Tim Andersen, The Appraiser's Advocate Podcast : Recent Episodes

Timothy Andersen - USPAP Instructor

Tim Andersen, The Appraiser’s Advocate, enlightens you on all things related to Real Estate Appraisal

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How Do You Know? — Evidence, Judgment, and the Income ApproachHow do appraisers know what they claim to know?

That simple question lies at the heart of professional real estate appraisal, yet it is rarely asked. In this episode of The Appraiser’s Advocate, Timothy C. Andersen, MAI, explores one of the profession’s most common assumptions: that the income approach is generally not applicable to owner-occupied single-family residences.

Rather than arguing for or against the income approach, this discussion asks a deeper question: What market evidence supports that conclusion? Is the decision based on market analysis, market participant behavior, and USPAP-compliant appraisal methodology? Or has it simply become accepted through tradition?

This podcast draws from USPAP, The Appraisal of Real Estate, housing economics, behavioral economics, and the philosophy of Socrates. It also examines how appraisers develop credible opinions of value through professional judgment, critical thinking, and evidence-based appraisal. Along the way, it introduces concepts such as judgment under uncertainty, market-supported conclusions, highest and best use, reconciliation, market participant analysis, and the importance of testing assumptions before accepting them.

Whether you are a real estate appraiser, review appraiser, lender, attorney, state appraisal board member, USPAP instructor, or valuation professional, this discussion challenges you to think beyond forms and checkboxes. It argues that appraisal is not bookkeeping—it is the disciplined interpretation of market evidence in the pursuit of a credible opinion of value.

The question is not whether the income approach should always be developed.

The question is far more important:

How do you know?

Many residential real estate appraisers fear cross examination. They imagine aggressive attorneys, trick questions, and public embarrassment. In reality, most experts do not fail because they are wrong. They fail because they are unprepared. What follows is how appraisers survive cross examination.

This episode on how appraisers survive cross examination explores what cross examination truly tests. Contrary to popular belief, it is not primarily a test of memory. It is a test of reasoning. Attorneys want to know whether an appraiser can explain what they did, why they did it, and how the available evidence supports their conclusions.

The discussion focuses on the importance of a strong workfile, careful documentation, and critical thinking. Listeners learn why a report is merely a claim while the workfile serves as the proof. The episode explains how unsupported adjustments, vague language, boilerplate explanations, and overconfidence can damage credibility under questioning.

The program also explores the psychology of expert testimony. Appraisers learn why calmness often proves more persuasive than confidence, why admitting limitations can strengthen credibility, and why uncertainty is not a weakness. The discussion emphasizes that market value itself reflects probability rather than certainty, making intellectual honesty a professional strength rather than a liability.

Throughout the episode, listeners receive practical guidance on answering difficult questions, avoiding common traps, maintaining professional composure, and preparing for testimony. The central theme remains constant: cross examination punishes ritual but rewards reasoning. So, this is how appraisers survive cross examination.

Why does a chocolate cake need vanilla? Because without it, the flavor feels incomplete. In this thought-provoking podcast episode, veteran real estate appraiser and educator Tim Andersen explores how that same principle applies to appraisal reporting. The appraisal form may contain the data, analysis, and conclusions, but the letter of transmittal quietly transforms the entire professional experience. Thus, the importance of a transmittal letter in a real estate appraisal report

What is the importance of a transmittal letter in a real estate appraisal report? This episode examines why a formal transmittal letter improves communication, builds trust, and strengthens credibility in residential real estate appraisal reports. Through practical examples and gentle humor, listeners discover how seemingly small refinements can dramatically improve the perception and effectiveness of an appraisal assignment.

The discussion explains how appraisal reports travel through many hands, including lenders, reviewers, attorneys, regulators, judges, and juries. A thoughtful transmittal letter helps orient those readers immediately while signaling professionalism, clarity, competence, and respect. In today’s increasingly automated appraisal environment, strong communication skills distinguish professional judgment from mere form-filling.

The episode also explores larger philosophical questions about appraisal practice, professionalism, and the growing influence of artificial intelligence. As AVMs and automation expand, appraisers must demonstrate value beyond mechanical data entry. Professional writing and presentation now matter more than ever.

Again, what is the importance of a transmittal letter in a real estate appraisal report? Ultimately, this podcast asks an important question: Are appraisers merely “kitchen help,” or are they the Chefs Pâtissier of professional valuation practice?

If you care about appraisal credibility, USPAP professionalism, communication, or the future of the profession itself, this episode delivers practical insight wrapped inside a memorable metaphor.

Is modern real estate appraisal grounded in science? Or does it still rely on untested assumptions? In 2026, the profession stands at a critical crossroads. This is between data-driven analysis and what can only be described as appraisal superstition. Appraisers routinely produce precise value conclusion. But, many of those conclusions remain difficult to test, replicate, or falsify.

At its core, credible real estate appraisal should rest on epistemology—verifiable, evidence-based reasoning supported by market data, statistical analysis, and transparent methodology. However, in everyday practice, much of the appraisal process still relies heavily on heuristics, or rules of thumb. These are proximity, subdivision similarity, and customary adjustment ranges. These shortcuts can be useful, but when left untested, they drift into unfalsifiable belief.

This is where the concept of superstition becomes relevant. Drawing from the philosophy of Karl Popper, any conclusion that cannot be challenged or disproven falls outside the realm of science. In real estate appraisal, this often appears in unsupported adjustments, intuitive comparable selection, and narrative-based reconciliation.

The solution is not to eliminate professional judgment, but to discipline it. Appraisers must increasingly adopt statistical methods, probabilistic thinking, and transparent documentation to ensure their conclusions meet modern standards of credibility. As appraisal technology, AI review systems, and regulatory scrutiny evolve, unsupported reasoning will become more visible—and less defensible.

Ultimately, the future of real estate appraisal depends on a simple principle: If a value conclusion cannot be tested, it cannot be trusted.

AI is entering residential real estate appraisal faster than most appraisers expected. Many professionals now ask whether using AI violates USPAP. Fear often drives that question, but clarity requires careful thinking. USPAP does not ban tools of any kind. Instead, USPAP governs behavior, judgment, and credibility.

Confidentiality remains a real concern. Appraisers must protect private data at all times. Entering sensitive property details into unsecured systems creates risk. Lack of transparency also creates problems. Some AI tools produce answers without showing their reasoning. Appraisers must always explain and support their conclusions.

Competency matters as well. USPAP requires appraisers to understand the tools they use. Blind reliance on any system creates exposure. However, not all uses of AI create problems. Many applications simply improve writing, organization, and clarity. Those uses resemble spellcheck or templates and carry minimal risk.

The key issue is judgment. Appraisers may use tools, but they cannot outsource decision-making. Value conclusions must always come from the appraiser’s own reasoning. Responsibility never shifts to software or automation. Every signed report still reflects the appraiser’s professional opinion.

Think about a courtroom setting. An attorney may ask how AI influenced the report. Clear, confident answers protect credibility. Weak or uncertain answers create serious problems. Verification and understanding become essential safeguards.

Smart appraisers follow three rules. Protect confidential information carefully. Verify every AI-assisted output thoroughly. Disclose meaningful use when appropriate. These steps maintain credibility and compliance.

AI is not the violation. Surrendering professional judgment creates the real danger. Appraisers who stay in control will adapt successfully. Those who do not risk losing both credibility and trust.

SEO Summary: Scientific Comparable Sales Selection Using Z-Scores and Similarity Scoring

Choosing comparable sales in real estate appraisal does not have to rely on judgment or guesswork. This podcast introduces a data-driven, scientific approach to comp selection using Z-scores, standardization, and similarity scoring. A Z-score measures how far a property feature—like square footage, age, lot size, or condition—is from the market average. This allows appraisers to compare different property characteristics on the same scale, eliminating bias caused by large numbers dominating smaller ones.

Once the appraiser standardizes the features, the spreadsheet calculates a similarity score, a Z-Score. This combines all differences into a single number that shows how close each sale is to the subject property. The lower the distance, the better the comparable. This process is known as statistical distance analysis and replaces traditional methods like bracketing and subjective comparison.

Such an approach also helps identify bad comps instantly. If any feature has a Z-score above ±2 or ±3, it signals a potential outlier that may distort value conclusions. By using standard deviation, regression analysis, and clustering, appraisers can improve accuracy, consistency, and defensibility.

Key benefits include:

Improved valuation accuracy
Reduced selection bias
Stronger USPAP compliance and defensibility
Clear, repeatable methodology

This modern appraisal technique aligns with data analytics, machine learning principles, and statistical modeling, making it essential for appraisers adapting to AI, AVMs, and evolving industry standards.

IntroductionThe cost and sales comparison gap is one of the most overlooked signals in real estate appraisal. Most appraisers notice the difference. Yet, few interpret it. This gap is not an error. It is market data that reflects how the market treats investment versus price, as well as how buyers respond to cost.

What does the Cost and Sales Comparison Measure?What measures production? Generally, the Cost Approach measures production. It reflects land, labor, capital, and risk. Then, the Sales Comparison Approach measures exchange. Because of this, it reflects what buyers actually pay in the market. So, when these two approaches diverge, the difference carries meaning. Therefore, if cost exceeds sales, the market may reject part of the investment. Is the property overbuilt? Its design may be outdated, or external conditions may be softening demand. Construction costs may have risen faster than market prices.

How to Interpret the GapWith the cost and sales comparison approach gap, if sales exceed cost, the market may reward investment. Therefore, demand may be strong. Supply may be limited. Land may be scarce. Buyers may be paying premiums. Interestingly, this cost vs value gap helps appraisers understand market behavior. That gap provides insight into supply and demand, depreciation, and buyer preferences. Therefore, this gap is a tool the appraiser must learn to use.

Strong appraisers do not ignore this gap. They measure it, analyze it, and explain it clearly in the appraisal report. This analysis strengthens reconciliation. It supports better judgment. It improves credibility under USPAP standards. Therefore, the cost approach becomes more than a calculation tool. It becomes a diagnostic tool and it helps explain why buyers pay what they pay.

Understanding the the cost and sales comparison approach gap is essential for modern real estate appraisal. It moves the appraiser from form filling to market interpretation. The cost and sales comparison approach gap. This is where true appraisal expertise begins.

AI for Real Estate Appraisers: 7 Essential Concepts You Must Understand

There is so much to know! What are the most important concepts real estate appraisers must understand to use artificial intelligence effectively? This podcast breaks it down. There are 7 essential concepts you must understand to use AI in a residential real estate appraisal.

Artificial intelligence is transforming the appraisal profession literally on a daily basis. But AI does not, cannot, replace professional judgment—it merely amplifies it. Understanding how to use AI tools correctly can improve efficiency, enhance report writing, and strengthen analytical clarity, thus foster credible appraisals and clear, persuasive appraisal reports. Misusing AI, however, can produce confident but flawed conclusions. These are to be avoided!

This episode explores essential topics including AI prompting techniques, USPAP compliance, confidentiality risks, and the difference between probability and truth in valuation. Learn why AI outputs must always be verified, how Scope of Work applies to AI inputs, and why hallucinated data is a real and present danger.

