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Posts Tagged ‘Soapbox Blog’

[Squeaking By] Somehow It All Comes Back To Appraisals

July 15, 2008 | 10:59 am | Radio |

“The appraisal industry is the lubricant of the mortgage industry” …Inventor of WD40 (just kidding)

In addition to Soapbox which contains the terrific contributions of my appraisal colleagues, appraising has made its presence known on our other blog Matrix via the current turmoil in the lending/mortgage industry.

[Other Shoe Drops Department] IndyMac Needed Appraisals Done Before Judgement Day

[In The Media] Real Estate Radio USA Appraisals & Bits

[In The Media] 4Realz Roundtable On Appraisals Cuomo/GSE Agreement For 1-1-09

UPDATE

[Subprime Truth In Lending] From A To Regulation Z


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[Sounding Bored] Not All Of Us Are The Square Round Peg

July 15, 2008 | 9:57 am | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. Righteous USPAP indignation runs rampant in the appraisal profession and I worry it is leading to our demise as an industry.

Update: “This commentary was NOT submitted by Adam Johnston as originally presented in the post on July 15, 2008. He is not the author of this commentary. I regret the error and any inconvenience it may have caused.” Jonathan Miller

Let’s put things into current affairs, this profession is changing, unfortunately. The federal government is overtaking the profession and we all know they will mess up the profession.

Allowing AMC’s to control the mortgage lending area will be the downfall of the independent appraiser. The AMC’s will feed their staff, which is primarily made up of appraisers that cannot compete in the profession or have no outside experiences to survive outside of mortgage work. I am trying to get out of the mortgage affairs and diversify as most of the mortgage review appraisers probably have never written an appraisal. These reviews are typically out sourced. Who are these reviewers? and who oversees the AMC’s and how they conduct their appraisal affairs?? NO ONE.

All the small appraisal shops and good appraisers are giving up. Just like the small hardware stores or small grocery stores are giving up to the larger, corporate owned Home Depot, Lowes or Cub.

Personally, this profession needs to go back to old way of doing business where all appraisers can complete with the AMC’s. This current mess is not totally an appraisal problem. Who allowed no doc refinances?, Who allowed interest only loans?, Who oversees predicator lending? Who governs the mortgage brokers? The mortgage brokers have ruined the mortgage profession as they have abused most all responsible lending practices, and the big banks buy these sub-prime loans. WAKE UP.

The big banks are controlling the AMC’s as they also have a vested interest in these companies to make additional profits off the consumer. Some of the big banks own and service some of these sub-prime lenders. Pay the appraiser a proper fee for their work and spend the additional costs on reviews of their work. If the appraiser provides poor appraisals, remove or suspend them from the panel.

As a former staff appraiser, I guarantee the staff appraiser gets more benefit than an independent. I have NEVER been asked by the clients I work for to inflate an appraisal to make a loan. There are still some of us doing a responsible job in appraisal work for my clients. Yet I am being lumped into being that all appraisers being controlled by the loan officer to get business. I don’t fit this image, so why do I need to suffer? A lot of this is due to poor state licensing and supervisor appraisers role by signing off on work they review. I’ll bet better than half of the distress home loans fall into this situation. This is where the true problem is.

The passing or consideration of the current HVCC policy will demise the appraisal profession. Is their no consultation with the working professionals in the appraisal business. The professional and responsible appraiser knows the real problem with the mortgage lending profession, yet we are never consulted as to our opinion. The future lending practices are being depicted upon the major lenders in the industry and the federal government.

From 2003 to 2006 shown times of excelled home values and the lending requirements were relaxed. Home and town home prices were rising faster than the appraiser could keep up with, especially in new construction. People were willing to pay for these new homes and builders responded by increasing their prices.

Mortgage brokers capitalized on this and now where are they?? Easy, file bankruptcy and start a new company and let the larger mortgage company they sold the loan to struggle to find a buyer for the sub prime loan.

Just my thoughts.


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[Lucky 13] The Appraisal Institute Updates The Bible

July 11, 2008 | 6:50 pm |

Just when you thought you had your summer reading under control (I have a slew of books next to my bed that blogging seems to keep me from reading), the Appraisal Institute updates it’s mainstay publication:

The Appraisal of Real Estate, Thirteenth Edition

While the book is a text-book, it’s actually a pretty good read and an invaluable resource during my appraisal career. Here’s a summary.

In fact, it is probably an even better read than my recent books: Bad Astronomy, The Aspirin Wars and American Nerd: The Story of my People.

