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Bryan shares a story about how a little extra forethought might head off major headaches down the road.

The Trainee

Recently, my trainee Kelsey told me she had an appraisal ready for me to review. I asked her about the two busy roads that abutted the property. “Did you make an adjustment for that?” I said.

“No, I didn’t,” she said.

“I wouldn’t have either,” I said. “But did you make a comment about it?” She did not.

And then I suggested that we probably should. “And now I’m going to tell you why.”

And so I told her a story about one of the very first appraisers I helped who had a complaint filed against her.

The Complaint

This is the story: I had an appraiser contact me, and she’d had a complaint filed. The reviewer alleged that she did not analyze and report that the subject property’s area, the whole subdivision really, backed up to a railroad track. And she called me and told me about it. And I said, “Stop talking. Let me talk.”

“If you missed it,” I said, “if you didn’t realize that the property backed up to a railroad, and you didn’t analyze that it could impact the marketability, you need to raise your hand and say, ‘I missed it. I made a mistake.’ You need to ‘fess up to that and accept the consequences, if there are any, and use it as a learning experience, and move on.”

That’s what we need to do. We need to be honest. And we need to tell what we did or didn’t do. When we make a mistake, we need to have the courage and the honor in saying, “I made a mistake. I’m human.” Because we all make mistakes. No one’s perfect. Practice makes better. There’s no such thing as perfection. Practice doesn’t make perfect.

On the other hand, if you did know that rail was there, if you did analyze that, if you did opine that there was no adverse condition as a consequence of that subject’s proximity to that rail, I don’t think you did anything wrong.

The Argument

Keep in mind that all of her comparable sales were in the immediate area. So if the subject suffered from some negative influence because of the nearby railroad track, all of her comps would have suffered a similar influence. Her value would be unchanged. She wouldn’t have made any adjustment. So really, we’re just talking about a reporting issue.

Now, maybe I would have handled it differently. Maybe the members of the regulatory commission would have handled it differently. Maybe the investigator would have handled it differently. However, we’re not here today to discuss whether this individual used best practices. We’re here to discuss whether the person met the minimum requirements of USPAP.

You see, if we talk about the pre-printed form, under the site section, it says, “Are there any adverse conditions or external factors, yes or no?” Well, in her heart, if she didn’t believe that had any impact on the subject, if she analyzed that and said there was no issue, she doesn’t have any obligation to report anything. The obligation is to report if it does have an adverse effect.

One of the things I argued on behalf of this client was, if you think she’s trying to hide that this property backed up to a rail, why didn’t she white out the railroad on her location map? The map clearly showed a railroad there. She wasn’t trying to hide it. She just didn’t think it had a negative impact.

Her case was dismissed. What I told her was that in the future, she could avoid this problem very easily. All she would have to do is say, “Hey, client. The subject property, the subdivision, backs up to a railroad track. I’ve analyzed this, and in my professional opinion, I don’t think there’s any negative impact.” That way, she tells the world, the client, that she didn’t miss it. She knows it’s there, she just doesn’t think it has an impact.

The Moral

The moral of this story is, if you think ahead, you can put this fire out before it begins. If she had said, “Hey, everybody, there’s a railroad track back there, but it’s not impacting the marketability,” then no one could have pointed at her and said, “She missed it.”

Now, you can argue about whether or not the railroad affected value. That’s a matter of opinion.

So what I suggested to Kelsey was this, in an effort to head off any problems, why don’t we say that the subject property backs to Carter Road, side to Southtown? Both of which are somewhat well-traveled, but an analysis of this revealed no negative impact. Because there’s areas of Carter Road that do affect marketability but up here, not so much. At least, that’s our opinion.

I was going to buy a house one time, and I thought, “I’ll get a good deal because it backs up to a bypass.” The bypass sat back a ways, and I thought, “That’s the Owensboro Beltline! That’s got to have a negative impact. I’ll be able to negotiate a good price on this.” No. It didn’t appear to impact the price at all. I wasn’t able to buy that house.

