Posted by Jonathan J. Miller -Sunday, April 15, 2012, 3:58 PM 4 Comments
I had an interesting conversation stream recently that I thought I’d re-share. I dropped the participants names off (just in case).
My conversation began on Twitter with a question from a friend
Broker/Friend: Why do people hate real estate agents?
Me: Probably for same reason they hate appraisers.
Conversation that moved over to Facebook (my Twitter stream flows through it)
Colleague1: People “hate” what they fear. People mostly fear the unknown. They also hate situations in which they don’t get what they think they want. Real estate valuations and transactions are the vortex for unmet expectations as well as the unknown. From a philosophical perspective many believe hate and fear are synonymous. If that’s true, perhaps the vibe agents and appraisers receive is more fear that just comes across as hate. Information and explanations can diffuse and even disperse some of that. Setting expectations properly and education. Sometimes I think agents and appraisers simply get busy and skip some basic steps that could help. People in every profession get too busy and skip those steps. Of course, you can never satisfy the assholes, but I believe a few simple customer service-oriented tactics could make life easier for everyone involved. Thanks for letting me post on your wall and I hope you have a great weekend.
Me: Well said [redact]. I think also that the bar is so low in both industries that there is a wider range of competence – combine that with a large and significant asset tied to raw emotion and self worth and a whole lot of hate is the byproduct.
Colleague1: That’s a really good point. When people are dealing with what is most often the single largest asset they’ll ever possess, emotions naturally run high and they do let it become very personal.
Friend: In my experience, lying is the #1 problem I’ve had with real estate agents. Reason # 2 would be when they flirt with my husband and act as if I’m not there.
Posted by Jonathan J. Miller -Monday, March 12, 2012, 8:38 AM Comments Off
Got this solicitation in the mail last week. I’d name names but letter doesn’t provide any.
They had our mortgage amount and the bank name that originally issued the mortgage (it’s long since been sold). The letter uses phrases that are close enough to actual to be confused for legitimate.
Housing and Economic Recovery Act of 2012? Try 2011. HARP, Foreclosure, “Failure to Respond”, restructuring, “Loan modification department”, 7% rate?
Out of curiosity, we called and they wanted us to mail our personal financial information to determine if we qualify.
Can you imagine the damage pariahs like this will do to people in desperate financial straits?
This is interview required viewing for anyone connected with real estate and mortgages. Here are a few choice snippets:
“We’ve made fraud and perjury just a business expense.”
“Felony, fraud, perjury on a mass scale.”
“It wasn’t Jamie Dimon…or the $8 burger flippers…the process was too institutionalized…what we don’t know is who the mid-level bank execu who said too hell with 700 years of property law…just rubber stamp it and get it through…”
“It’s the Ford Pinto approach…eh some will burn to death, we’ll write a check later.”
Spoken with amazing clarity – always love Barry’s insights and delivery of his views.
WashPost Columnist: Mortgage Settlement Makes “Fraud a Business Expense” [Bloomberg Law/YouTube]
The Robosigning Deal is a Useless Embarrassment [The Big Picture]
Foreclosure settlement a failure of law, a triumph for bank attorneys [Washington Post]
Posted by Jonathan J. Miller -Monday, February 6, 2012, 9:18 AM Comments Off
Last week there was plenty of outrage from the directed at Freddie Mac who was found to have been betting against homeowners who were stuck with higher interest rates. They claimed there was a firewall and that they stopped the practice before FHFA, their regulator, told them to – but that wasn’t the point. It’s an unconscionable action from that institution.
FHFA, was once again late to the party (think housing boom and accounting scandal, of formerly named OFHEO). Now a government owned financial institution who is critical to the US housing mortgage market was betting against the US homeowner in conflict of their charter.
In President Obama’s SOTU speech, he announced creation of an office to prosecute those who violated the law related to the housing bubble. The initial reaction of many, including myself was “where were you 3 years ago?” as if this action was too late.
The Freddie Mac debacle and now the MERS lawsuit reestablishes that it is not too late. Without due process, faith in the US financial system will not be repaired.
Some observations and feedback as a result of my post were fascinating:
One appraiser in Michigan who commented on the Business Insider repost tweeted me to say he was blacklisted by Rels, the firm cited in my original post.
I was entertained by the diatribe of a couple of people who rambled about things that weren’t in or inferred by the post.
One commenter “Ken” knew of the property so well I can only assume by his arrogance he was the appraiser or review appraiser on the assignment in question and was saving his bacon by reframing the conversation.
It was interesting to see people respond to the post as if they were reviewing this as some sort of appraisal when I was simply pointing out that an AMC appraiser used a “comp” that was an outlier from other data available, that was condemned, had a notice visible from the street and would have at the minimum, raised a flag to the condition of the interior of the property.
The defensiveness of some of the comments inferred that the homeowner was unrealistic and the market had declined. Doh!