Ok, I admit it, I am dull and boring.


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[Sounding Bored] Appraiser Professionalism (aka: Where’s Mike?)

July 11, 2008 | 5:31 pm | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. This week I am thankful I learned more about a new hire than the interview revealed.

We’re busy.

Our firm is seeing some of the highest volume we have experienced in our 21+ year history. I’m not bragging (although I’m very happy about it – getting away from primary reliance on mortgage related work a few years ago made all the difference).

Appraising is a feast and famine business and it’s tough to find good appraisers. We recently planned to hire two new appraisers: a trainee and someone with experience to handle the higher volume.

We found a sharp trainee fairly quickly but it took a while to find someone with experience. We ran into an appraiser a few months prior, who was laid off after the bank he worked for was purchased by another institution. He began to do fee work on his own but didn’t want to continue doing that.

I had run into him on a number of occasions and found him to be an affable guy who seemed to know what he was doing. We ask him to come to our office for two interviews over a two week period to speak with myself and my sister who is one our owners (so is my wife) and we brought in our senior appraiser to interview him as well.

We all gave a thumbs up and made him an offer (we pay salary, not a fee split) and he accepted the next day. A start date was set in the near future. We turned down further requests by others to interview.

The night before his start date he emailed to say he had to rush to visit his sick mother out of state who was in the hospital and he would get back to us. He expected to return the following week.

As the next week approached we sent him an email to touch base, see how things were going with his mother and ask whether he needed more time.

No response.

The new week started and we sent him another note.

No response.

That was about a month ago. Still no word. No phone call. No email.

In retrospect, we now assume there was never a “sick mother” and he was probably waiting for another incoming offer after we made ours.

This was the person that was going to represent our company in the field. I am really glad we were able to see the lack of professionalism that none of us saw in the interview. Even worse, he was issued a fine by the state licensing bureau, announced a few weeks after he accepted the position. That was news to us as well.

When someone is under duress, whether it is a sick relative, a pending fine, etc. their behavior at that moment is a test of true character.

We ended up finding a terrific appraiser with experience.

Apparently things happen for a reason.



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[Commercial Grade] Time To Break Out The Ouija Board

July 11, 2008 | 4:24 pm |

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Commercial Grade is a post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, depending on what day of the week it is, one of the smartest guys I know. …Jonathan Miller

Remember the Ouija Board you played with as a kid? It used to be so comforting to know that you could tell the future. With the local real estate market in transition, and everyone trying to understand just what the heck is going on, it may be time to break out the Ouija board again.

Our market, New York City, seems to be somewhat insulated from the woes being experienced by the rest of the country, but experts throughout the City (and the Country) seem to disagree on whether our market fundamentals are just so different from the rest of the country that we will escape the pain, or if it’s just been delayed and around the corner.

Lenders in particular seem to be scratching their heads. Over the past six months or so I’ve received a flurry of phone calls from a number of major lenders interested in retaining us for a market study so that they could, essentially, figure out if it’s safe to continue making loans in the near future.

The conversation usually goes something like this:

Lender: We’d like you to do a market study for us. What would you charge?

Me: Let’s talk about the scope of the study. What questions, specifically, do you want us to address?

Lender: We’d like to know if there’s still demand for new development and what the saturation point is. We’d like to know every project that has come on line and is in marketing, what it’s selling for, and the absorption rates. In addition to what’s currently marketing, we’d like to know every project in the pipeline. We’d like to have that broken out by condo, co-op, rental and by neighborhood.

Me: I see. You realize that there is no central database of such info. It would require all original research with the various community districts, Buildings Department, Attorney General’s office and lots of calls to brokers and developers. This is a large and very complex market and at the end of the day, I’m not sure that this data or any data is really going to answer the demand question for you. We can do the research but it’ll be very expensive and take a couple of months. (I know, I’m quite the salesman!)

Lender: (long pause) OhI have approval for $5,000.

Me: (long pause) Wellmaybe we can revise the scope somewhat

I understand wanting to get your arms around the situation, but the bottom line is that no market study or econometric analysis is going to tell a lender that it’s safe to continue building and making construction loans in this environment. I’ve seen analysts put together pages of formulae and algorithmic theorems trying to quantify demand, but there are so many variables and assumptions incorporated into these models so as to render them (in my opinion) meaningless.

Try as we might to understand the current market, it’s still anyone’s best guess as to where we are in the cycle and how much pain we’ll experience before it’s over. No examination of past performance or theoretical demand projections are going to definitively answer that for us. Back to my original question.