I get it. This is a case-by-case issue. You’ve got to look at your market, that segment of the market, and analyze your data to see whether there’s a market reaction or not.

The Dead?

What if your house backs up to a cemetery? (And by the way, what’s the difference between a cemetery and a graveyard? What does “Saved by the Bell” mean? To get the answers, you’ll have to listen to the episode!)

Either way, acknowledge the cemetery and analyze whether it has a negative impact. I certainly wouldn’t mind the quiet neighbors, but other people might be creeped out and might not want to buy that house.

The Fix

Just a thought: Let your client know, “I’m aware that the property is adjacent to a cemetery, or a well-traveled road, or a railroad track. And here is my analysis of whether or not that thing affects the value.” That way, nobody can point a finger and say that you missed it. That way, you can say you noticed it and then offer your opinion about the impact of its proximity.

External obsolescence — a loss of value caused by something outside of the property lines — isn’t something you can fix. All you can do is acknowledge it and analyze its impact on the property.

Be transparent about your thinking and your analysis, and you’ll head off a lot of problems before they ever arise.

Want more like this?

Check out Bryan’s webinar (below) about covering your appraisal (CYA) and his Cover Your Appraisal course at Appraiser eLearning.

In “The Appraisal Update,” Bryan Reynolds asks four ACTS attendees to share their reasons for coming to the conference and their takeaways from the week. Here are a few highlights of Bryan’s questions and his interviewees’ answers, condensed and edited for clarity:

Why did you decide to attend ACTS this year?

Jason Covington, an appraiser in Nashville, TN and first-time attendee:

“The timing was right for me to go experience what everybody’s been talking about, to meet the people who’ve been doing this longer than me, people I can learn from … names you’ve heard of, people you work in and around but never have met directly. This gave me the avenue to have conversations with those people and actually see the answer to the question, ‘How do I make change? How does my voice impact my industry? How does my voice count?’”

Nakia Manning, a trainee in Atlanta, GA and first-time attendee:

“I found it was necessary for my growth as an appraiser to go out and meet other appraisers. Up until now, my only contact with the appraisal world had just been my mentor. I felt like it was essential that I join this organization so I could learn more and come to this event, For me, it wasn’t the continuing ed. It was more that I felt the need to meet other people in my profession.”

Mark Skapinetz, an appraiser in Atlanta, GA and first-time attendee:

“For me [the motivation was], meeting people I’ve been wanting to meet for a long time. Having good conversations. You are building relationships with people you can call when you have a problem. I’ve had those people. Now I’ve gained more people to go to when I have a problem, to help me solve it. That alone is worth its weight in gold.”

How was your experience?

Ken Williams, an appraiser in Jackson, MS, second-time attendee, and splendid fisherman:

“This was probably my greatest experience at an ACTS conference. This meeting was really special. Of course, catching that fish didn’t hurt things at all.

“The first conference I was a newbie and everybody was a stranger to me. But I came back with a lot of knowledge and brought it back [to Mississippi] … This time around, I knew a lot of the people. It really brought the camaraderie together. I could loosen up a little bit and freely mingle, having fun and not being offensive. Come to find out it’s hard to offend you guys. But the camaraderie, the information, is what it’s all about. I think [NAA is] a wonderful organization, it’s going to do good things. And I do know that in numbers we’re going to accomplish a lot more. And I think we have that with this association.”

Mark Skapinetz

“I loved it. I liked the setup, I liked the way it was run. I liked the topics I was there for. That mock trial, along with what Craig Capilla added in his presentation after that, hands down, was the best thing I’ve heard in so long. It was something well needed, from somebody that knows what he’s talking about. Hopefully we do another mock trial. Most people have never been in front of a board. You don’t know what you’re up against. That opened my eyes as well. Really well done.