An appraiser friend of mine forwarded me this response from an AMC who saw the post to get a chuckle:
A couple of comments:
*There is no mention of what the subject collateral is, it’s condition, or if there is any improvement – or the relevance of this comp – in other words, what was the Scope of Work? An appraiser is supposed to select comps that are similar, proximate and timely.
*The article states that the borrower did get the loan – which at least on the surface might indicate that the comp was sufficient for the lender’s needs.
*There is no mention of what kind of appraisal product was ordered – drive-by or other.
*The author suggests that the siding had not been removed – does that mean the hole is newer than the appraisal?
*and sometimes there are lousy appraisers
[redacted]: As candidly as possible, I receive an anecdote similar to this periodically and in almost all cases, after full review, it is an optics issue – the appraiser performed the work properly based on client instructions and the Scope of Work. Not always – but almost always.
Two final points:
*There continue to be complaints about quality but it nearly always ties back to someone not getting the value assigned that was hoped for. The market continues to slide and by nearly all estimates will continue to do so in 2012. The messenger continues to be shot and will be for another 1-2 years….
*Did you know that Freddie and Fannie have both stated publicly that appraisals that go through AMCs statistically are “better” than not going through AMCs?
Other than appraisers causing you misery, I hope all else is well in your world.
Thank you for checking in.
My favorite point made here was the comment:
As candidly as possible, I receive an anecdote similar to this periodically and in almost all cases, after full review, it is an optics issue – the appraiser performed the work properly based on client instructions and the Scope of Work. Not always – but almost always.
In other words, depending on the scope of the assignment, the appraisal may be meaningless and this type of quality would be reasonable. Throw comps denoted as “condemned” onto the report because it is a recent sale even though as a drive-by, the sale would be suspect.
Why go through the appraisal exercise if you can’t rely on it? Those entrenched in the AMC world, in terms of their business practices or quality say its just as good as non-AMC work. Given the decimated ranks of the good appraisers, it’s become a self fulfilling prophecy.
Posted by Jonathan J. Miller -Tuesday, January 17, 2012, 3:08 PM 6 Comments
My senior staff appraiser shared the following nightmare story – about a friend of his who is going through a mortgage refinance with one of the big US national banks regarding a house in Long Island, NY. Rather not say the bank name but a stagecoach comes to mind.
An appraisal was ordered through a big appraisal management company – Rels. Their appraiser used a condemned house with a big hole in the side of it – visible from the street – as a comparable sale presented in the report
Attached are the photos of the condemned house used by the appraiser in my friends appraisal…They are still fighting to have a new appraisal done. I will be honest the house was not this bad (when it was sold) as most of the siding has been removed. However, it was bought by a developer/LLC (not a person) and the condemned sign was on the door had the appraiser gotten out of the car. The hole in the side I believe was there as you can see that is the side with some siding still remaining.
The condemned house appears to have sold well under market value because a developer bought it to renovate and flip at market levels. No commentary or awareness of this was evident in the report. This condemned house is in the same neighborhood but the borrowers property happened to be updated and in good condition. Interestingly, I’m told the condemned sale was the outlier of the other sales presented in report that pulled the value well below the other “non-condemned” sales.
The slogan on the Rels web site is: Quality appraisals — and rapid turn times.
However I see the terms “quality” and “rapid” as mutually exclusive. “Quality” is more aligned with “timely” and “rapid” is more aligned with “fast and furious without review”.
The borrowers are peeved because although they can get a mortgage, the suspect report is in their file and they are worried it will haunt them later with a home equity application or something they haven’t thought of – after all – they paid for it. In fairness to Rels, it doesn’t sound like they are in the loop and the bank just wants to close the loan. The bank is making comments along the lines of “the appraisal won’t stay with your file, so just close” which seems to stray from my understanding of file documentation for lending.
Lesson?
Housing doesn’t recover until appraiser amateurism is eliminated from the lending process. Amazingly, large institutions still seem more interested in efficiency and a built-in “low” bias than getting valuation services that provide reliable results in order to make informed decisions to generate business with.
Posted by Jonathan J. Miller -Tuesday, November 29, 2011, 7:00 AM Comments Off
Last summer I wrote an article for the now defunct Live Valuation Magazine. I attempted to explain to both appraisers and non-appraisers why our appraisal industry is so screwed up.
It was the cover story for one of the last issues – nearly a think tank of new ideas, the loss to the industry was a real setback.
In light of this change and the importance of the message to the industry, I have allowed Appraisal Buzz to republish it. Hope you enjoy it.
Neutral Valuation: Allowing appraisers to provide the service they were built for
As a real estate appraiser for the past 25 years, I’ve always viewed my role as a provider of a neutral valuation benchmark for clients to become empowered to make more informed decisions. Of course this is a fantasy-based, in-a-perfect-world depiction rather than an actual practice. In mortgage lending, residential real estate appraisers are not able to provide an independent market value without some sort of reprisal if the results do not match the client’s needs.