Anyone have a Ouija board that I can borrow?


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[Commercial Grade] Lending 101

June 26, 2008 | 1:40 pm |

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Commercial Grade is a post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, depending on what day of the week it is, one of the smartest guys I know. …Jonathan Miller


I think that I finally understand what the problem is.

We just need to go back to basics and make sure that the real estate lenders are being property educated. I recently came across a textbook written for lenders: The Complete Guide to Financing Real Estate Developments (Hardcover) by Ira Nachem ( 2007, McGraw-Hill, New York), List price $79.96. Seemed like a respectable enough book, which is why my jaw dropped and I had to read the following section three times to make sure that I wasn’t imagining things

A section in Chapter 5 with the heading “Influencing the Appraisal”,

Since appraisers want to continue to receive assignments, they generally have a desire to satisfy you, their client. You sometimes can play on that desire and get the appraiser to produce a report with values a bit higher (or lower) than he otherwise would report.If you want to make sure that the appraiser is not undervaluing the property, you should tactfully indicate your concern up front

Do you believe this stuff?!

As I was reading this I kept on waiting for Alan Funt to jump out and tell me that the whole thing was a joke. He didn’t. (I guess he couldn’t since he died in 1999.)

It gets better

A third reason to go against a conservative valuation involves market conditions and competition among lending institutions. When more lenders are in the market, competition for business increasesTo be more competitive, loan officers who receive higher appraised values can make larger loans

Over the years I’ve spoken to numerous loan officers that truly don’t have a clue as to how the appraisal function is supposed to fit into the underwriting process. Unfortunately books like this do little to educate them.

I look forward to reading future books in this series: “Shmearing the Building Inspector” and “Tax Evasion for Dummies”.


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Establishing A Bond With An Appraiser Is Expensive

June 24, 2008 | 7:42 am |

This post was also presented on Matrix.

In one of the more poorly thought out layers of legislation being proposed in Congress to help the housing market and credit problems pertains to the appraisal element within the Homeownership Preservation and Protection Act of 2007. This bill is being championed by US Senator Dodd. The whole concept of bonding the appraiser demonstrates a lack of understanding of how we fit into the lending process.

I’ve touched on this legislation in a previous post about how the act misses the mark because it provides no tangible solution to the appraisal element of the mortgage lending process (emphasis added: no). The legislation seems to be stuck at the moment but I am not so sure how long that will last.

Because I am familiar with the topic (it’s my profession), it really scares me to think of the thousands of pieces of legislation that are crafted in bills by Congress every year that are probably just like this one. I am sure Senator Dodd’s intentions are honorable, but the bill completely misses the issue at hand.

A key concern brought up by this bill is the cost of bonding an appraiser. As if obtaining a bond makes an appraiser suddenly ethical and/or not subject to intensive, economically incentivised pressure?

Since I have never had to obtain a bond, I am not completely confident of my thinking here, but I suspect I am on the right track:

The Dodd legislation says:

Appraisers must obtain bonds equal to one percent of the value of the homes appraised.

Ok, so if I say Miller Samuel appraises $5,000,000,000 worth of Manhattan real estate in a year, that amounts to a $50,000,000 bond (1%).

I couldn’t find any published quotes for appraisal surety bonds, but if we say the cost is 2% of face value of the bond, then $50,000,000 x 2% = $1,000,000. In other words, our firm will need to spend $1,000,000 this year in order to comply with legislation that does nothing to address the problem (insulating appraisers from pressure).

Issue 1: If appraisers wish to remain in business, they will have to pass along the costs to their clients (ultimately the consumer in most cases). Common sense says that most appraisers will be forced out of business or no longer perform appraisals for lenders if this interpretation is correct.

This means I have to pass costs of $1,000,000 to my clients (appraising is a razor thin margin business). That really means I am going to have to raise my fees many times just to break even and I am doubtful that my client base will readily absorb the significant increase in fees. As I mentioned in the prior post, I think this will actually make more good appraisers leave the profession.

Issue 2: Appraisers may have to obtain these bonds individually, not in lump sum as in the example above. Try doing this thousands of times in the course of a year. Additional staffing costs, paper work and time has costs associated with it. Total it up and the bill makes appraisals cost prohibitive and will lengthen the appraisal process.

