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Communicating Appraisal Results: Tips For Improvement

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The appraisal process is one of the most important and often one of the most misunderstood
aspects of relocation. Gargano outlines in great detail how appraisers can be more effective
in communicating their results to the primary stakeholder they serve.

By: James R. Gargano, Jr., IFAS, CRP

The ability to communicate effectively is the cornerstone to any successful relationship,  whether it be between spouses, parent and child, teacher and student, coach and player, or between an employer and employee. Simply stated, most relationships are negatively
impacted when productive communication channels are not fostered. It is no exception to the Relocation Industry, as it relates to the Appraisal Process. The following items represent keys toward accomplishing the effective communication of the appraisal process.

1. The Accomplished and Savvy Relocation Appraiser Recognizes That he/she is  Communicating an Appraisal to Multiple Parties.

Various Segments of the appraisal analysis should cater to each potential reading segment. As stated within the Definitions & Guidelines of the Worldwide ERC Appraisal Form, the intended user of the appraisal report are the appraiser’s client and the employer. A vast majority of corporations also allow their individual transferees to review the appraisal. The intelligent and
accomplished relocation appraiser recognizes that his/her appraisal report potentially is going to be reviewed by a variety of users. The writing style and content of the report needs to recognize that each user may have a differing level of understanding for appraisal methodologies. Certain elements of the report should be geared directly to the relocation management company and/or corporate client needs, while other content should be aimed at the transferee.

For example, the relocation company and corporate client may desire more analytical elements, such as absorption studies/supply-demand analysis, detailed commentary ofs décor and appeal, and a keen understanding of the rationale for the application of a forecasting adjustment. On the other hand, the transferee is potentially interested in more specific information related to the actual home. Including a detailed list of the transferee improvements made during the term of ownership, affirms to the transferee that the items were, in fact, considered in the overall valuation, (regardless of the actual contributory value of the improvements applied by the appraiser toward the anticipated sales price).

Additionally, when the transferee offers market data for consideration in the appraisal analysis, a thorough discussion should be dedicated toward explanation when such a property is not utilized as a primary value indicator. Offering detailed explanation as to
the omission of transferee-offered market data, will give the employee a better understanding of the rationale behind the search criteria utilized in locating the most valid comparable data.

Furthermore, dedicating a section within the report detailing the positive and negative marketing aspects of the subject property and/or marketplace, may offer valuable insight to the transferee as to the overall rationale of the anticipated sales price.

2. The Professional Relocation Appraiser Avoids the “Form-Filler Syndrome”.

Quite a few appraisers fall prey to this condition, leading to a predictable and “robotic” style of writing. Appraisers in general need to be more creative, analytical, and descriptive in their appraisal presentation. The accomplished appraiser attempts to reinvent his/her style periodically. Generating the same type of analysis year after year, is not a trait of a dedicated relocation appraiser. Simply checking the boxes of the form, and adding little detail and substance to the areas of the appraisal form, does not add value to the appraisal process. In general, clients tend to appreciate a more detailed and descriptive analysis, adding substance to the adage that the appraiser truly represents the “eyes and ears” of the client.

Along those same lines, the accomplished relocation appraiser avoids the use of “canned commentary” throughout the body of his/her appraisal. Each transferee needs to feel that the appraisal being performed on his/her residence specifically addresses the location and physical attributes of the home. Commentary concerning market conditions should never be based purely on seasonal expectations. There have been many instances when particular markets actually are robust between November and January -the heart of the holiday season. Similarly, the beginning of the Spring Market does not automatically translate into an active market environment. Markets also can be quite fluid in many regions of the U.S. A market that was considered active 30 days ago, often can become saturated quickly. Regardless of the particular time of year, the analysis of the “pulse” of a particular market must be supported by quantitative data.

Special attention should be given to the commentary utilized to describe the Listing and Comparable Sales data. Many clients have expressed a desire to have appraisal reports incorporate greater detail in this area of the report. Simply repeating what already has
been clearly outlined in the comparable grid sections does not add any value to the analysis. Telling the reader something more specific about each property, can make the appraisal report far more valuable to the corporate client, third-party reviewer, and the
transferee. Another area of the report which can provide an excellent source of information is the section for photographs. Generous use of photographs, with detailed descriptions can tell the reader about the positive and negative aspects of a particular property. For instance, detailing the décor elements of the individual interior rooms can substantiate further an appraiser’s suggestion to address the items of personalization.  Additionally, taking photographs of various positive or negative site characteristics can be a valuable reference to the reader.