“It was different from other conferences in the sense that it didn’t seem so robotic to me. I liked the intimacy of it. I like that everyone was getting to know each other. I’m looking forward to next year.“

Nakia Manning

“It was amazing! … As soon as I was introducing myself, the central theme was, ‘Hey, you’re a trainee. Take my information. If there is anything I can do to help you, just give me a call.’ What stood out to me about the conference? It was the family atmosphere. It was still more than just a profession. It was all love, it was all community and family. It felt like more than just work. It felt like people who were genuinely interested in my well-being as an appraiser, and my well-being as an individual as well.”

“It felt like more than just work. It felt like people who were genuinely interested in my well-being as an appraiser, and my well-being as an individual as well.” —Nakia Manning

Jason Covington

“I found myself in an environment where I felt like I mattered and my voice was heard. There were platforms where I could get involved and petition for change. It felt wonderful to be a part of something like that.”

Will you come back to future ACTS conferences?

Nakia Manning

“Indeed! I’m from South Carolina, so it will be a pleasure to go to Charleston. Hopefully I’ll be able to puff my shoulders up and actually be an appraiser, not a trainee.”

Ken Williams

“Did you have to ask that question? <laughs> Absolutely! I’m already looking forward to [the next] one.”

What would you tell other appraisers about this conference?

Nakia Manning

“If there are any trainees listening, don’t wait like I did until the end of your training period to realize the need to get out and meet other appraisers. People have different ways of arriving at their opinion, and it would help you tremendously to see things from other perspectives. It was education about what we do, but there was also education about how to run your business — not just the job itself, but how to be more effective from a business standpoint. Really great people, really good information, and the CE is just the icing on the cake.”

Jason Covington

“Take a chance. Break out of the normal routine. Take a few days to meet some people. The topics and the speakers were top-notch. Wonderful information! The information I received was incredible. Give it a try!”

Ken "Big Fish" Williams
Ken “Big Fish” Williams

About the Author:

Bryan S. Reynolds, CDEI™ is a KY/TN Certified General Real Property Appraiser, a registered agent with the TN State Board of Equalization and an AQB Certified USPAP Instructor. He has testified in various courts, planning and zoning boards as both an expert and as an agent making valuation arguments before local and state hearing officials and Administrated Law Judges. Reynolds is the owner of Bryan S. Reynolds & Associates, Reynolds Appraisal Service and a partner in Appraiser eLearning. He provides residential and commercial valuation services, educational offerings, mentoring, consulting, and litigation support services throughout the country. He is available for lectures and is well known for his Think Outside the “Check” Box approach.

Bryan Reynolds reflects on why we appraisers should focus on our top abilities and delegate the tasks we aren’t so great at.

Have you looked in the mirror lately? I mean, really just stood in front of the mirror and taken a long, hard look at yourself?

Do you like what you see there? The wonderful thing is that if you don’t like what you see, you have the ability to change it.

As a business coach, I often tell clients: If you’re not performing at your peak ability, maybe you should look in the mirror and say, “You’re fired.”

I say quite frequently there are no two pieces of dirt on the planet exactly alike. No two pieces of real estate are the same. That’s what makes real estate so different from other goods and services that we buy and sell every day. Each property is unique, just like we are as human beings. We all have strength and weaknesses. And we, as human beings, resist change.

Extinction Is Not Inevitable. Case Study: One-Hour Photo Labs

But no matter how much we resist, change keeps happening anyway. We can be ready for it, or we can push back. Remember those old one-hour photo places? How many of those are still standing? Well I know one that adapted to change. It belonged to a guy named Eddie. He started working on digital cameras, selling them, converting old DVDs and VHS tapes to digital formats, taking old torn photos and making them look brand new. When my mom was on husband #2, after my dad died, she had a photo taken of all her grandkids. Her brother’s son was in the picture with his new wife, who did not last long as part of the family. My mother took this picture over to Eddie, and she said, “Eddie, you see that girl standing next to my grandson? That was his wife. Can you make her disappear, and move my other grandson over a little bit?” And he did it! I was like, “Mom! You can’t just make people disappear!” But I guess in a photograph you sure can.