Issue 3: Appraisers may have to violate their appraisal license when obtaining the bond for each assignment. In order to get mandated coverage, they have to provide the value before doing the appraisal (it’s called “cart before the horse”), a direct violation of the licensing law mandated by Congress in 1989 via FIRREA/USPAP. I would think the appraiser’s value estimate for the bond would error on the high side to make sure the property is covered, adding even more costs.

Admittedly I am not familiar with the cost and process of obtaining a bond so I would welcome feedback and insight on this. I am amazed how little information exists out there. Nothing of significance has been written about bonding appraisers that I am aware of.

Appraising is my profession. Lack of common sense is now my bond.

UPDATE: I have been told that the cost of the bond is based on the prior year’s valuation.


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[The Hall Monitor] The First Step To Recovery Is Admitting We Have A Problem

June 22, 2008 | 5:38 pm |

Todd Huttunen began appraising more than 20 years ago with a few years off in between to pursue a career in cabinet making. He relegated that to hobby status and is currently an appraiser in an assessor’s office. His best friend dubbed him The Hall Monitor because of his rigidity and respect for rules. He offers Soapbox readers tongue-in-groove insight on appraisal issues. This week Todd applies oil to the squeaky news. …Jonathan Miller


We cannot drill our way out of $4 per gallon gasoline. It is a simple matter of supply and demand. This is something appraisers understand. Unlike the real estate market these days, in terms of energy, Demand is growing and supply is shrinking.

The United States comprises 4.5% of the world’s population and consumes 24% of the world’s oil. We use 20.8 million barrels of oil a day. The next largest consumer is China which has more than four times our population but uses only one third as much oil.

If China used as much oil as we do, per capita, they alone would be consuming 89,000,000 barrels a day (more than the world is currently producing), which is of course impossible. If they purchased every barrel produced everywhere they still wouldn’t have enough for themselves they’d be short about 2.8 million barrels a day – and there would be not one drop for anyone else on the planet!

And then there is the little matter of India, which has 1,100,000,000 people, nearly as many as China and 3.5 times more than the United States. Much the same as China, they have a rising standard of living and they want cars too. It is difficult for me to understand those – particularly the morons on Fox News – who claim that all we need to do is start drilling for oil off the coasts and in Alaska and we’ll be fine. Our leaders suggest that our standard of living is not negotiable. Well I’m sorry but “Houston, we’ve got a problem” and it’s not going to be solved by sticking more straws in the ground nor is the answer to be found in ethanol, wind farms, nuclear power or used french fry oil. The American way of life will have to change, whether we like it or not.

You may ask what kinds of changes can any one person make in their own life. I think it starts, in this political season, by redefining what is meant by the word “patriotism”. Instead of, or at least in addition to symbols like “Support the Troops” bumper stickers and politicians wearing flag lapel pins, why not make a more tangible statement by riding a bike to work or school instead of driving a car. Or if you really want to reduce your carbon footprint, try a vegetarian diet (personally, I’m going to switch to a bike commute but I’m not ready to give up hamburgers just yet).


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[Commercial Grade] Justice Is. Confused

June 17, 2008 | 10:04 pm |

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Commercial Grade is a post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, depending on what day of the week it is, one of the smartest guys I know. …Jonathan Miller


On June 12, 2008 the Court of Appeals of the State of New York decided a lease dispute case, 936 Second Avenue, L.P. v. Second Corporate Development Co.

The issue, according to the New York State Bar Association, was

whether the net lease itself must be considered by appraisers in valuing the demised premises for purposes of establishing the net rent for a renewal term of the lease. The lease encumbering this property specified that upon exercising a renewal option the new net rent would be equal to 7% of the “value of the demised premises.”

For the purpose of setting this new rent lessor and lessee each retained an appraiser. Lessor’s appraiser concluded to a value that was more than double lessee’s opinion of value. Apparently the primary difference was that lessee’s appraiser took into account the renewal lease terms (i.e. appraised the leasehold interest) while the lessor’s did not. The Supreme Court had ruled that the lease should not be considered in estimating the property value for the purpose of determining the new rent, however this was overturned on appeal. The Appeals Court essentially decided that since the lease did not specifically state that the lease encumbrance should be excluded from consideration, it should not be.

I am not a lawyer, but to me this is a completely illogical decision based on circular reasoning.

To say that the parties must base a lease rate on the value of a property that is presumed to be encumbered by a lease defies common sense and real estate economics. I am fairly certain that when the lease was drafted in the 1960’s it did not specifically state that the lease be excluded from consideration because it was just unfathomable to both parties that it would not be.