We also examine how AI excels at report drafting and organization, yet fails at highest and best use analysis, market interpretation, and professional judgment. The takeaway is clear: AI can assist in explaining value, but only the appraiser can form a credible value opinion.

Whether you are a seasoned MAI or a newer residential appraiser, this discussion will sharpen your thinking and prepare you for the future of valuation in an AI-driven world. So, there are 7 essential concepts you must understand to use AI in a residential real estate appraisal.

Key takeaway: AI is a tool—not a thinker, not a witness, and not a substitute for appraisal expertise.

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The Cost Approach is one of the most misunderstood aspects of real estate appraisal. Many appraisers treat it as a required form step. They calculate cost. Then, they subtract depreciation. Finally, they move on. But the Cost Approach is much more than a calculation tool. It is a framework for understanding how markets create and recognize value. It connects land, labor, capital, and risk. What risk?

There are many. Every property begins with construction. Before any sale, there is investment. Somebody must purchase materials. Which contractors to hire? Is all this cash outflow worth the risk? The Cost Approach models this process. It asks a simple question. What would it cost to build this property today? Then it asks a deeper question. Does the market recognize that cost? What if there are gaps between the cost approach and the sales comparison approach? This gap between cost and value is critical. It is not an error. Rather, it is market data. If cost exceeds value, the property may be overbuilt. If value exceeds cost, demand may be strong.

Is there depreciation? Depreciation is also an aspect of the cost approach most appraisers misunderstand. It is not just subtraction. It reflects how the market reacts to age, design, and external forces. This approach helps explain buyer behavior. The Sales Comparison Approach shows what buyers paid. The Cost Approach helps explain why they paid it.

What else? The cost approach is a diagnostic tool. It tests assumptions, reveals inconsistencies, and sharpens reconciliation. Strong appraisers do not ignore it. They use it to think more clearly. It shows them how to separate cost from value.

The Cost Approach is not about filling out a form. It is about understanding how markets transform investment into value.

When Does the Appraiser-Client Relationship Legally End?

One of the most misunderstood issues in residential real estate appraisal is, “Does the appraiser-client relationship legally end?” Many appraisers assume it concludes upon delivery of the appraisal report. That assumption is dangerous.

So, when is the end of the Appraiser-Client Relationship Under USPAP? Under USPAP, particularly the Record Keeping Rule, the appraiser’s obligations do not terminate at report delivery. The workfile must be retained for the required period, and it must contain true copies of all written reports and supporting documentation necessary to defend the analyses, opinions, and conclusions. The professional relationship may shift after delivery, but regulatory exposure does not.

Confidentiality boundaries also continue beyond submission. The appraiser must protect confidential information and assignment results unless properly authorized by the client or required by due process of law. Casual post-delivery discussions, especially with third parties, can trigger serious ethical and legal consequences.

Post-delivery liability exposure remains real. Reconsideration requests, lender follow-ups, borrower complaints, and AMC revision demands can reopen risk. State board investigations often begin months or even years after the report was completed. The triggering event is frequently not valuation error alone, but unclear scope of work, incomplete documentation, or poorly defined engagement terms.

This is why engagement letters matter. Clearly defining intended use, intended users, scope of work, and assignment conditions creates a defensible boundary. Explicit scope closure language can reduce misunderstandings and protect the appraiser from unintended extended liability.

So, when is the end of the Appraiser-Client Relationship Under USPAP? The relationship may evolve after report delivery, but professional responsibility under USPAP endures. Smart appraisers manage that reality proactively.

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Reconciliation, Becoming, and Public Trust in Real Estate AppraisalReconciliation under USPAP SR 1-6 is often treated as a technical step at the end of the appraisal process. In practice, it is far more than a mechanical exercise. True reconciliation is not about averaging numbers or following software defaults—it is about professional judgment under uncertainty.

USPAP requires appraisers to reconcile the quality and quantity of data, as well as the relevance and applicability of the valuation approaches used. This places reconciliation at the core of appraisal ethics, not just methodology. It is the moment where the appraiser must take responsibility not only for the final value conclusion, but for the reasoning that produced it.

From a philosophical perspective, reconciliation reflects what Søren Kierkegaard described as “becoming”: the transition from following procedures to standing personally behind one’s own choices. In this sense, reconciliation is an existential act. The appraiser cannot hide behind forms, templates, or algorithms. They must interpret conflicting evidence, assess uncertainty, and justify why certain data deserve greater credibility than others.

This shift moves appraisal away from mechanical form-filling and toward intellectual accountability. Appraisers are not fiduciaries in the legal sense, but they are stewards of public trust. Their primary obligation is not loyalty to the client, but loyalty to professional judgment, independence, and truth-seeking.

Reconciliation is where data becomes knowledge, numbers become meaning, and appraisal becomes a genuinely ethical practice.

Why Appraisers Opine Value—They Do Not Estimate ItMany people casually describe a real estate appraisal as an “estimate of value.” While common, this language misrepresents what appraisal actually is and why professional judgment remains essential. An appraisal is not an estimate of a hidden or pre-existing number. It is a reasoned value opinion formed under conditions of uncertainty.

An estimate assumes that a true value already exists. It can be approximated with better data or tools. Market value does not work that way. No single, correct value resides inside a property waiting to be discovered. Instead, market value reflects how typical buyers and sellers are most likely to behave. This assumes a specific point in time, under specific conditions, with incomplete information.

Real estate markets involve people, not machines. Therefore, uncertainty cannot be eliminated. Every sale is unique. Different buyers, financing terms, timing, motivations, and negotiations can produce different outcomes without anyone acting irrationally. A sale price shows what happened, not what had to happen.

This is why appraisers opine value. They do not estimate it. A value opinion integrates data, analysis, experience, and judgment into a credible conclusion about probable market behavior. Data informs the process, but judgment drives it. No amount of automation, peer conformity, or form-filling can replace that responsibility.

USPAP reflects this reality. It emphasizes credibility over accuracy. Credible appraisal practice requires transparent reasoning, appropriate scope of work, and professional accountability. Nothing in USPAP calls for mechanical precision.

Understanding this distinction protects the integrity of the appraisal profession. It also serves to clarify the appraiser’s role, and reinforces why judgment remains non-delegable in valuation practice.

Ethics Is Not Just Compliance: What USPAP Is Really Asking of AppraisersIn this episode, we take a clear-eyed, plain-language look at professional ethics in real estate appraisal. And why ethics is far more than rule-following or box-checking.

Too often, ethics is treated as compliance: follow USPAP, disclose conflicts, don’t lie, don’t cheat. All of that matters, true. But it’s not the whole story. This episode explores what USPAP is actually designed to do. It differentiates between honest mistakes, professional carelessness, and intentional bias. And it makes clear why those distinctions matter for public trust, credibility, and the future of the appraisal profession.

We walk through three fundamentally different kinds of ethical failure that appraisers face in the real world:

• Carelessness and negligence. This is when assumptions go untested or data goes unchecked
• Knowing misrepresentation. When an appraiser recognizes a problem but proceeds anyway
• Systemic pressure. Those times when speed, volume, or client influence quietly undermine independence

Using USPAP SR 1-3 and SR 2-3, this episode explains why intent matters just as much as accuracy, and why a report can be “technically correct” yet ethically indefensible. We unpack why USPAP places responsibility squarely on the appraiser, even when the system makes ethical practice uncomfortable.

This is not a scolding and not a lecture. It’s a professional conversation about judgment, responsibility, and what it actually means to sign your name to an appraisal certification.

If you’re an appraiser, reviewer, regulator, attorney, or lender who wants to understand why USPAP is written the way it is, how ethics differs from mere compliance, and why professional judgment cannot be delegated to forms, templates, AVMs, or clients, then this episode of the Appraiser’s Advocate is for you.

Because USPAP isn’t asking for perfection.

Many residential real estate appraisers remain deeply loyal to the GSE and AMC appraisal system—even as fees decline, turn times shrink, and professional judgment is increasingly replaced by checklists, models, and automation. This podcast explores why that loyalty exists and why it is so hard to let go.

The answer is not ignorance or laziness. Most appraisers are rational professionals responding to incentives, habits, and identities built over decades. The GSE system provides structure, predictability, and clear rules. It tells appraisers what “good work” looks like and absorbs much of the responsibility when things go wrong. That feels safe.

But that safety is an illusion.

Over time, the same system that promises protection also treats appraisers as interchangeable parts, compresses fees, rewards speed over judgment, and steadily removes professional autonomy. Appraisers stay not because the system loves them back—but because leaving feels risky. Behavioral economics calls this loss aversion. Psychology calls it identity attachment. Most appraisers simply call it survival.

This piece also examines why private appraisal work—such as expert witness assignments, litigation support, and consulting—feels intimidating. In private work, the appraiser is the form. Reasoning replaces checklists. Judgment replaces automation. That level of visibility requires confidence, education, and intellectual courage rarely taught in production environments.

Ultimately, this podcast does not shame appraisers or demand change. Instead, it offers illumination. It invites appraisers to reflect honestly on who controls their work, their time, and their professional future.

The lantern is lit. The choice, as always, belongs to the appraiser.

USPAP and Scope of Work…Again? In this episode of The Appraiser’s Advocate, Tim Andersen dives deep into one of the most misunderstood concepts in real estate valuation: Scope of Work. Yes, USPAP tells us there are four official Scope of Work components. But here’s the twist every appraiser needs to hear: every USPAP Rule is actually a Scope of Work Rule. If that revelation doesn’t wake up the trainees in the back row, nothing will.

Tim breaks it all down. How the Ethics Rule, Competency Rule, Record Keeping Rule, Standards Rules 1 and 2, and even the Jurisdictional Exception Rule fit together. They secretly shape, constrain, or dictate what appraisers must do to produce credible assignment results. This is not just valuation theory. It’s the practical foundation for defensible appraisal practice, regulatory compliance, and the protection of the public trust.

Tim uses clear analogies (Blueprints vs. Building Code), real-world examples, and a dash of good-natured humor. He shows why Scope of Work isn’t just a procedural step. Rather, it is the integrative architecture behind every credible appraisal report. Whether you’re a seasoned SRA, a new trainee, or someone who still thinks USPAP is optional reading (spoiler: it’s not), this podcast delivers clarity where there’s usually confusion.

Learn how to identify insufficient Scope of Work decisions, how to explain your scope to clients without breaking into a cold sweat, and how to avoid the common pitfalls that lead to complaints, revisions, and existential dread.

This is a must-listen for appraisers committed to best practices, USPAP compliance, and credible valuation results—with just enough humor to remind you the profession doesn’t have to be boring.

And Keep your E&O Insurance up-to-date and an Administrative Law Attorney on speed dial.

USPAP and the Calm Mind. In this deep-dive, Tim Andersen, The Appraiser’s Advocate, explores how USPAP becomes far more powerful when paired with an internal discipline of calm, clarity, and composure. While the Ethics Rule, Competency Rule, Scope of Work Rule, Record Keeping Rule, and Standards 1 & 2 form the external architecture of appraisal professionalism, the podcast argues that no regulation—however noble—can slow your pulse when the AMC calls, the agent threatens, or the state board letter lands in your inbox like a meteor impact. That requires something USPAP can’t teach: inner governance.