3. The Professional Relocation Appraiser Understands & Cites the Worldwide ERC  Relocation Appraisal Guide

Published by Worldwide ERC, and created with the input and skills of many of the most talented appraisers throughout country, this guide should be sitting on any good appraiser’s desk as a constant source of reference. Using the guide as a specific source, can provide needed clarity and substantiation for an appraisers methodologies.

In addition, the dedicated appraiser, regardless of experience level, should also occasionally take the time to read and review the firs page of the Worldwide ERC Appraisal Form. The definitions & guidelines section of the form serves as a comprehensive refresher of the primary elements associated with the relocation appraisal process. Furthermore, it is a constant reminder of how different the mechanics and concepts of a relocation appraisal are, in comparison to mortgage related appraisal forms.

Corporations and third-party companies should consider including the first page of the Worldwide ERC Appraisal Form as part of the materials presented in a relocation information packet to transferring employees. By reading the definitions & guidelines section of the appraisal form prior to the initiation of the appraisal process, a transferee can gain valuable understanding of the parameters upon which the eventual anticipated sales price will be based upon. How many times have we heard in the appeal process of a transferee claim that the condition, modernization and/or upgrading of their home is anything but “average”. By reviewing the guidelines of the appraisal report, one would realize that an “average” classification simply refers to a rating which describes an attribute as generally typical for the particular marketplace. For instance, a newly constructed, upper-bracket residence, still can be correctly be classified as “average”, based upon Worldwide ERC guidelines, if it is located within an area/marketplace of similar residences.

4. Skilled Relocation Appraisers are Proactive in their Appraisal Presentation –

Addressing ambiguous items of a particular appraisal directly within the body of the report, can avoid a lengthy appeal process. There are many instances in a relocation appraiser’s career when an appraisal assignment can be classified as anything but “cookie-cutter”. Further explanation is required to clearly state the position of the appraisal opinion.

Primary issues that can cause a reviewer grief is the treatment of additional rooms, (what is actually a “site improvement” and what constitutes “finished space”); gross living area; and attic space. As noted in the previous section, the appraiser should be familiar with
the Worldwide ERC Relocation Appraisal Guide. This source is very clear in the proper treatment of these areas. Conformance to the guidelines outlined in this source, creates an “appraiser protocol” that should be followed to avoid serious inconsistencies between
appraisals, and in turn, alleviate the confusion and anxiety level of the appraisal reviewer.

For a wide variety of reasons, there also may be instances when a property is a unique appraisal subject. Clearly state the unique conditions of the subject property, and discuss in a direct and open manner what rationale was used when locating comparable data for the property. On the surface, the reader may not understand why a certain set of properties were used as comparables in an appraisal. For instance, there actually may be a very good reason why an appraiser uses a home that is physically or is in another
location as a comparable in a particular assignment. The appraiser needs to clarify the primary search criteria used, and why a particular property was relied upon in the analysis.

An adherence, or better awareness of the previous steps, can help the appraiser to communicate more effectively within an appraisal report. Many appraiser’s are more “technically-oriented”, and possess the necessary skills to produce a credible estimate of the
anticipated sales price. However, further emphasis needs to be placed on the writing skills necessary to convey with creativity and detail the elements supporting the estimate of value.  As the appraisal process represents one the most important components of the entire relocation process, the continued improvement in this area needs to be a requirement of the entire appraiser community.


James R. Gargano, Jr., IFAS, CRP is a Partner and Principal for Bomba Gargano Valuation, Inc., a full-service appraisal firm, with a specialty in Relocation.  Mr. Gargano is the Secretary for RAC, as well as serving as the organization’s Admissions & Membership Chairman from 2003-2007.  He was also honored as RAC’s 1st Annual Report Writing Contest Winner. Mr. Gargano served on Worldwide ERC’s Mobility Editorial Advisory Committee in 2005-2006.

(Reprinted with the permission of Worldwide ERC from February 2006 issue of Mobility).

