happen to be in the wrong, you can have a disinterested professional source upon which to base your concern. We will measure the property, take accurate notes, and create a very honest and market supported report. Even if you do not learn your property is over value, at least you will know what the salient features and other relevant items in your home are properly shown and accounted for.

Below are some links to the local city webpages, where you can look at your tax information.  Some cities have better information available at the assessors office.

http://www.norfolk.gov/

This is Norfolk's home page.  Once you reach that you click on the city services pop down and follow the links for  Real Estate Assessments".  This information is very limited and Norfolk actually has a very well put together system in their office that is available to the public.

http://198.252.244.20/e-gov/Real_Estate/index.jsp

This Virginia Beach's webpage for tax assessments.

http://www.chesapeake.va.us/services/depart/real-est/app/welcome.shtml

This is Chesapeake's webpage for tax assessments.

http://www.portsmouthva.gov/assessor/data/

This is Portsmouth's webpage for tax assessments.

http://www.suffolk.va.us/realest/

This is Suffolk's webpage for tax assessments.

http://www.hampton.va.us/sol/propertysearch/index.html#

This is Hampton's Webpage for tax assessments

https://www2.ci.newport-news.va.us/reisweb1/

This is Newport News's Webpage for tax assessments

Above includes the majority of the area we cover.  If you have any questions please let us know. appraisals@fmava.com

March 8, 2007

Today marked another successful informational seminar for a local real estate office.  Woody spoke before approximately 20 agents at Nancy Chandler & Associates, at their Norfolk office. 

Woody gave a structured review of an appraisal form 1004, and ended with a very informative question and answer session.  We have done several of these in the past 2 years, and welcome the opportunity to help bridge the gap between the fields.  It really is important that agents understand why and how appraisers obtain and use market data.  It helps them be better prepared for the appraisers they encounter in their day to day business. 

Topics covered included: matched pair analysis, cost approach, differences in licensed appraisers and unlicensed assistants, and several other minor topics.  The agents at Nancy Chandler, with their Managing Broker Hope Roots, asked some very thoughtful questions, and all seem to be of the best professional caliber.  It was a great pleaseure to have been able to spend time with them, and we look  forward to continuing to work with them in the future. 

If you are a local realtor, or loan officer that would like to have us come in for a free informational hour, please contact us at appraisals@fmava.com

I don't have any hardcore numbers for the area, in terms of foreclosures expected or current at this moment, but I wanted to let everyone know that we are no doing our 9th foreclosure use appraisal in 3 months.  We didn't do that many in the last 12 months preceeding that. 

That leads me to beleive that there is a high increase for the market.  I get questions about this almost daily, so I figured I would put that stat up.  I iwll have more info soon.   

Well blogging seems to be the buzz word of the year.  It seems everywhere I go someone is either talking about their personal blog, or about someone else's blog they love to read. 

I guess it's time we start doing it as well, especially since our provide has now created software to do it.  So we will be posting new blogs as time goes by and I hope that you all take an opportunity to subscribe with us and learn more about our company and whatever else we are doing at the moment.