Through real-world case studies—ranging from the “Velvet Voice” broker to the haunted warehouse (spoiler: not actually haunted, just competitive marketing)—Tim shows how a calm mind leads to better analysis, cleaner reasoning, stronger ethics, and fewer ulcer-inducing emails from state appraisal boards. Appraisers gain practical strategies for maintaining objectivity in chaotic markets, communicating clearly during emotionally charged assignments (like divorce cases), and creating workfiles so tight the state board could review them with a magnifying glass and still go home early. Sounds pretty good, don’t you think?

And yes—there’s humor. Because if appraisers can’t laugh at “ocean views” reflected off nearby windows, what hope is there?

This episode is a must-listen for appraisers wanting stronger USPAP compliance, better risk management, improved client trust, and a more peaceful professional life—all without chanting, crystals, or goat yoga.

Keep your E&O up to date, and use legal counsel when necessary!

USPAP: The Moral Compass of the Appraiser, from Tim Andersen, The Appraiser’s Advocate (tim@theappraisersadvocate.com). This podcast is a powerful exploration of the ethical, philosophical, and professional foundations of real estate appraisal. It draws on the Ethics Rule of USPAP — competence, independence, impartiality, objectivity, and protection of the public trust. This podcast also reminds appraisers that valuation is more than a technical exercise. Rather, it is also a moral act rooted in truth and professional integrity. Through vivid examples and the wisdom of Aristotle, Kant, Aquinas, Kierkegaard, and Dr. James Graaskamp, the document argues that law compels, ethics guide, but morals elevate. And where does UAD 3.6 fall into all this?

In today’s far-too-busy appraisal world, Appraisers face daily pressures such as “hitting the number”. Appraisers must manage ambiguous data, training apprentices, and navigating AI-driven technologies. This podcast reframes those pressures as moral choices. Tim emphasizes character, duty, and the courage to tell the truth even when it costs business. It highlights the Mirror Test — would you be proud of your report if it were published tomorrow? — as a practical ethical benchmark.

The document’s emphasis on public trust aligns appraisal practice with the common good, showing that accurate and honest valuation sustains fair markets, consumer confidence, and societal justice. In an age of automation, it asserts that the human appraiser remains the moral center of valuation.

Perfect for CE, coaching, and professional development, this work positions ethical appraisal practice as a blend of philosophy, duty, and disciplined judgment.

And remember to keep your E&O insurance up-to-date, and an Administrative Law Attorney on speed dial.

In this episode of The Appraiser’s Advocate, host Tim Andersen, MAI explores the surprising power of uncertainty — not as a weakness, but as one of the highest professional and moral virtues. Drawing on philosophy, science, art, and real estate appraisal practice, this 12-minute reflection reveals how doubt, humility, and intellectual honesty shape better decisions and deeper trust. Therefore, it is perfectly for an appraiser to tell the client, “The data were not very indicative of value. Therefore, I did the best I could with what I had.” Is this a fault? No, it is candid honesty – a demonstration of professional integrity.

Listeners will discover why uncertainty fuels curiosity, protects integrity, and builds credibility in every field — from Socrates’ “I know that I do not know,” to the appraiser’s careful phrase, “based on available evidence.” Tim Andersen, an AQB-certified USPAP instructor, connects these timeless ideas to USPAP ethics. This connection shows that credibility, not certainty, is the true foundation of public trust in valuation. Public trust, and giving the public reason to trust appraisal and appraisers, is the cornerstone of real estate appraisal.

Through stories, humor, and gentle wisdom, the episode examines how uncertainty becomes the soil of all virtue: humility in knowledge, compassion in ethics, wonder in art, and transparency in professional life. Whether you’re an appraiser, educator, or lifelong learner, this episode offers encouragement to “love the questions themselves,” as Rilke advised, and to walk confidently in a world that will never be fully certain.

Since uncertainty is an integral part of the science and are of real estate appraisal, keep your E&O insurance up to date, and an Administrative Law Attorney on speed dial.

This is a powerful episode of The Appraiser’s Advocate. In it, Timothy C. Andersen, MAI, explores what an ancient Roman legend can teach us today. We appraisers need to practice ethics, morality, and professional courage. “Horatius at the Bridge” by Thomas Babington Macaulay tells the story of one soldier who stood alone. His charge was to defend Rome’s bridge against invading forces. Andersen draws a striking parallel between Horatius’s moral stand and the modern residential real estate appraiser’s duty to protect the bridge of public trust.

When clients, lenders, and market pressures push for quick or biased results, the appraiser’s courage and adherence to USPAP’s Ethics Rule become acts of modern heroism. Through vivid storytelling, Andersen weaves together virtue ethics, Aristotle’s golden mean, Aquinas’s right reasoning for the right reasons, and the sacred calling of truth-telling in valuation.

Listeners will discover why each credible appraisal is a defense of market integrity. How ethical resistance protects the profession. And why impartiality, objectivity, and independence are not just regulatory words—but moral commitments.

Join this 12-minute journey through history, philosophy, and professionalism—and rediscover why appraisers stand as the guardians of economic justice. Make sure your E&O Insurance is up to date and you have an administrative law attorney on your speed dial!

🎧 Listen now: Horatius at the Bridge — The Ethics and Morality of Courage in Real Estate Appraisal

In this episode of The Appraiser’s Advocate, Tim Andersen, MAI, dives into a timeless question for real estate appraisers: 👉 Is market value the same as true value? If not, what’s the difference? Why are both important for an appraiser to know and understand? If there is a “natural” value, is there the concept of “artificial” value?

We know market value as the benchmark in USPAP, FIRREA, and lending regulations — the most probable price a property would bring in a fair and open market. But beneath that definition lies an ethical dilemma: when the market shifts, does it still measure what’s real, or just what’s happening now?

Tim introduces the deeper idea of natural value — the intrinsic worth of property rooted in fairness, sustainability, and human flourishing. Drawing from Aristotle’s “just price,” Thomas Aquinas’s moral theology, and Adam Smith’s “natural price,” this episode compares market value’s precision with natural value’s conscience.

Using examples from the 2008 housing crash, farmland use, and the unseen value of wetlands, Tim shows how these two forms of value can drift apart — and why reconnecting them is vital to protecting public trust and ethical appraisal practice.

Whether you’re an appraiser, reviewer, attorney, or educator, this conversation will deepen your understanding of value — not just as a number, but as a moral commitment.

And as always, it pays to remember to keep your appraisal tools sharp and well-oiled. Keep your ethics taught and properly layered. Make sure your E&O Insurance is up to date. And keep an administrative law attorney on speed-dial.

USPAP: Stones or Cities?In the world of real estate appraisal, every professional faces a choice: are we simply hauling stones, or are we building cities? That question lies at the heart of USPAP: Stones or Cities, a reflection on why appraisers must embrace not only the technical details of valuation but also the broader ethical and professional vision that underpins public trust.

The Uniform Standards of Professional Appraisal Practice (USPAP) serve as more than a checklist; they provide the ethical scaffolding that ensures our work builds confidence in markets, lenders, and communities. Too often, appraisers view compliance as a burden — like moving rocks from one place to another. But when we see our role through the lens of purpose, transparency, and integrity, our daily tasks become part of constructing something greater: fairness in lending, justice in taxation, and confidence in real estate markets.

Dr. James Graaskamp reminded us that real estate is never merely physical; it is social, economic, and ethical. Similarly, the USPAP Ethics Rule calls us to independence, impartiality, and freedom from bias. When appraisers honor these principles, they do more than complete assignments — they help shape the cities of tomorrow.

USPAP: Stones or Cities challenges each appraiser to ask: Am I simply producing reports, or am I contributing to a just and trustworthy marketplace? The answer defines not just our careers, but the legacy of the profession itself.

By embracing a professional vision rooted in ethics, competence, and leadership, appraisers move beyond stone-hauling to city-building — ensuring that their work truly serves the public trust.

And remember to keep your E&O up-to-date and have an experienced administrative law attorney on your side!

H1: UAD 3.6: Blessing or Bother? A Practical Guide for Residential AppraisersRollout begins September 8, 2025. Whether UAD 3.6 is a blessing or a bother depends on your practice focus. If you live on the GSE side of the house, mastering the nuances is unavoidable—and worth your time. If your work leans to estates, divorces, tax appeals, and Yellow Book assignments, you’ll encounter less immediate pressure.

In this episode of The Appraiser’s Advocate, we explain what’s changing, why software and client timelines may feel bumpy at first, and how to prepare without panic. Vendors, lenders, and AMCs are learning too; we’ll cover realistic expectations for staggered adoption so you can keep cash flow steady and clients confident.

What you’ll learn What UAD 3.6 actually changes (dynamic report, structured data, packaging) * Who really needs it now (GSE work) vs. where it’s less urgent (non-GSE assignments) * Transition pains to expect (software readiness, lender/AMC ramp-up) * How to protect your practice (flag awareness, workflows, templates, client education) * Professional guardrails*—keep ethics first, maintain E&O, and know when to call counsel

Need a hand? Email me: tim@theappraisersadvocate.com

But no matter what happens, keep your ethics foremost, pay your E&O insurance premiums, have an administrative law attorney on speed dial, and contact me at tim@theappraisersadvocate.com when I can be of service to you. Thanks!

What does your signature mean? In real estate appraisal, ethics (i.e., USPAP) and public trust form the foundation of professional credibility. This episode of The Appraiser’s Advocate emphasizes the critical importance of an appraiser’s signature, which represents not only an opinion of value but also a solemn pledge of honesty, objectivity, and compliance with the Uniform Standards of Professional Appraisal Practice (USPAP).

The discussion highlights how the appraiser’s signature is more than a procedural step. It functions as a seal of integrity, signaling to clients, lenders, courts, and the public that the report is unbiased, transparent, and free from conflicts of interest. Just as importantly, the signature assures that you conducted the valuation process with due diligence and professional independence, protecting the broader market from misinformation and manipulation.

What does your signature mean? This podcast reminds listeners that every appraisal carries ethical weight. The appraiser’s signature on the Certification directly influences lending decisions, property sales, and even legal disputes. A careless or biased opinion can erode confidence in the market and damage public trust. By contrast, a well-documented, ethically sound appraisal builds credibility, not just for the individual professional, but for the entire appraisal industry.

So, what does your signature mean? Ultimately, this episode underscores a vital truth: an appraiser’s signature is never just ink on a page. It is a public affirmation of trustworthiness, professional standards, and moral responsibility. For appraisers seeking to strengthen their careers, upholding ethics and protecting the public trust remain non-negotiable responsibilities.

And remember: keep your E&O Insurance up-to-date, and an administrative law attorney on speed dial!

Why are there among our Fellows who conclude the new UAD3.6 is a terror? It may be that it is a change from what we already know, and everybody (not just appraisers) fear changes. Or maybe it is because this will require appraisers to learn a new “language”. After all, what currently works in report writing will be obsolete when UAD3.6 comes out. Or maybe it is just that appraisers think the GSEs have no call or right to meddle in what works. Hey! It ain’t broke, so don’t fix it. No, it’s not broke. But it is old and outdated.