 

Valuation Logic Provides The “Ah-Hah!” Moment

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RAC member Tim Lynch, CRP writes in:

“Received the WERC directory earlier this week and noticed that it was about the same size as last year’s directory. However, upon further investigation, I noticed that there were 30 more pages for the brokers and 27 fewer pages for the appraisers in this year’s directory as compared to last year’s directory (did not include pages including listings outside the US).

There are likely several reasons as to why this occurred but I did not look into it any further than the actual page count.”

The flurry of discussion erupted between RAC members from Tim’s quantification of something fairly abstract: was it worth it to be in this directory?

Some of the most basic valuation questions outside of a property can provide an “ah-hah!” moment like this. The ability to provide that simple moment is often the product of significant valuation experience, something all RAC members have in common.

E & O Insurance and Coverage of Your Prior Appraisal Work

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Our RAC members had a spirited round of discussions about E & O insurance that covers prior work. Their names were redacted to protect the innocent (kidding). Here are some of the ideas and themes that came up:

When shopping for a new policy, the biggest concern an appraiser is whether prior work is covered. Every carrier is different and this is clearly something to ask for. Here are some comments from RAC members:

When you retire you need to acquire what is called “tail coverage” to allow continuous coverage that may be brought after your business has ceased. I would question your provider when changing policies to find out who will represent you for past work completed prior to changing insurance providers.

The problem with changing e/o providers is that the new provider may not warrant your historical appraisals. When retiring you may need to consider a policy that covers you for the past several years as well.

You (may) need to keep copies of ALL of your policies as the claim is against the policy in place at the time the report was prepared.

A few thoughts about picking an E & O carrier (RAC doesn’t endorse specific companies):

I think [firm name] is great. You can get them on the phone and ask them questions and they are happy to provide an opinion at no charge. In my area they have offered free seminars with CE credit. The premium has stayed the same for years. If I ever have a problem, I believe they will defend me. In contrast, I think some other companies might just pay out and cancel my policy.

If you have a claim you are dealing with the carrier directly. In our experience the carrier is far more important than the agency.

(I) know that they dedicate resources specifically to the appraisal industry.

You Get a Copy of the Appraisal Whether You Want It or Not

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In the past, borrowers could only get a copy of the appraisal report completed for their residential mortgage application only if they requested one. Now the applicant no longer has to request a copy, they are entitled to a copy automatically.

In January 2014, the Consumer Financial Protection Bureau (CFPB) implemented its final rule requiring creditors to provide applicants free copies of all appraisals and other written valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling.

The borrowers will receive a copy even if the mortgage never closed. Here’s a consumer guide for the new requirement.

It should be pointed out that the lender is the one required to provide a report copy to the borrower, not the original appraiser.

“Low” Mortgage Rates Are Relative

Percent Not that long ago, we all considered a 6.5% mortgage interest rate very reasonable. Additionally, we all know how the perception of interest rates impacts the housing market.

After reading this article “Where Will Residential Mortgage Rates be a Year from Now?“, I wonder if buyers will consider a mortgage interest rate of 6.5% high and ultimately slow their appetites for buying homes?

RAC Blog Awakes from Slumber To Leverage Members Extensive Valuation Knowledge

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For those of you that don’t know me, I’m Jonathan Miller, a long time member of RAC who dabbles in social media. At our recent conference in Dallas I was asked by the RAC Board to help share our membership’s wide array of valuation expertise with the public. This web site seems like a perfect vehicle to do that.

One of the reasons I’ve remained a RAC member for more than half of my 28 year appraisal career is because RAC members are the best residential (and commercial) appraisers in the country. I always wanted to be aligned with RAC – even though my market area has always seen limited relocation work. I knew it was important to maintain access to their collective knowledge so I could continue to grow as a valuation professional…and the membership is comprised of a great group of people.

What began as an organization that literally “wrote the book on relocation appraising” for ERC is really much more than that. RAC members are also known for their appraisal expertise of complex residential properties including litigation support, testimony and reviews. So much so that RAC has incorporated that message into their new tag line – “RAC: Providing valuation solutions for complex residential properties.”

We’ll soon be providing other ways to keep connected and informed so stay tuned!

RAC Member, Tim Lynch – Dwellworks 2013 Service Provider of the Year

Dwellworks is excited to announce our Service Providers of the Year for 2013. These individuals are recognized for the exceptional service consistently delivered on behalf of Dwellworks to each valued client. Award winners were selected based on a combination of performance statistics and feedback from each of Dwellworks’ operating teams.