Since the credit crunch began with the Lehman Brothers bankruptcy that roiled the world economy in September 2008, our profession has actually strayed farther from being any sort of neutral valuation benchmark….[read more]
Like in the original publication, the comments on Appraisal Buzz reflect the fact that the article really touched a nerve.
Neutral Valuation: Allowing appraisers to provide the service they were built for [Appraisal Buzz]
Neutral Valuation: Allowing appraisers to provide the service they were built for [Live Valuation Magazine]
Neutral Valuation: Allowing appraisers to provide the service they were built for [Miller Samuel [pdf]]
Posted by Jonathan J. Miller -Monday, November 21, 2011, 3:03 PM Comments Off
My friend Barry Ritholtz penned an especially terrific column published in WaPo back on November 5th “What caused the financial crisis? The Big Lie goes viral.” that is worth reading if you haven’t. And apparently many have since there are several thousand comments/social media shares associated with it.
He lays it all out for us. Here’s my favorite part:
Here is the surprising takeaway: They are winning. Thanks to the endless repetition of the Big Lie.
A Big Lie is so colossal that no one would believe that someone could have the impudence to distort the truth so infamously. There are many examples: Claims that Earth is not warming, or that evolution is not the best thesis we have for how humans developed. Those opposed to stimulus spending have gone so far as to claim that the infrastructure of the United States is just fine, Grade A (not D, as the we discussed last month), and needs little repair.
Wall Street has its own version: Its Big Lie is that banks and investment houses are merely victims of the crash. You see, the entire boom and bust was caused by misguided government policies. It was not irresponsible lending or derivative or excess leverage or misguided compensation packages, but rather long-standing housing policies that were at fault.
Posted by Jonathan J. Miller -Monday, November 21, 2011, 12:39 PM 6 Comments
[click to expand]
It’s been nearly a year since I got enough energy to talk about a National Association of Realtors Existing Home Sales release. While their editorial side of the association is very good, the research side continues to issue information that simply misleads their agents and the public.
Total existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 1.4 percent to a seasonally adjusted annual rate of 4.97 million in October from a downwardly revised 4.90 million in September, and are 13.5 percent above the 4.38 million unit level in October 2010.
To those in the real estate trenches, this is confusing. Perhaps it is some sort of skeptical breath of fresh air in a cauldron of bad economic news? The media is confused using the word “unexpected” a lot and agents are confused because this is NOT what is happening on the ground.
Doesn’t it seem odd that the rate of contract failures nearly doubled, yet sales increased? Not logical.
A higher rate of contract failures has held back a sales recovery. Contract failures2 reported by NAR members jumped to 33 percent in October from 18 percent in September, and were only 8 percent a year ago, so we should be seeing stronger sales,” Yun added.
The reason for all this gobblygook? NAR Research continues to over emphasize “seasonally adjusted” (methodology is not disclosed) results in a market that has been subjected to unprecedented external influences such as tax credits and downwardly managed mortgage rates.
No seasonal adjustments [black line]
In the above chart, the orange glow overlay on the black line reflects non-adjusted sales activity annualized from August to October over the past 3 years. The latest segment shows a sharp decline in sales relative to the prior 2 years. That is what real estate professionals and consumers are generally feeling since that is what is actually happening across the country.
Seasonal adjustments [red line]
The seasonally adjusted red line has been slowly eroding in 2011 and a headline saying “October Existing-Home Sales Rise, Unsold Inventory Continues to Decline” is completely out of context. Inventory is declining because it always declines in the last several months of the year.
Contrary to the institutional culture baked-in over at NAR Research, this simply creates more mistrust from the membership and consumers – and more importantly, it does not help agents sell more properties, the key reason for the existence of this trade group.
Posted by Jonathan J. Miller -Monday, September 5, 2011, 10:16 PM 3 Comments
Last May I gave a keynote presentation at RAC’s national conference in Las Vegas and caught up with many of the best appraisers in the country (my friends and colleagues). One of the attendees was the founder of LiveValuation Magazine, Ernie Durbin, II, SRA, CRP. He asked me to write an article on “neutral valuation”, one of the topics of the speech.
LiveValuation Magazine contains the best, most relevant content to appraisers and the appraisal industry I have come across. It is also a great resource for users of appraisal services.
For me it was an honor just to be asked to contribute to LiveValuation Magazine let alone be placed on its cover as the feature story.
And here is the article (I recommend you go to page 25 below for the full blown magazine w/graphics version) – the topic is something I am very passionate about and hope that forward looking appraisers will get something out of it.
Had a fun interview with Tom and Sara this morning on the always MUST watch/listen Bloomberg Surveillance. We talked housing, rentals, vacancy and inventory. An added bonus was the addition of Adam Davidson – co-founder and co-host of Planet Money... Read More