The irony is that the Court concluded that

absent an agreement to the contrary, the effect of a net lease must be considered in valuing property for the purpose of setting rent for a renewal lease term. Such a rule comports with precedent, appraisal practices and common sense.

Well, I can’t speak to precedent, but as far as appraisal practices and common sense, I’d have to respectfully disagree with our esteemed Justices.

Webmaster’s note: I have experience with circular reasoning as well. On family vacations via car, my sons have a song that goes like this:

I know a song that gets on everybody’s nerves,
everybody’s nerves,
everybody’s nerves,
I know a song that gets on everybody’s nerves
and this is how it goes…
(repeat).


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[The Homeownership Preservation and Protection Act] Dodd Bill Places A “Hit” On Good Appraisers, With Bondage

June 6, 2008 | 5:07 pm |

This post was also presented on Matrix.

Back in September 2007, US Senator Dodd from my home state of Connecticut submitted what appears to be hastily conceived legislation to solve the mortgage crisis in response to the prior month’s credit market meltdown. I believe it was created to address subprime lending, but because it was so loosely presented, it casts a wide blanket over the lending process to little effect and likely causes more problems because it embraces conventional wisdom rather than actual practices. As far as appraisals go, it clearly doesn’t recognize the fundamental problems that New York AG Cuomo has already recognized.

The appraisal related language in the bill is sloppy and contains slang, suggesting that someone with little experience drafted it or the the bill was not understood by the Senator. I am very disappointed. It found co-sponsors because it contains buzzwords like “appraiser”, “mortgage” and “meltdown”.

In fact, the language of the bill was so vague and misdirected (the appraisal part) that most appraisers never took it seriously, instead focusing on efforts by Senator Frank and NY AG Cuomo. However, it still has life and is being taken seriously.

The bill is now in the Banking, Housing and Urban Affairs Committee.

I think Senator Dodd’s introduction of the concept of bonding was to incentivize the appraiser to do good by having “skin in the game” but it does nothing to solve the current lending problem. Is this the best that can be done by Congress? It’s damaging to the lending industry and poorly written and thought out, and in my opinion, it allows Congress to say this takes care of the problem, when in fact, it makes it worse.

Here is the appraisal-related content summary provided by Senator Dodd’s web site.

V. Require good faith and fair dealing in appraisals.
– Prohibit pressure from being brought to bear on appraisers.
– Hold lenders liable for appraisals to avoid the appraisal problems created in the current climate.

Here’s the actual language of the appraisal related portion of the bill:

Title IV Good Faith and Fair Dealing In Appraisals

Requirements for Appraisers

  • Appraisers owe a duty of good faith and fair dealing to borrowers.

My comment: Generic boilerplate that probably needs to be said. On that note I propose legislation that government officials never abuse their power, the public shouldn’t commit crimes and all school kids show do their homework. In other words, its an ideal, but it has nothing to do with addressing the core systemic problem – remove the possibility of collusion from the process.

  • No lender may encourage or influence an appraiser to “hit” a certain value in connection with making a home loan. In addition, a lender may not seek to influence an appraisers work, nor select an appraiser on the basis of an expectation that he or she will appraise a property at a high enough value to facilitate a home loan.

My comment: They actually use the word “hit” in the legislation. Who wrote this? How is a lender prevented from attempting to “seek to influence an appraisers work.” These are just words.

  • A crucial cause of the current mortgage meltdown has been inflated appraisals. Many ethical appraisers complain that lenders will only use appraisers who consistently value properties at the levels necessary to allow the loan to close. Appraisers who do not cooperate simply do not get hired. This is particularly detrimental to the homeowner because it leads the homeowner to believe he or she has equity where little or none may exist.

Comment: “A crucial cause” implies appraisers initiated the problem. Wrong. They were the enabler of the lenders and the bad ones were rewarded for unethical practice. They actually use the word “meltdown” in this bill? This paragraph also infers that good appraisals are always low. You can say stuff like this all day long but that doesn’t stop it from happening.

  • Appraisers must obtain bonds equal to one percent of the value of the homes appraised.

Comment: “How do the costs of the bonding enter into this? I am not familiar with getting bonded I assume that means appraisers would file for a bond with a predetermined amount so we get enough coverage. That violates federal licensing law (USPAP). This does nothing to fix systemic fraud and burdens the appraisers that do the right thing with additional costs. How does it keep a bad appraiser from doing bad work? They charge the bond costs to their unwitting (or not) clients and it’s no skin off their back. Good grief.

  • Remedies available to borrowers

— Lenders must adjust outstanding mortgages where appraisals exceeded true market value by 10 percent or more.