So, to claim “UAD3.6 is a terror” may be jumping the gun a little. Between this writing and November 2, 2026 when UAD goes into effect, there are approximately 14-months within which appraisers can learn and then conquer USD3.6. Is there going to be some disruption of appraisal life as we know it? Yes, of course. Are some of our Fellows going to find this transition difficult? Surely. Will the UAD3.6 that rolls out in September of 2025 be the same UAD3.6 that presents in November 2026? Probably not. So, what are we appraisers going to do? Some will see these changes are a reason to collapse and fail. Others will see it as an opportunity to rise to the occasion. Really, is that not how we should all be?

So, we can collapse in tears of frustration, or triumph with tears of joy and enthusiasm. If you think UAD3.6 is a terror you’ll be right. And it you think it is an opportunity to excel, you’ll be right, too.

In any event, keep your E&O Insurance up-to-date, and an experienced administrative law attorney‘s number handy in your phone. Those don’t mean you are afraid of anything. It merely means your wise.

What’s wrong with the supervisor/trainee model? Nothing, other than it does not work. Outside of that small limitation, it is entirely viable. So, really, despite the fact that model is as old as dirt, what’s wrong with it? If it does not work, why did the appraisal industry implement it in the first place? Is it fixable? If it is fixable, who is going to fix it?

What’s wrong with the residential real estate supervisor/trainee model is, in part, how it started. Real estate appraisal has always been a cottage industry. It was originally an offshoot of the brokerage and construction industries. Brokers and builders were supposed to be familiar with real estate values, costs of construction, and so forth. In 1932, when what was then known as the American Institute of Real Estate Appraisers began, almost all of its members were also brokers and builders, as well as investors. While it had a formal Code of Ethics, as well as a formalized educational program, it had to form a plan by which to train new appraisers. It was just accepted that the old guys would teach the new guys the practical side of real estate appraisal.

But that highlighted what was wrong with the residential real estate supervisor/trainee model. In many cases, the old guys did know there stuff but, for various reasons, were not willing and/or able to teach it to newbies. This is basically the problem with the system now. Lots of schools and programs “teaching” real estate appraisal, but no practical way for newbies to enter the system. Unfortunately, this is still the case.

Remember, whether you have 30-years experience, or are a newbie, you’ll need proper E&O insurance, as well as an administrative law attorney if you get that letter from your state.

What does appraisal’s future hold? This is a question that comes in all the time. Since it comes in all the time, and time is dynamic, so is the answer to the question. Simply, we cannot have the assurance of a yes or no answer. There are too many variables to account for. There are too many changes we cannot see around corners we cannot imagine. Yet, somewhere, somehow, there are among us those for whom the variables settle their flutter and corners become less opaque. Appraisal’s friend, Craig Morley is one of those savants for whom the future is slightly less cloudy than for we mere mortals.

What does appraisal’s future hold for appraisers? That (among others) is the question we put to Craig in this podcast. Craig, with his usual gentle wisdom and clear eye, addressed some of these issues. His answers will surprise some, disquiet some, enrage some, frighten some, and enlighten the rest of us. There is no reason to chronical those answers here. Please listen to the podcast.

And remember, you need full E&O coverage from a reputable broker, as well as a great administrative law attorney in your corner, if “that letter” ever arrives from the state appraisal board.

The reconsideration of value is a formal process. In the Fannie Mae Selling Guide are the guidelines that allows a lender or borrower to request a review of an appraisal when relevant new information may affect the value opinion. This isn’t about disagreeing with the appraiser’s judgment. It’s about presenting factual, material data—such as overlooked property features or newly closed comparable sales—that may not have been available during the original analysis. The appraiser then reviews this information and determines whether it justifies any change to the original value.

A reconsideration of value must be supported by specific, verifiable market data. It cannot be based on mere dissatisfaction with the appraised value. The appraiser’s role is to assess the credibility and relevance of the submitted information. If the new data is meaningful and meets professional standards, the appraiser may issue a revised report. However, if the appraiser finds the information immaterial or redundant, the original value opinion stands. This reinforces the objectivity and independence of the appraisal process.

The reconsideration of value request typically must be submitted within 30 days of the appraisal’s delivery. Only the borrower can initiate it. Appraisers are prohibited from making changes based solely on client preferences or pressure. The process safeguards the reliability of valuation in mortgage lending. It also offers a mechanism to correct genuine oversights. When properly handled, it ensures fair and accurate appraisals without compromising professional ethics or regulatory compliance.

And don’t forget to keep your E&O Insurance up to date and a great administrative law attorney on your side!

USPAP, SR1-6, and Reconciliation are central to producing a credible opinion of value in any real estate appraisal report. The 2024 Uniform Standards of Professional Appraisal Practice (USPAP) emphasizes that reconciliation is not just a procedural formality—it is an essential component of value development. According to USPAP’s Standard Rule 1-6(a), appraisers must reconcile the quality and quantity of the data analyzed within each valuation approach. This rule underscores the importance of critical thinking and professional judgment in ensuring the appraisal is not merely mechanical, but rooted in logic, accuracy, and market relevance.

USPAP, SR1-6, and Reconciliation also require clear communication and transparency in every USPAP-compliant appraisal. Under SR1-6(b), appraisers must reconcile the applicability and relevance of each method and technique used to arrive at the final value conclusion. This means explaining why one approach—such as the sales comparison, cost, or income approach—was given greater weight over others. For clients, lenders, and legal professionals reviewing the appraisal report, this level of clarity enhances trust, supports regulatory compliance, and upholds the ethical standards of the profession.

USPAP, SR1-6, and Reconciliation ensure that an appraiser’s conclusion is both defensible and reliable. Proper reconciliation weaves together all relevant market data, analysis techniques, and scope of work into a unified, well-reasoned value opinion. In a world increasingly driven by data and regulation, credible appraisal report reconciliation stands as a hallmark of professional excellence and client confidence in real estate valuation.

No matter what, make sure your E&O is up to date and you have great administrative law attorney on your side.

DOES REAL ESTATE APPRAISAL HAVE A FUTURE?

Does real estate appraisal have a future? This question comes in to me all the time. And it’s important! We’ve invested a lot of time and money to become appraisers. Did we waste all that? There are some who say yes to that question. Generally, they point out the changes that are coming to real estate appraisal (or have come). Then they point out the sacrifices to keep up with these changes are just too big. Those changes are coming at us just too fast. The learning curve is just too long. These appraisers should transition out of the business

So, does real estate appraisal have a future? Of course it does. It will be different than it is now, though. Because UAD 3.6 demands greater reporting, it also demands more thorough appraisals. More attention to details. Less boilerplate. Fewer unsupported assumptions about adjustments, market trends, and effective age. Yet the professional education and training behind those demands will make those who stay in the business better appraisers. How is that a bad thing? It is also likely appraisers will need to make some transitions. This means transitions to commercial work, non-lender work, court work, divorce work, tax appeal work, etc.

Yes, all things considered, real estate appraisal has a future. But the hallmark of that future is one of change. Is what you read on the appraiser-oriented websites, etc. accurate? If it is, then within 24-months of this podcast, there likely will be fifteen percent fewer appraisers than there are now. There likely will be fewer folks getting into the business. And those who stay are likely to be better trained. Why? Because the cookie-cutter house in the cookie-cutter subdivision will be an assignment of the past. Make sure you have proper E&O insurance and proper legal counsel. Those requirements will not change.

USPAP, Verification, and Bernoulli’s Fallacy. That’s a mouthful! What does it mean? I’m assuming you’ve heard of USPAP. Verification is an important component of USPAP’s SR1-4 (learn it, love it, use it). But it is likely Bernoulli’s Fallacy is something you don’t know about. Yet. You will, though. It is going to become really important in residential real estate appraisal, especially when UAD3.6 takes effect in November of 2026. Read on to learn why.

Really USPAP, verification and Bernoulli’s Fallacy go together. USPAP’s Standards Rule 1-4 requires us appraisers to “…collect, verify, and analyze all information necessary for credible assignment results.” As with a lot of USPAP, this is not overly clear (hello, ASB!). Bernoulli’s Fallacy says, in so many words, in statistical inference, people often wrongly assume that a single event, or a small number of observations, directly reveals the underlying probability of a process. We see this all the time from clients. Most houses in a subdivision sell for between $300K and $350K. Yet the one with the premium view and the kitchen upgrades that sold for $393K gets all their attention. If the subject is your basic house in the neighborhood, then its value is somewhere between $300K and $350K, that one outlier notwithstanding. One outlier’s price does not predict market value, despite what the client demands.

USPAP, verification, and Bernoulli’s Fallacy are a package deal. USPAP demands verification and we avoid Bernoulli’s Fallacy by being very skeptical about the predictive value of one or two outliers. This will become even more important as UAD3.6 kicks in and appraisers will need to write more in their appraisal reports. Are you preparing for that?

Questions? Contact me at tim@theappraisersadvocate.com. Need legal help or information on E&O insurance. I can help you with those, too.

USPAP and choosing comps is likely a poor name for this podcast. It’s a poor name since USPAP’s Standard One is silent on the choice of choosing comparable sales. In fact, all Standard One (see SR1-4(a)) says about the sales comparison approach consists of twenty-seven words. None of them is the word comparable, nor the words comparable sales. So, no, Standard One in USPAP is not a reliable source relative to choosing comparable sales.

However, USPAP and choosing comps in made easier in the context of the Comment to SR1-3(b). This is USPAP’s Market Analysis and Highest and Best Use Standards Rule. In that Comment is the admonition the appraiser “…must analyze the relevant legal, physical, and economic factors to the extent necessary for credible assignment results.” So, if there is a model for choosing a comparable sale, it is that such a sale must have the same relevant legal, physical, and economic characteristics as the subject. In turn, this means appraisers must understand the subject’s legal, physical, and economic factors before it is possible to understand those of competing sales, thus before it is possible to choose comps.

So, since USPAP and choosing comps seems to be an incompatible pairing, is there another model to use as part of the process of choosing comparable sales? Indirectly, yes, there is. One of the difficulties we face in this task is that there is no formal definition of a comparable sale. There are merely descriptions. A careful reading of The 15th ed. of the Appraisal of Real Estate shows that a common description is that a comparable sale is one that has the same highest and best use as the subject.

And remember to have an experienced attorney on your speed-dial, and your E&O insurance up to date!

USPAP does not specifically use the term, “…from your workfile…” However, you’ll find your state appraisal board does. In fact, you’ll find the board uses this phrase a lost. Given that, let’s spend some time on what the phrase means how we appraisers must comply with it.

“From your workfile” means just that. Under USPAP’s Standard 1, the appraiser has the ethical obligation to have enough materials, data, analyses, and so forth to support everything. In this instance, everything means every conclusion, statement of fact, opinion, etc. A lot of appraisers ask why this is necessary. To support everything from the data, analyses, and information in the workfile means the appraiser acted objectively. Each opinion, conclusion, and so forth merits objective, market-based support. If the market does not support a conclusion, if there is even a hint of subjectivity in a highest and best use or value opinion, then its credibility is fatally flawed.