Or at least, Eddie can. And he’s still got a thriving business, while all the other one-hour photo labs are long gone.

So here’s what I want you to think about: We resist change, external change and changes within ourselves. It’s human nature. But sometimes, we do ourselves harm by refusing to change.

Do You Need a Trainee?

I want you to ask yourself: Are you performing at the highest level that you could be? In my coaching practice and my appraisal classes, I talk to a lot of people. A guy approached me after class once and said he was thinking about bringing on a trainee. He’s in his 70s and had health issues but was still in business.

Let me just pause here to say that I’m a big-time supporter of trainees, and I’m all for YOU bringing on a trainee. I’m creating the Trainee Committee and the Trainee Network for the NAA. I want us to do all we can to support trainees and supervisors, and if you want to expand your business, it’s something you should think about.

But you need to be sure you actually need a trainee. Because may need another kind of hire altogether.

So I said to this man, “Sir, I don’t mean to be rude, but you don’t need a trainee yet. You need a helper.” He was making all the phone calls to schedule appointments. He was handling all the requests from lenders to prepare and send bids, accepting orders, starting the files, and setting them up in the appraisal software.

“That’s kind of a waste of your time,” I told him. He didn’t need a trainee for all that. He needed a helper: someone to answer the phone, reply to emails, schedule his weeks, take all that busy work off of his shoulders.

Triage Your Time

I’m not saying he, or I, or any of us are too good to do these things. I’m not too important to answer my phone. I DO answer my phone, in fact. I’m no better than anybody, and nobody’s better than me.

It’s just that these things are not the highest and best use of your time.

I wrote an article many years ago about a dentist, a surgeon, and a head chef. The whole premise is: identify what only you can do, and DO THAT. Over and over, every single day. Then build a team to back you up, so you can take the busy work off your schedule and let a highly organized person do that for you.

When I suggested this, the man’s eyes lit up.

I’m excited to see where he takes his practice. And maybe you should be having this same conversation — with yourself.

“Identify what only you can do, and DO THAT. Over and over, every single day. Then build a team to back you up, so you can take the busy work off your schedule and let a highly organized person do that for you.”

So look at yourself in the mirror. Maybe you should fire yourself from the work you shouldn’t be doing, work you should hire someone else to do — so you can do the actual work of appraisal and analysis.

Maybe you should fire yourself from the part of the work that you don’t like doing, and get someone else who has that expertise to step in. I could try to figure out accounting, but I don’t want to. So I hire a professional accounting firm. I don’t want to schedule all the appointments and make all the phone calls. I’ve been there; I’ve done that. And it’s not that I’m too good to do it; I’d just rather use my time for something else.

Look in the mirror. Take an assessment. And don’t be afraid to make some changes. Don’t be afraid to implement some new ideas or strategies. Worst case, you can always go back to the old way if you want to. But there’s a part of me that would bet that you won’t want to.

And if you’ve never read Who Moved My Cheese? by Spencer Johnson, M.D., I highly recommend it. Read it, and then think about making some positive changes that will take some of the headache out of your life. And consider building a team to help you with that.


About the Author:

Bryan S. Reynolds, CDEI™ is a KY/TN Certified General Real Property Appraiser, a registered agent with the TN State Board of Equalization and an AQB Certified USPAP Instructor. He has testified in various courts, planning and zoning boards as both an expert and as an agent making valuation arguments before local and state hearing officials and Administrated Law Judges. Reynolds is the owner of Bryan S. Reynolds & Associates, Reynolds Appraisal Service and a partner in Appraiser eLearning. He provides residential and commercial valuation services, educational offerings, mentoring, consulting, and litigation support services throughout the country. He is available for lectures and is well known for his Think Outside the “Check” Box approach.

Bryan Reynolds suggests two changes lenders should make to help appraisal companies operate more efficiently: Let appraisal trainees do inspections and appraisal firms make assignments.

Listen, lenders! No, I’m not talking about the adorable Listen Linda Kid, although he is absolutely fantastic. But I am gonna rip off his best line: Listen, lenders!