Comment: Can you imagine the litigation costs that would result if this passes? Who determines whether the value is off by more than 10%? Another appraiser who is hired by the homeowner? An AMC? A real estate broker? Zillow? A lender using an Automated Valuation Model? What is “True” market value? Is this a new definition of market value and all other forms like “Fair” used by GAAP are “False”? I find it hard not to say the word “true” in this application without sounding sarcastic.

— When an appraisal exceeds market value by 10 percent (plus or minus 2 percent) or more, a borrower has a cause of action against the lender. A consumer who is awarded remedies under this section shall collect from the appraiser’s bond.

Comment: Can you imagine the the costs that will be endured by the consumer? I understand that bonding costs for the typical appraiser would be $10,000 to $40,000 per year (per appraiser). For what? Appraising is already a razor thin margin business. Two things are going to happen: appraisal services are going to probably double, and many good appraisers will be forced out of business.

— Actual and statutory damages up to $5,000.

Comment:The further destabilization of the lending industry is worth $5k?

Here are the Senators who think this is a good idea:

Sponsored by Christopher Dodd(D-Ct), with co-sponsors: Sen. Daniel Akaka [D-HI]
Sen. Barbara Boxer [D-CA]
Sen. Sherrod Brown [D-OH]
Sen. Robert Casey [D-PA]
Sen. Hillary Clinton [D-NY]
Sen. Richard Durbin [D-IL]
Sen. Dianne Feinstein [D-CA]
Sen. Thomas Harkin [D-IA]
Sen. Edward Kennedy [D-MA]
Sen. John Kerry [D-MA]
Sen. Amy Klobuchar [D-MN]
Sen. Frank Lautenberg [D-NJ]
Sen. Claire McCaskill [D-MO]
Sen. Robert Menéndez [D-NJ]
Sen. Barbara Mikulski [D-MD]
Sen. Barack Obama [D-IL]
Sen. John Reed [D-RI]
Sen. Charles Schumer [D-NY]
Sen. Sheldon Whitehouse [D-RI]

I’ll bet if the situation was explained to the Senators with clarity, they would have issues with the bill as written. Time is of the essence, but the solution needs to solve the problem. The problem is about self-dealing and allaying investor’s concerns with the products they are purchasing.


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[Sounding Bored] Negotiating Appraisal Fees, Staring In The Headlights

June 4, 2008 | 9:32 pm | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. I was particularly annoyed about getting pressure to drop my fee this week, so I turned on my headlights.

I was highly recommended by several sources to perform an appraisal in a sticky legal matter. We delivered an engagement letter. After a few days the client left a message saying the proposal looked good “but see what you can do about the fee” in a slightly sarcastic tone.

I winced when I heard the message because this was a complex matter involving litigation and court testimony and I quoted what I thought was a fair fee. Of course I may not have been in sync with expectations or this individual simply expected to negotiate.

There is nothing wrong with negotiating a fee up or down if the ultimate assignment, once defined, is not what was originally expected. However, I am particularly sensitive to the commoditizing of appraisal services (ie AMCs) that has occurred over the past decade.

…that we are just a bunch of form-fillers.

I tend to see our industry as a deer in headlights when negotiating fees and turn times.

In other words, as an industry we are way too happy to accommodate (I guess that correlates well with the credit crunch) the client whether it is fair or not.

Of course I am being very idealistic here but why not?

I don’t to be in the game of quoting a very high fee building in the expectation of negotiating downward. I quote what I am willing to work for. That seems to be more a professional approach to me. Avoiding being:

  • defensive.
  • condescending.
  • showing righteous indignation.

It sounds pretty basic but I am often amazed at how many of us (I ahve had my moments) have acted that way to a client.

We don’t need any more apologists for our worth as experts. Of course it ultimately is what the market will bear but why automatically negotiate?

Suggest that the client looks elsewhere if they are uncomfortable with the fee.

It has been my experience that the client doesn’t always go elsewhere if they were handled professionally in the past.

Incidentally, that particular client ended up calling back and hiring us for the assignment and expanded the engagement for a higher fee.

You get what you pay for.


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Outstanding On Our Soapbox: Bigger Is Not Always Better

May 19, 2008 | 2:14 pm |

In this week’s The Hall Monitor post in our other blog Soapbox called Bigger Is Not Always Better explores the idea that the multiple decades long trend toward larger house sizes may be over.

In other words, smaller housing size may matter more in the near future.


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