What about phone messages? How is it possible to get those from the workfile! Simple. When you verify a sale, take notes on that call. Who? What? Where? When? Why? How? When you have the answers to those questions, you are home free. Brokers won’t return your phone calls? Then send an email with this statement, “I know you are busy. So, if you do not respond to this email, I’ll assume the facts of this transaction are as you noted them in the MLS.” Then, make sure your workfile has a copy of the deed, mortgage, survey or plat, zoning classification and code, and everything else the County/Parish has on the subject. This supports your objectivity.

And remember, make sure you have great E&O insurance on your side, as well as a great attorney.

USPAP doesn’t mention time adjustments. They are not useless or unnecessary. Measuring and analyzing changes in market conditions are critical and fundamental to real estate appraisal. Indeed, they are the foundation of an accurate opinion of value. This is simply because such a value conclusion has as its base a specific date in time. This is the effective date of appraisal. So, from within the neighborhood boundaries appraisers delineate at the beginning of the appraisal report, they must analyze sufficient sales data.

To do what? To determine if there have been any changes in market conditions over the passage of time. Typically, this time starts when the comparable goes under contract. Then it ends on the effective date of the appraisal. Has the market has measurably changed over that period? That change means the appraiser should market-adjust the comps up- or downward, as the market demands.

Again, USPAP doesn’t mention time adjustments. But this raises the question of which time period should the appraiser measure? As you’ll understand from the podcast, the GSEs assume the appraiser will measure the subject’s relevant market(s) over at least twelve (12) months. There is no black-and-white answer to the question, “How far back should I go for time adjustment data?” 12-months is a minimum, however.

Since USPAP doesn’t mention time adjustments, assume a twelve percent (12%) net increase over that one (-1-) year period. Assume prices increased twelve percent (12%) from January to August but went flat as of September 1st. If a comp went under contract September 14th, closed escrow November 27th, and the effective date of your appraisal is December 23rd, your time adjustment would be zero (-0-). The market went flat three (-3-) months ago. This is, therefore, the difference between the annual change per year and any current market trends.

A hill to die on. That sounds way too serious for a real estate appraisal podcast, right? These are supposed to be about USPAP, and education, and more practical stuff. But I’ve been studying on this topic for some time. Frankly, what AMCs do (or don’t do) does not bother me as much as it does some appraisers. Those appraisers complain that AMCs do not distinguish between their gross fees and the proration of that fee that goes to the appraiser. That’s true. But when you buy a car, the dealer does not make transparent the contributory cost of the spark plugs and drive shaft, either.

And the fees the AMCs pay are not, in my opinion, a hill to die on, at least not right now. That time is coming – soon. So, unless the AMC withholds some pertinent information from the appraiser, or somehow misrepresents the situation, then the appraiser sets the fee by accepting it. But there is a hill to die on when it comes to AMCs. And that hill is USPAP, of which all AMCs, you’d think, would be aware. But while the GSEs are pushing appraisal waivers, it also seems AMCs are stressing appraisers to accept lower fees for the same quantity of work, all to sustain the AMCs’ fee structure. Remember, the AMC can ask the appraiser anything it wants to ask. If, however, that request includes a knowledgeable request to violate USPAP, then it is time the appraiser should fire that AMC and get a new client.

Today, right now, get out of AMC work and into private work. I’ll be happy to consult with you on that. And make sure your E&O insurance is as relevant as possible. It will help to have expert legal counsel in your phone’s directory, too!

To comply with USPAP can be such a pain in the neck! For example, take what’s happening now. In the past, a commission was a commission and nobody gave any thought to it. But now, it might be nothing we appraisers should worry about, but it also might be a sales concession. If the commission inflates the purchase price over what it would have been otherwise, we appraisers have to account for that. And that requires cash-equivalency adjustments. And those are such a pain in the neck!

To comply with USPAP can be such a bother! Then there are mortgage buy-downs. Let’s face it, mortgage interest rates are high and will likely remain high for the foreseeable future. So, if a seller offers the buyer a buy-down from seven percent to five percent, what buyer is going to be dumb enough to say no to that? But, yet, we appraisers must look at that as a financing concession. And when it comes to financing concessions, we have to perform the cash equivalency calculations. USPAP demands we do them. The GSE’s definition of market value demands we do them. And, of course, every buyer wants to know they overpaid for their property, right?

To comply with USPAP can be such an inconvenience. For example, we appraisers are supposed to verify our sales, cost, and rental data. Yet for the lousy fees the AMCs are willing to pay, we don’t make enough money to verify data with the buyer, the seller, the broker, the builder, and so forth. Yet, when we sign that Certification, we certify to the client we complied with USPAP. Did we? If you certify that you did, but you really did not, then you are going to need great legal counsel and comprehensive E&O insurance. Contact me: tim@theappraisersadvocate.com.

There’s too much going on in AppraisalWorld. It is essentially impossible to keep track of what’s going on. FHFA just announced, in the most neutral of tones, that appraisal waivers could now be had, under certain conditions unheard of before. Again, conditions apply, but waivers are going to be available up to a 90% loan-to-value ratio (and 97% with a property data collection requirement). One of the conditions that applies is that the borrower would have to possess a killer FICO score. But that condition is current at the end of 2024. Given current political and social forces, who knows what those will be six-, twelve-, and eighteen-months from now? If real estate appraisal is the adult supervision of the mortgage lending industry, it appears that industry has found a way to remove the adult’s influence.

And, there’s too much going on in other areas, too. Fannie Mae is still sending letters to state appraisal boards about time and GLA adjustments. Certain states that do not accept anonymous complaints just trash them as a matter of course. Other states that accept such complaints insert those letters way at the bottom of their to do list. This may help the state with its administrative work load. But it does not help the appraiser to sleep well at night as this hangs over the appraiser’s head, family, and business.

And speaking about there is too much going on. There are now grumblings that USPAP needs to replace the ambiguous word credible (credible to whom and how to measure it?) with the word reliable. This is especially true now that the ROV process assumes the borrower is an intended user of the appraisal report.

So, what to do? Consider making friends with an administrative law attorney in each state in which you have a credential. And please make sure you have proper E&O insurance coverage.

Financing concessions and USPAP! More on this? Haven’t we heard enough on concessions, cash equivalency, and stuff they don’t teach us in appraisal school?! If you listen to what Fannie and Freddie have to say on these topics, the answer would have to be an emphatic “NO!”. Why? Because Fannie and Freddie continue to tell us we are not making the necessary adjustment when we need to. If we can’t believe Fannie and Freddie, who can we believe, right?

Financing concessions and USPAP are real issues! When it comes to making adjustments, any adjustments for that matter, education is the key. We may not make the necessary adjustments because we don’t know we are supposed to make them. Or maybe we don’t know how to make them. Well, education solves those problems. And this education is easy-to-access, as well as easy-to-afford. So, what’s stopping you from getting the education you need?!

As you know, NAR settled the Sitzer-Burnett case. And this case, in part, dealt with financing concessions. Now, is the party who pays the buyer’s broker’s brokerage commission granting a sales or financing concession? Or, is that party merely negotiating the best purchase and sale deal they can? How you, the appraiser, choose to answer those questions is important. One answer will require a sales financing adjustment. One answer will not. But there is no one-size-fits-all response. So it will be necessary to do the analytics on this question for each and every assignment. Critical thinking is a hallmark of a real estate appraiser. So, think critically about your answers to the financing concessions question. Your answers will affect how you make a living.

And don’t forget to make sure your E&O insurance is up-to-date. If you answer the above critical thinking question properly, you won’t need legal counsel to get you out of a jam!

What do technicians, mechanics, and engineers have to do with USPAP and Real Estate Appraisal? Maybe nothing.

But, at this point, it is easiest to conclude that a technician is one who knows that something should be done, though not necessarily how, when, or why. Technicians, mechanics, and engineers understand there is a process involved somewhere. A technician understands this, too, but for whatever reason, is not yet familiar with it. But a mechanic understands there is a problem within the system to be solved. The mechanic also understands there is a process involved in its solution. Then, via training and experience, the mechanic is capable of being part of that solution. Indeed, the mechanic understands the system sufficiently to solve the problem alone. So, if the mechanic can take care of the system’s problems, what is the purpose of an engineer?

Technicians, mechanics, and engineers all have their respective places in the natural order of things. Technicians help mechanics. Mechanics work within systems and fix the problems within them. But mechanics are limited to working with existing systems. Therefore, there must be somebody to design and implement the systems on which the technicians and mechanics work. So, without engineers, there would be little need for mechanics and technicians.

So, here’s the connection. Are appraisers technicians, mechanics, or engineers? Filling out an appraisal reporting form is the job of a technician. Knowing what to put into the form is the job of a mechanic. But by designing and executing the appraisal, what we appraisers summarize on the form requires we function as engineers. We do more than fix problems. We design systems to have the fewest problems as possible.

Oh, and make sure your E&O is always up to date. And, when you need it, get proper legal advice.

One of the purposes of this podcast is to make you mad. Another is to open your eyes to the power the analytics of the cost approach have to analyze sales. Another is to anger you. About what? About the depth of its questions and what is likely to be the shallowness of your answers to them. With any luck at all, this podcast will do both. If it does, then you’re paying attention. Thank you! If it does not, then I’m not doing a proper job as a USPAP instructor. I’ll need to work smarter to open your eyes.

Again, I want to make you mad. It is clear most appraisers do not like to engage in the analytics of the cost approach. Generally, we are not too familiar with it since most of its protocols are not market oriented. And there is a lot of math involved. Remember that four out of three appraisers do not understand math. The GSEs make it clear that they do not think the cost approach results in a reliable indication of market value. So, it is clear that most appraisers, because of these limitations, do not appreciate the deep analytical power the cost approach really has. Most of us simply do not understand how the protocols of the cost approach help us to come to a credible opinion of market value. Therefore, I’m going to ask you 10 questions on the cost approach and stuff related to it. After we’ve finished with them, you probably will still not like to tackle the cost approach (and for the same reasons). Nevertheless, you just may have a better understanding and appreciation of its powerful analytical capabilities. And remember to keep your E&O Insurance up to date, and understand the need for legal counsel.

This question comes up – a lot! It is common for reviewers to conclude the appraiser did not support, for example, the GLA adjustment. So the appraiser gets all bent out of shape and shouts, “I supported my adjustments! Right in the narrative I write the GLA adjustment is $65 a square foot! How can that reviewer say I did not support my GLA adjustment!?” Now it is time to go to USPAP for great advice. And that advice has to do with supporting adjustments. What is that advice? That advice is to support your adjustments. Why is that so hard?

Honestly, going to USPAP for great advice is easier than it sounds, although its advice may be indirect. For example USPAP does not use the term adjustment (or any of its derivatives) until AO-13. But right there, in USPAP’s definition of credible is the Comment that makes it clear that “…credible assignment results require support by relevant evidence and logic…” Next, in the Record Keeping Rule, is the statement that the appraiser’s workfile “…must include…documentation necessary to support the appraiser’s opinions and conclusions…” Therefore, the appraiser’s insistence the above statement is “support” for the $65 GLA adjustment is simply wrong.