In fairness, I give everybody a hard time: appraisers, agents, underwriters. Today it’s the lending community’s turn — you lenders out there, hear me out.

It’s not news to anyone to say that we’re in unprecedented times. Everybody’s waiting for appraisals. Everyone wants to solve the backlog problem with new ideas and products and hybrids. Everyone has “the solution.”

Let’s look at this for a minute. You know why supervisory appraisers are apprehensive about taking on appraiser trainees? It’s because, what value do they add? If I’ve got to go out on every inspection and hold the trainee’s hand, they really don’t add any value to me as a business owner.

USPAP, Fannie Mae, Freddie Mac, your states all allow appraisers to send trainees out on their own, after a certain period and once you feel the trainee is competent . But the lending community continues to push back on this. If the lenders are willing to send an insurance agent out to do inspections, why in the world are they not letting me send my trainee out to do an inspection without me?

Lenders, just listen a minute: A lot of these problems would be solved if you let us appraisers do what USPAP, Fannie Mae, Freddie Mac and our states allow for. Let me teach a trainee the proper methods of observation, and let me send them out. I can hire three trainees! I can expand my book of business!

But if I have to accompany them on every inspection, why would I bring someone on to train at all? Dustin Harris makes the point beautifully on his blog at theappraisercoach.com:

“Our clients (AMCs and Lenders) have made it next to impossible to take on a new recruit. Most of the engagement letters I receive have the following little statement attached, ‘The Certified Appraiser must physically inspect the property, all comparables, and complete the appraisal report. The use of Trainees for this assignment is not allowed.’ So, let me get this straight: I can hire and train a new appraiser, but they cannot do anything to help my business grow until they are fully Certified. Gee, sign me up!” —Dustin Harris, The Appraiser Coach Blog

Well said.

Here’s another thing, lenders (and maybe this goes out to AMCs as well): If I want to hire three certified appraisers, and now I can hire three trainee appraisers for each of them, that’s nine more trainees and three certified appraisers. I have an army now! I’m ready to take on lots of work. But here’s the problem: The lender is going to send the appraisal request to the specific appraiser. Why don’t they send it to the firm? Why don’t they send it to me?

For instance, I have an appraiser. Matt. You send an order to my firm, I could say, that’s outside of Matt’s immediate area. He services that area, but that’s an hour drive. Let me send Kelsey! She’s ten minutes away from that property. So let me assign it based on what makes more business sense. Or maybe Matt’s two weeks behind and Kelsey doesn’t have anything to do. Doesn’t it make sense that I, the business owner, make the assigning decisions, for efficiency purposes?

Listen, lenders. We can solve a lot of problems if you do two things:

1. Let appraisal companies make assignments.

Start assigning the appraisal to the firm, and let the firm decide he best person for the job. Think about it. You send over a fourplex. Kelsey’s only done one in her life. Matt’s done 400 in the last three years! Wouldn’t it make sense for me to assign that multiplex to Matt? I as the business owner know how to delegate those assignments a lot better than you do.

So why don’t we look at approving appraisal firms instead of individual appraisers. If you need to vet them, I understand that. But approve my firm, let me hire more appraisers, and I’ll delegate the assignments out responsibly.

And then finally, listen lenders:

2. Let trainees do inspections.

Let me start using my trainees to their full potential. Trust me to choose them, then let me trust them to do the work I assign. This helps you, it helps me, and it helps the communities we serve.

Most of all, if lenders and AMCs don’t make it less onerous for us to take on and train new appraisers, then how do they expect new appraisers to enter the profession? Our industry is aging. We need excited, sharp young people to take up the trade. Which means we veterans are gonna need to show them the ropes. But we can’t do it out of charity. There need to be incentives for all of us — supervisory appraisers and trainees.

Just listen!

Business is booming for real estate appraisers right now. But the “shadow inventory” is looming. Do you have a backup plan?