The 2013 award winners are:

  • International Destination Services: Sarah Wharton of Surrey, British Columbia, Canada and Beverly North of Thurgarton, Nottingham, United Kingdom
  • United States Destination Services: Betsy Asen of New York, NY and Iris Bourque and Paul Bourque of Fallbrook, CA
  • United States Property Management: Dee Block of Chicago, IL and Brian McCabe of Arnold, MD
  • United States Valuation Services: Becky Matzdorff of Ankeny, IA and Tim Lynch of Littleton, CO

“We appreciate the hard work and dedication that these suppliers demonstrated throughout the year,” said Bob Rosing, CEO of Dwellworks. “We look forward to our continued partnership with all of our service providers who deliver outstanding service to our clients and the industry. We are proud to call them partners.”

Dwellworks manages a global network of over 14,000 independent contractors.

Dwellworks, LLC

January 6, 2014

RAC Members Butch Hicks and Dena Knopp – Dwellworks 2012 Suppliers of the Year

Dwellworks, LLC is excited to announce its Supplier of the Year award winners for 2012. Each supplier is recognized for the exceptional service consistently delivered on behalf of Dwellworks to each valued client. Award winners were selected based on a combination of performance statistics and feedback from each of Dwellworks’ operating teams.

The 2012 award winners are:

  • Career Advising: Nancy Chisholm
  • Destination Services: Jonell McWilliams, Ferrah McKeown, Vita van Tonder and Claire Hall
  • Property Management: Dave Demarest and Michael Wheeler
  • Valuation Services: Gary Paluszcyk, Butch Hicks and Dena Knopp

Patrick Spicuzza, Senior Vice President of Supply Chain at Dwellworks, stated, “At Dwellworks, we understand the importance of having a dedicated network that believes in our value system of delivering outstanding service to our clients. As an extension of our organization, this year’s award winners are exceptional representatives and we are proud to call them our partners.”

“We are incredibly grateful for all of the hard work and dedication that these suppliers have provided throughout the year,” said Bob Rosing, CEO of Dwellworks. “Their high levels of service are critical as we continue to grow and serve our clients. We look forward to our continued partnership with all of our suppliers who continue to work hard and provide some of the best service in the industry.”

Dwellworks manages a supply chain of over 13,000 independent contractors throughout North America.

Dwellworks, LLC

December 14, 2012

RAC Member Jim Gargano – Dwellworks 2011 Supplier of the Year

Dwellworks, LLC, a provider of innovative services for the relocation, real estate, and mortgage lending industries, is excited to announce its Supplier of the Year Award winners for 2011. Each supplier is recognized for the exceptional service consistently delivered on behalf of Dwellworks to each valued client. Award winners were selected based on a combination of performance statistics and feedback from each of Dwellworks’ operating teams.

The 2011 award winners are:

  • Jean Mathopoullos of Houston, TX and Yvette Stachowiak of Seattle, WA – Destination Services division;
  • Paul Bourque of Fallbrook, CA and Paul Moccio of Mount Vernon, NY – Property Management division;
  • Paul Murray of Harbor Company, Inc in Towson, MD – Repairs, Maintenance & Improvements division;
  • Mary Emmerich of Avon Lake, OH and Sharon McCormick of Durham, NC – Career Advisers division;
  • Kathleen Offner of Houston – Educational Advisers division;
  • Jim Gargano of Bomba Gargano Valuation, Inc. in Naperville, IL and Mark Hunter of Mission Viejo, CA. – Appraisal Management division.

Patrick Spicuzza, Senior Vice President of Network Services at Dwellworks, stated, “At Dwellworks, we understand the importance of having a dedicated network that believes in our value system of delivering outstanding service to our clients. As an extension of our organization, this year’s award winners are exceptional representatives and we are proud to call them our partners.”

“We are incredibly grateful for all of the hard work and dedication that these suppliers have provided throughout the year,” said Bob Rosing, CEO of Dwellworks. “Their high levels of service are critical as we continue to grow and serve our clients. We look forward to our continued partnership with all of our suppliers who continue to work hard and provide some of the best service in the industry.”

Dwellworks manages a supply chain of over 10,000 independent contractors throughout the United States on an annual basis.

Dwellworks, LLC

December 19, 2011

 

 

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