Going to USPAP for great advice is both sound advice and a simple strategy. In this example, the appraiser’s support is already in the workfile, just not yet in the report itself. Somehow, the appraiser had to arrive at the $65 conclusion. Assuming these component processes are in the workfile, getting them into the report is easy. Try this: “Analysis of five comparable sales larger than the subject with five sales smaller than the subject indicates the market recognizes a $65 per square foot factor for size differences.” Taking USPAP’s great advice avoids E & O and legal problems. Try it. You’ll see.

When you think of USPAP and the State Board, chills run up and down your spine, right? In any given year, the typical real estate appraiser has less than a five percent chance of getting that letter from a state appraisal Board. But what happens when that letter thuds on your desk? It is not a time to panic, but it is a time to pay attention. Close attention. Life will go on. You’ll still be able to appraise real estate so you can make a living. But you’ll need help. Remember, contact me at tim@theappraisersadvocate.com to help you when it happens.

So what is going to happen when USPAP and the State Board become foremost in your professional life? It is likely the state board will send you a questionnaire to complete and return to the investigator. These questions will become the basis for the state’s investigation into any complaint filed against you. Therefore, you must answer them completely, fully, and truthfully. But you must not give the state the rope to hang you with. For example, One question might be, “Were you compensated for the assignment?” Assuming you did not work for free, the entirety of your answer would be, “Yes”. No more, no less. The state has no reason, frankly, to know your professional fee for that job.

Since the topic of this podcast is USPAP and the State Board, there are indeed more such questions I could preview. However, time and space do not permit a greater discussion. So, please, listen to the podcast. But one more thing. If you do get that letter from the state, you need to act, not ignore it! You’ll need counsel from your E&O people, an attorney, and a USPAP expert. This is not a job you do alone!

USPAP and Functional Obsolescence?! You ask, “Tim, haven’t you covered this topic here on the podcast, as well as a bunch of other times, places, venues, and symposia?” Yes I surely have. But that was the other functional obsolescence. Today, on this podcast, I’m going to talk about the true functional obsolescence. Yes, the functional obsolescence the market really abhors. And this is the functional obsolescence you will not find in some crusty, musty, dusty old house. It is not the irrelevant functional obsolescence of aged cat urine. It is not the functional obsolescence of a house with five bedrooms and only one bath. No, this is a functional obsolescence factor even more insidious than any of those.

In this podcast on USPAP and functional obsolescence I’m going to talk about the worst functional obsolescence of all. And what’s even more interesting is this form of functional obsolescence is totally preventable. It is always curable, but the cure may be expensive, time-consuming, and difficult. But it does not need to be. So, Tim, what in the world are we talking about here?

To talk about USPAP and functional obsolescence is to talk about that obsolescence that ends up corroding your brain and your heart! You likely just tore out your earbuds and are staring at them aghast that I should say such a thing. But I just said it and you just heard it. Have you ever heard an appraiser declare, “My adjustments are based on my 20-years experience in this business!”? That appraiser just declared her functional obsolescence set in 20-years ago! She just proudly announced, “I have not paid attention in the last nine of my 7-hour USPAP update classes!” Maybe I’m wrong, but isn’t a superficial ignorance that profound something to hide rather than openly declare? Keep listening. Thanks!

There are some of our appraisal fellows whose grasp of the concept USPAP and Competence is yet to be as strong as it could or should be. In a 15-ish minute podcast, it is simply not possible to look into this subject with any depth or conviction. So we won’t. But we will look at what USPAP says about the topic. Note to our friends on the ASB: In the next 7-hour USPAP update class, perhaps it would be possible to devote 30-minutes to the miniscule and trivial grammatical changes you made to the document. Then, devote 6.5 hours to something important and relevant such as competence, how to get it, and why it is important. After all, the GSEs are sending appraisers to their state boards for discipline over the component issues of Competence and appraisers’ ignorance of them. How about helping us out, Guys, what do you say?

OK. Rant over. Back to USPAP and Competence. In USPAP, there is no definition of of competence, competency, competent, and so forth. (There is not one in the 6th ed. of The Dictionary of Real Estate Appraisal, either). This despite the fact USPAP refers to these terms over 300 times. This is not an oversight. There are plenty of definitions out there in dictionaries and other professional texts. Some of these are in the podcast, so please listen to hear them. Or check them out for yourself.

So, in what we do, is an understanding of the concept of USPAP and Competence important? Is it even relevant in real estate appraisal? I say that it is of major importance to us, what we do, and how we do it. Now, you’re free to disagree with me. You should, really. But do the research yourself. Eventually, you’ll agree with me. So, why not start now?

This podcast sports a metaphysical title. “USPAP: Questions and Reflections”. Why this title? Who in their right mind wants to think about USPAP? B-O-R-I-N-G! I’ll concede that point. But somebody has to think about it. And, as a USPAP instructor, I get paid to think about it. Really, I get paid to teach it. But before I can teach it, I choose to think about it first. Choose all the ways there are to explain it so that it is clearer and more persuasive than it is written. And, frankly, it is not written overly well. But that’s the topic of another podcast. I can say that with impunity since nobody reads these show-notes. So, let’s get a little metaphysical, shall we?

“USPAP: Questions and Reflections” is primarily the results of some of the questions that come in to me as a USPAP instructor. But Reflections comes from the processes I go through in order to be able to answer those questions. I want to answer them cogently, persuasively, and completely. Or, at least as cogently, persuasively, and completely as I can. Take as one example, the first question on the podcast: “Can I use the extraordinary assumption that the present use of the property is its highest and best use? Like, there’s a lot of work that can go into highest and best use. But with a $450 fee and a 48-hour turn-around time, I’d go broke – FAST! – if I had to do a real highest and best use analysis every time. So, can I?”

So, as I reflected on that appraiser’s questions, the title “USPAP: Questions and Reflections” just leaped into my mind. Actually, this is a great question, worthy of deep reflection since there is not a cut-and-dried answer to it. Even USPAP admits this.

USPAP and the Public Trust is a topic we appraisers do not address all that often. Perhaps we should, since there is confusion on the issue. At the base of this confusion is the fact appraisers think our job is to protect the public (i.e., the buyer, the lender, the client, the borrower, etc). In reality, this simply is not true. What USPAP does say is that it is USPAP’s job to promote and maintain a high level of public trust in appraisal practice. Clearly, there is a difference between the two, don’t you think?

When we think of USPAP and the Public Trust, it makes sense to put that thought into the context of protection. USPAP itself refers to protect or protection 114 times. Yet not one of these references is in the context of shielding someone from something or acting as someone’s champion. Therefore, to conclude USPAP bestows on appraisers a responsibility to protect someone or something has no basis in fact nor practice. In fact, it is clear from the context of USPAP’s definition of an appraiser that USPAP does not shoulder the appraiser with this champion’s burden. How so? By definition, an appraiser is one who is “…independent, impartial, and objective…” It is essentially impossible to demonstrate these three attributes, as well as, simultaneously, to protect somebody from something.

Therefore, USPAP and the Public Trust refers to the reasons we give to the public to trust us, what we do, how we do it, and why we do it. For example, when it comes to adjustments, do we understand that merely because there is a difference between the subject and a comp, there might not be an adjustment? When we know when to make an adjustment, then we give the public reason to trust us.

When it comes to USPAP and written reports, the response of the typical appraiser is to stifle a yawn. “Who cares about writing reports? We just fill in a form, send it to the client, and hope it does not come back for revisions!” But, adding the narrative addenda items to the form is report writing, isn’t it? And a common response to that is, “I just cut-and-paste stuff from other reports. For $400, I can’t spend a lot of time writing!” This is true. But that appraiser will have a truckload of trouble selling that logic and reasoning to a state appraisal board.

In fact, USPAP and written reports is such an important topic that basic appraisal texts usually devote one entire chapter to writing the report. If you’ll think about it, the phrase “…writing the report…” conveys little meaning. Rather, we should speak about “…communicating the appraisal to the client…” since this is really what we are hired to do. Clients hire us to communicate to them, in a precise format, the results of our analyses leading to a credible value conclusion. What clients do not want is a report. Rather, clients want (and need!) our analyses of the relevant data. Our analyses should transform the raw market data into information the client uses to make informed, timely decisions.

So, yes, USPAP and written report is a major topic – one to which we all are well advised to pay more attention. Because, really, we are not merely writing reports. We are (or should be) communicating to our clients. They want answers to value questions (among other things). That’s why they hired us, the experts, the appraiser. So, are we providing our clients with answers? Or do we merely provide them with filled-out forms?

When you think about USPAP and ROVs (Reconsiderations of Value), gentle and peaceful thoughts are not what come to mind. Somebody wants you to reconsider your value conclusion. That is a gentle way to say, “I think you’ve made a mistake!” But let’s face facts – we all make mistakes. And given the state of the appraisal art – with our dependence on 90-year-old protocols and techniques – that we do not make more is a surprise.

In the context of USPAP and ROVs, if a borrower initiates one, they think we have made a mistake. Maybe we did. But maybe not. The point is that now there is a protocol, for ROVs, where in the past there was one but far less formal. Not surprisingly, it favors the borrower, but is not entirely anti-appraiser. For example, the ROV can contain only five (-5-) “comps” to analyze. And only the borrower or the lender (or its underwriter) can initiate an ROV, not the seller, the broker(s) in the transaction, etc. To make all this even clearer, there can be only one ROV request from the borrower. Plus, the lender pays for the ROV, not the borrower, even if the borrower initiates the request.

On the other hand, if we appraisers can’t or won’t co-operate with the ROV, there will be sanctions. If it is necessary to get a second appraisal, the lender (or its underwriter) will remove the appraiser from its approved appraiser panel, thus the appraiser will never work for that lender again. In addition, the lender (or its underwriter) will refer the appraisal and the appraiser to the state appraisal authorities.

Is there a secret? USPAP and ROVs means the appraiser must have a killer workfile and be willing to co-operate fully when that ROV comes in.

There’s a lot of crap on the Internet about civilization’s pending collapse. There is even stuff on the Internet about USPAP and Sasquatch. But there is nothing on the Internet about USPAP and Hot Sauce. So, I figured I’d add to the Internet’s mindless clutter and post about Hot Sauce, USPAP, their relationship, and the demise of western civilization. But the only problem is that there is not such a relationship. If western civilization collapses, it will not have its base in USPAP or Hot Sauce.

Actually, the title “USPAP and Hot Sauce” is to get more clicks on my podcasts. What this podcast is really about is the overuse of boilerplate in appraisal reports. Deliberate amounts of hot sauce can improve the flavor experience of some foods. Deliberate amounts of boilerplate can, on occasion, improve an appraisal report by shortening the time it takes to write one. But the overuse of boilerplate? Nope, that can be as wrong as hot sauce in Key Lime Pie.

So, what’s the problem with boilerplate? Actually, there are two problems: (1) it is there, when it has no reason to be there; and (2) it serves no purpose in the report. Ask yourself this question, “If there is something in my report that does not at least indirectly affect exposure time, highest and best use, marketability, and/or market value, why did I analyze it in the first place, and why did I put in in the report?” In the previous 12 months two reports came across my desk in which the appraisers made clear they had not invoked Departure. You now ask, “What’s Departure?” And that is the proper question to ask since it has not been part of USPAP since 2006. Put only what’s important in the report!