If you’re a real estate appraiser, you’ve probably been busy for awhile now. Real estate agents are crazy busy. We appraisers have been swamped with purchase transactions as well as refinancing. Interest rates are on our side.

Remember the 1980s, when interest rates were sky-high? When 10 percent seemed like a great rate? Six percent for long-term mortgage money is really a great rate, historically speaking. I’m like you: I want 2.5 percent, but four or five, even six percent? We have been in fantasy land. I’m sure consumers are loving it. Appraisers are loving it. Real estate agents are loving it.

In terms of the market, Covid has done the opposite of what we expected. We thought nobody would want to sell their houses. We thought people wouldn’t want agents coming into their houses to show. We thought people would wait until this was all over to put their houses on the market.

To a degree, we thought wrong. Certainly some people probably didn’t want agents and lookie-loos traipsing through their houses during a pandemic. But here’s the thing: Scarcity equals value. And in the wake of Covid, people are changing their ideas about where and how they want to live. So there’s a lot of desire right now, and there’s a limited supply.

But what is lurking in the shadows?

I’m not trying to scare you, but if you haven’t heard of this term, Google it: Shadow Inventory.

What does that mean? In this context, it means delinquent loans. REO properties. Foreclosures on the horizon. Loans that were delinquent but there’s a reasonable expectation that they’ll become delinquent again. All of these make up what is known as “shadow inventory.” And this shadow inventory is on the rise.

It makes perfect sense. With Covid, a lot of folks haven’t been able to work, haven’t been able to make their mortgage payments. Renters are behind, landlords can’t kick them out, and that leaves property owners in a fix. Forbearance programs on government-backed loans have held off a wave of evictions and foreclosures, but when those programs end, an estimated 1.8 million mortgages will be in delinquency. And the delinquency rate for FHA mortgages has soared.

What’s gonna happen when those moratoriums lift?

The Real Deal: New York Real Estate News reports mortgage delinquency rates jumped to the highest in two decades. As we look at some of these numbers, it gets our attention.

I don’t know what will happen. Maybe big government will step in. But what if they don’t? Are we gearing up for a new housing crisis? At least banks aren’t making crazy loans anymore. Stated income. 125 percent loan-to-values. So it’s different now. But is it that much different?

Appraisers, you’re probably gonna be fine. If a lot of these houses go into foreclosure, you’re probably gonna have REO work to do, foreclosure work to do. But the shadow inventory is something to think about, and I encourage you to diversify your practice. If all your eggs are in one valuation basket — if you’re only doing refinances, if you’re only doing purchase transactions — what happens if (when) these rates start to go up?

“If you’re only doing refinancing and purchase transactions, you might want to diversify your practice.”

I hope it won’t be this year or next year. But at some point, these rates are going to go up. And if you’re only doing refinancing and purchase transactions, you might want to diversify your practice.

What skill set do you have that may help you in other areas? Maybe you get your home measurement credential. Take a class, take a second class, contact Hamp Thomas and take a written exam (it’s administered online right now), and you can become a home measurement specialist. There’s a whole book of business right there. Go to the brokerage firms and offer to measure houses. Offer to do a restricted appraisal report.

Look at the opportunities available to you. Maybe you take your appraiser hat off and provide consulting services. Maybe you become a real estate agent. Maybe you get into the tax appeal arena. There are so many ways to make money in this business.

One thing’s for sure: Most things change. If you don’t believe that, look in the mirror. Be ready and willing to adapt, or resist and be left behind — you get to decide.

In the meantime, Google “shadow inventory.” Do a little research. That inventory is growing. It’s gonna be interesting to see what happens.

We’ve been living in extremely interesting times for over a year now. Covid will hopefully go away soon, although perhaps not entirely. But the effects will linger, and the aftermath may also be … interesting. Be ready. Start increasing your knowledge base. Open your mind to opportunity.

We’ll talk about the near and far future at the ACTS Conference on April 14-16 in Bay St. Louis, MS. We’ll celebrate the past ten years of the NAA and discuss the future of our profession. Please join us! We’d love to have you.