WOW! “USPAP, Sasquatch, NAR, and Comparable Sales” is one helluva name for a podcast! That’s true, thank you. But given that the ramifications of the Sitzer-Burnett are obvious but still unknown, invoked Sasquatch. And the fact cash equivalency adjustments to comparable sales may become more prevalent than in times past brought all of those concepts together into one big, yet unanswered question. And that’s the real conundrum. We don’t know yet what is going to happen.

Not only that, but in “USPAP, Sasquatch, NAR, Comparable Sales” I ask a truckload of questions, but provide only a teaspoon of answers. Why? Because it is possible (not certain, merely possible) that with all of the class action suits still pending against NAR relative to price fixing, then NAR is going to be in financial hot water despite its 1.5-million members.

Since this podcast is one for appraisers, not (buyer’s) brokers, we appraisers need to be aware of how Sitzer-Burnett will affect us. And, like Sasquatch, we know the affect is there, but we just can’t yet prove what those affects are. How will this decision affect us? If NAR’s structure changes, will the big brokers have their own in-house MLS systems? If so, will they be compatible across platforms? How many will appraisers have to join to have proper amounts of data? Appraisers depend on brokers for data. Will there be fewer brokers in the future? Fewer deals? If the buyer pays their broker how, if at all, does that impact the sales price from a cash equivalency standpoint? Why? So may questions still, yet so few answers!

So, sit back, listen, think critically, and enjoy! And click the link above to the Sasquatch film. Something is there, we just don’t know what it is yet.

USPAP, analysis, and synthesis are terms we do not hear all that often. That’s a shame, too. This is because, according to USPAP, a credible appraisal and a non-misleading report are the results of analysis and synthesis. Yes, Standard One is the appraisal development standard. And Standard Two is the appraisal reporting standard. But we know this, so what is so special about analysis and synthesis?

Under USPAP, analysis and synthesis are necessary opposites. To analyze means to deconstruct something, or to take something apart. On the other hand, to synthesize means to (re)assemble something – ideally into something new, or that which did not exist before that synthesis created it.

Appraisers analyze markets by taking them apart. They analyze subject properties by taking them apart (usually via the cost approach. This is why there should always be a cost approach for a single-family residence appraisal. We take markets apart to be able to understand them, then use that understanding to predict trends. We take comparable sales apart to understand, via the Principle of Substitution, which components of market value apply to the subject. Finally, we take the subject apart to conclude which components the market demands and which it does not. These latter components are those that are super adequate and functionally obsolete.

But that which appraisers have taken apart, appraisers must assemble. This assemblage is also called synthesis. But appraisers do not merely reassemble the parts. Rather, they assemble the parts into something new, something that did not exist before. From what they took apart, they synthesize to arrive at a market value opinion. The opinion was nowhere to be found since it did not exist until the appraiser formed it in his/her head.

So, USPAP, analysis, and synthesis are the appraisal process. It’s just that appraisers typically do not look at that process in that way.

Preview, Foreshadow, Predict. In the context of a real estate appraisal, what do these mean? Some time ago, I did a podcast on writing the appraisal backwards. I never meant this to confuse anybody with this. What I meant was to impart wisdom. It is wise not to open the reporting form on your computer the instant the appraisal order arrives. Rather, once it arrives, do the appraisal first. In other words, come up with a credible value opinion first, then write the report.

Why? Because when you know the end from the beginning, you can preview, foreshadow, and predict. Why are these important? Simple! When we enter information on page one of the reporting form, we are predicting what’s on page two. With a quizzical look on your face, you are now asking, “WHAT?!” And frankly, that is the question you should ask when presented with that statement.

For example, we preview, foreshadow, and predict when, in One-Unit Housing Trends, we indicate the subject’s market is stable. How is that predicting anything? By marking stable you foreshadow that, in the sales comparison approach grid, there will be no adjustments for changes in value over time. This give your client a little peek into the future.

It also foreshadows that among your comps may be one or two “old” sales. You have previewed that such sales are OK since there is no particular change in the market from, say, times past until the effective date of the appraisal. So, up front, you are preparing the client not to see a time adjustment. And you know this trend to be both true and correct since you have all the data to support in the workfile if anybody wants to see it. And that demonstrates to the client we are competent, don’t you think?

Topics such as USPAP and relevant adjustments can bring out the very worst in appraisers, because of the arguments this topic causes. This is simply because the science of relevant adjustments is taught only superficially in appraisal school. Yet we teach it is art, or we do not teach at all. This podcast is about understanding when adjustments are necessary. Then its about understanding why adjustments are necessary. But the praxis of making them is the subject of another podcast. There are plenty of them out there (here is one of mine).

So, let’s talk about USPAP and relevant adjustments here. USPAP does not use the word adjustment or adjustments, thus they are not part of appraisal. Which leads us to the two questions behind this podcast. One is “How do I know when an adjustment is necessary?”. And the second is, “What size adjustment do I make?”.

Please understand the first question is surprisingly easy. Follow USPAP and relevant adjustments are straightforward. This easy answer is, “An adjustment is necessary when the micro-market tells us it is”. Note the micro-market is the sole source of this wisdom, not the AMC, etc. In this instance, properties that are comparable to and competitive with the subject compose the relevant micro-market.

As to the size of the adjustment, the micro-market tells us that, too. Usually, the size of the adjustment will be a low-to-high range, from which we reconcile a dollar amount. Adjustments don’t come from tables or schedules our first supervisors gave out 20-years ago. Because appraisers deal with market value, the adjustments must therefore come from the market, too. So, we make adjustments to make sure our value opinions are credible, with their bases in micro-market data. Such professionalism gives the Public reason to trust us, rather than an AVM.

In this podcast, we cover three topics, all of which are a function of USPAP and certainty. The first topic is “When is an Adjustment Correct?” Second is “What are the Ethics of Using Artificial Intelligence (AI) in a Real Estate Appraisal and Report?” Finally, we’ll consider the real source of appraisal fees – the appraiser. That should get some folks upset! But that’s OK! One of the purposes of these broadcasts is to stimulate critical thought.

So you’ll know, the reason we call this USPAP and Certainty is because USPAP is not certain. That’s why we form value opinions, not value estimates. This lack of certainty is easy to find in extracting adjustments. Using market-depreciate cost will yield on adjustment, while extraction from a comparable sale will yield another. Assuming both have their foundations in verified market data, they’re both correct. But how well do you explain your choice between them? That’s the secret.

And don’t get me started on USPAP and certainty when it comes to AI and real estate appraisals. Too late! I’ve started. AI in real estate appraisal is NOT the future. It is the present and is rapidly becoming the norm. Those appraisers who will not or cannot keep up with the advances in AI will be the appraisers who, within a short time, will be wishing they had. It’s a done deal.

You think it is taboo to talk about appraisal fees? It may be. But after you’ve listened to this podcast, you just may agree with me – or not! Your choice!

USPAP and certainty! What is certain is that USPAP remains the standard for appraisals and appraisal reports. As we know more about USPAP, it is easier to comply with it. Thanks for listening!

When it comes to USPAP and a verification model, where is that model? USPAP makes it clear we have to verify the sales data, etc. But USPAP is strangely silent on what to verify means. It is equally mute on how to accomplish the verification it demands. So, is there a reason for this lack of communication on USPAP’s part? Or, is there some method to the ASB’s madness? To both questions, the answer is “YES”.

When USPAP does not define a term, it is because it sees no reason to do so. So, as we look at USPAP and a verification model, USPAP (the ASB really) concludes the standard definitions out there of verification, to verify, etc. suffice. They are sufficiently applicable to appraisal to define the terms, too, in an appraisal context. And the reason behind the ASB’s madness? Since, by definition, appraisers must be “…independent, impartial, and objective…”, this lack of a formal verification model allows (forces?) appraisers to conclude their own model(s). Since we are professionals, is this not the way it is supposed to be?

USPAP and a verification model? In reality, the verification model we have is the Fannie Mae and Freddie Mac default definition of Market Value. True, that definition has a lot of moving parts. But each part is a question to ask. To ask of whom? We ask the buyer, seller, broker, builder, etc. those questions. And the more people we verify with, the more answers we get. And the more answers we get, the closer we get to the truth of the transaction. So, what is the truth of the transaction? Simple. Was the sale arm’s-length? If the answer is no, we can confidently eliminate it. That’s something we appraisers can take all the way to the bank!

Wait a minute! You say USPAP and neighborhood analysis don’t go together? In one sense, you’re right. USPAP does not use the word neighborhood in Standard 1 or 2. For reasons unknown, the GSEs continue to use the word neighborhood, even though, in a certain context, it could have racist overtones. Seems a little hypocritical to me. But the GSEs have not asked me to function as their ethics police.

So, when it comes to USPAP and neighborhood analysis, does the appraiser have to analyze the neighborhood? That raises the question, “OK, how does one analyze the neighborhood?”. You have to remember that the GSEs look to us for more than merely a value conclusion. They look at us to peer, prophet-like, into the future and tell them what will happen. In this way, we aid the GSEs in understanding and mitigating risk. What risks do the GSEs take? One of their risks (among many – most not related to appraising) is underwriting the loan. From the GSEs come the money you and I use to purchase our homes. Since the GSEs want both a return on their investment, as well as a return of their investment, they must understand the risk factors of purchasing mortgage loans.

So, we appraisers likely do not think of USPAP and neighborhood analysis in the same mental sentence. But the GSEs do. We help them manage risk. Since housing plays a huge part in the economy of the US, our ability to help the GSEs manage the risk of buying those loans is crucial. This is why, even in the GSE’s eyes, appraisals are a significant cog in the US’s mortgage money machine. Therefore, are we helping the GSEs manage risk, or just providing them with useless boilerplate?

Take advantage of USPAP and Extraordinary Assumptions! Their proper use can provide you with a number of advantages! On the other hand, their improper use can earn you the opportunity to spend a less-than-pleasant afternoon with your state appraisal board! How so? Read on, then listen to the podcast! To listen to the podcast is why you’re here, right?

USPAP and Extraordinary Assumptions means USPAP, under very specific and limited conditions, allows you to guess as a part of your value conclusion. Guess?! Yes! How about an example? You’re appraising a proposed house from the architect’s and contractor’s plans and specs. The effective date of the appraisal is nine (-9-) months into the future, which is when the house will be complete. But right now, only the site, and plans and specs, exist. So, under these limited and specific circumstances, you guess the house will be complete per plans and specs nine (-9-) months into the future. You do not know this since the future is unknown and unknowable. But because you’ve used an Extraordinary Assumption, with a summary of the rationale for making that guess, its OK. You’ve also fully disclosed that guess (that it will be built per plans and specs in nine (-9-) months. And that full disclosure included the admission that, if your guess, your Extraordinary Assumption proves false, could affects the results of the appraisal.

So, it is to our benefit as real estate appraisers to understand and educate ourselves USPAP and Extraordinary Assumptions! This lets us expand our specific scope of business practice since it is possible to appraise as if improved property that, in reality, is actually vacant. How great is that?!

To have a podcast on The Cost Approach and USPAP. How exciting (not)! You’re right. This is not exactly the conversation you’ll have when you get together with friends. Even if those friends are other appraisers! But the point is the cost approach is an untapped resource. It is the sunshine to which appraisers typically do not expose their analytics. This is a shame, really, since this approach can tell us so much about the quality of our analytics via the other approaches. How so?

We all know that in older neighborhoods, there are likely to be few vacant site sales. This is where we appraisers can put the cost approach and USPAP to good use. This absence of data makes adjusting for site differences such as size, view, access, shape, etc. difficult to extract from the market. But you can use improved sales data to extract comparable site values. That takes a little practice and training, true, but once you master that protocol, life as an appraiser becomes easier. And, reports go out the door a little faster. Who doesn’t want to produce more reports, thus greater cash-flow, right?

And what are the advantages to appraisers who understand the cost approach and USPAP? More than you think, frankly! But the eye-opener is that as we come to understand the cost approach, then begin to use it properly, our clients are less motivated to hire AVMs and BPOs. Therefore, they are more prone to hire us, since we provide services and insights that the other tools simply cannot. So mastering the cost approach should not be a chore. Instead, let’s look at it as the opportunity to become even more indispensable. Let’s seize the opportunity to become even more professional than we are today!

When it comes to USPAP and state complaints, what is an appraiser to do? The first step is really clear: don’t do anything – yet. Why? Simply because you are in an emotionally unstable state. You’ve just been attacked personally by some stranger who has absolutely no clue how hard you work! You want to retaliate – to strike back fast and destructively. To scorch your attacker’s earth! Which is exactly why you should do nothing – yet.

But when it comes to USPAP and state complaints, there are steps you can take that in the end will protect you and help – rather than hurt – your cause. Your first step is to call your E&O people. You do this because this is what your policy calls for. You have read your E&O policy, right? Those folks will thank you, open a file, and ask you if you want legal help. Thank them for the offer, but tell them you’ll get your own counsel (which, by the way, within the limits of your policy), your E&O will pay for.

Your next call when it comes to USPAP and state complaints is to contact an administrative law attorney who is familiar with the workings of your state appraisal board. You can Google(r) this, or call the state bar and ask for a list of such attorneys. Once you have that attorney, they should contact the state and ask for an extension to the time limit the state gave you to respond. You and your attorney should ask for 30-days. You won’t get it, but you’ll probably get ten days.

Finally, when it comes to USPAP and state complaints, follow your attorney’s advice. This is a fight you cannot win all by yourself. Bring in the necessary experts to act as your champions!

USPAP, Cows, and Competency?! Never in your life did you think you’d see that as the tagline of an appraisal podcast, right? I did not, either. But sometimes you have to change the way you look at things. Sometimes there has to be a little disruption to understand even more deeply what you think you already understand. That’s what we are going to do here.

USPAP, Cows, and Competency is really about an experience my Wife had (you’ll have to listen to get the story). Basically, my Wife had to accuse a purveyor of fine meats of incompetency to get what she had ordered and paid for. Why? Because the purveyor was not going to provide the service, expertise, and satisfaction it promised in its marketing. In other words, the purveyor was going to pretend its incompetence was not incompetence. Rather, it was merely not having enough specific combinations of fine meats to meet demand. But my Wife educated a vice president in the error (and stupidity and incompetence) of his reasoning and logic in such a way that he will long remember. And those memories will not be pleasant ones, either. But he had it coming.

So, really, in this podcast, USPAP, Cows, and Competency the actual subject is COMPETENCY. Cows are just a vehicle to carry the story. And why is competency the subject of this podcast, but not cows!? Because there are some appraisers out there who are just plain ol’ incompetent. Why should the rest of us care? Because those incompetents are painting the rest of us with the wide brush of their ignorance, arrogance, and poor choices. Why are we letting this happen?

USPAP and Questions to Tim was the only title I could invent for this podcast. After all, there is not one theme here. Rather this podcast consists of questions that have come in to me in the past from regulators, students, and boots-on-the-ground appraisers. Every so often, I’ll work on answering them. Most of the questions are polite, thoughtful, even respectful. Some of them are…otherwise. That’s OK. I welcome them all. After all, if I’ve made you mad enough to correspond with me, I’ve made you mad enough to think critically, which is the purpose of my professional existence (well, that and make a good living, thank you).

USPAP and Questions to Tim is a theme I’ve thought about for a long time. I do a lot of teaching and some of these questions come up in classes, especially in USPAP classes. In this podcast, I talk about education. Remember education takes place not only in classrooms. There are numerous real estate appraisal conferences each year. The appraiser who wants to stay up-to-date, the appraiser who cares about servicing clients well, the appraiser who wants to stay in the business, attends at least one of these each year. This is where the real education goes on since at these conferences you get to converse one-on-one with the movers and shakers of real estate appraisal.

Thanks for asking the questions! And thanks for listening to the answers!

When it comes to USPAP and MARKETING, what do you need to know? First, that USPAP says nothing about marketing. That’s business. USPAP does not concern itself with your appraisal business. But USPAP is clear about what we can market. Every license renewal cycle, we get 28 or more hours of continuing education. How efficient are appraisers at marketing our level of practical education? Appraisers must be conversant with the laws that govern them as appraisers. Do we effectively and convincingly market our expertise in this area? How about that appraisers are market area experts? Is this a flag we proudly fly?

How about USPAP and MARKETING in the media? How often do you post something professional on Linked-in? A post here does not need to be long or complex. It just needs to be there. Why? Whatever positive it is you do to make your name stand out from the crowd helps you professionally, don’t you think?

How about a lunch-and-learn? When it comes to USPAP and MARKETING, this may be the best money you ever spent. How so? Invite 10 real estate attorneys to lunch. You’re paying for it so its free to them. You will have a small group of relevant potential clients. Since its a small group, you’ll have their attention, too. What will you talk about? You’re the expert! Share that expertise with them! With a tip and drinks, will that cost you$300 to $400? Yes! and you’ll get all that back, and more, with the first assignment you get from just one of them!

Times are slow, true. So start marketing! Act now and leave your so-called competition in the dust!

“USPAP and That Does Not Solve the Problem” is a strange title for a podcast right? But it has a purpose. In a past podcast, I showed a list of what you were not supposed to say to your state appraisal board. Clearly, not a lot of appraisers paid attention to this. How do I know? Because the dumb stuff real estate appraisers still say to their state boards keeps coming into me. You ask for an example? Unfortunately, there are too many of them. And, once you hear some of these responses, you’ll agree with me that they are dumb.

So, this title, “USPAP and That Does Not Solve the Problem”, applies to appraisers’ responses to state boards. Now, at this point, let me make clear how incredibly stupid a typical response is. Typically, the state sends you a letter (or an email) letting you know a complaint has come in. In that communication the state asks for your cooperation, a copy of the appraisal, a copy of the workfile, and whatever else it wants to ask for. It is a stupid response, and one that is altogether too typical, to ignore the letter. Upon reading the letter, the appraiser’s response is something verbal such as, “This is bullshit!”, then something physical such as running the letter through the shredder, or simply deleting the email. These actions indeed solve the problem. But only temporarily. And the problem that replaces this so-called solution is exponentially worse than the original problem.

Worse? Yes, state appraisal boards tend to revoke the credentials of those appraisers who deign to defy them. So, the title, “USPAP and That Does Not Solve the Problem” is an open invitation to comply with your state board’s request to solve the problem. What’s so hard about that?

USPAP and Cash Equivalency? No! Surely, with all the mechanics of an appraisal there are to worry about, now there is another one!? Say it ain’t so! It would be nice simply to ignore cash equivalency (since, after all, there is math involved). But the definition of Market Value dictates otherwise. USPAP dictates otherwise [see SR1-2(c)(i-iv)]. The GSE’s sales guides, etc. dictate otherwise. It’s true – we can’t escape cash equivalency. So, we might as well get used to it, get used to understanding it, and get comfortable with calculating it. We don’t have much of a choice if we want the Public to trust us appraisers. We do want the Public to trust us, right?

At its essence, the concept of USPAP and cash equivalency comes down to a simple statement. Any property’s cash equivalent price is what it would have sold for if the buyer paid all cash (no mortgage) at the closing table, the seller took all cash, and they each paid their own closing costs. True, the math behind that can be a bit intimidating. However, it is also possible to pick up the phone, call a party to the transaction, and ask if the sales price was cash equivalent. No math involved in that one. True, you will probably have to explain what cash equivalency is, which means you must understand it to explain it. And, true, that party could lie to you and tell you what you want to hear. But the point is, you will have verified cash equivalency with a party to the transaction, which is all you can do.

So, yes, the concept of USPAP and cash equivalency is one we appraisers must deal with. But, as we do, we give our clients a true picture of the market. That’s our job, right?

USPAP and the investigator’s questions is a topic we’ve covered before. But investigators still keep asking questions. So it makes sense to be aware of them, as well as how to answer them. That raises the question, “How do I answer the investigator’s questions?”. There is a two-part answer: part one is “from the data in your workfile”. Part two is “and those data in your workfile must have market support”. Remember, if you can’t find it in the market, why is it in your appraisal? If you can’t find it in your workfile (which is your appraisal), why is it in your report? Note there are classes to help you with this.

To use the term “USPAP and The Investigator’s Questions” implies USPAP is the source of the investigator’s questions. That’s because USPAP is that source. So are the state’s appraisal statutes. But most of the questions are from USPAP. Why? Simply because USPAP is the standard. Does your appraisal meet Standard Rule 1? Does you appraisal report meet Standard Rule 2? If so, you are good to go. If not, there are ramifications to consider.

Here is but one example of USPAP and the investigator’s questions. “From only the data in your workfile, please demonstrate the derivation of your GLA adjustment of X-dollars per square foot.” As far as the investigator’s questions go, this one is simple and straightforward. However, the issue is that, all too often, this derivation is not in the workfile. That adjustment is, instead, the result of rules-of-thumb and the appraiser’s “…twenty years of experience…”. Since the dollar amount of the GLA adjustment is one the market indicates, it is a fact, not an opinion. USPAP’s SR2-3 makes it clear the appraiser certifies this dollar amount is both “…true and correct…”. This means verification. And how can an appraiser certify something is true and correct if there is no verification in the workfile of that fact?

USPAP and the last time? What does that mean? When you listen to the podcast you’ll find out.

USPAP and the last time asks a series of questions. These ask you about the last time you considered an appraisal concept or idea. This is important simply because appraisals have too many moving parts. It is way too easy to get caught in the details and the mechanics of an appraisal and appraisal report. When we get caught that way, we lose sight of what an appraisal really is. An appraisal is really nothing more than a simple answer to a client’s appraisal question, “What’s my property worth?”. But it is common to lose sight of this simplicity when we have to worry about USPAP’s requirements, the GSE’s differing appraisal and reporting requirements, and what a state investigator may think. That’s a lot to worry about.

So, in this podcast, USPAP and the last time, we take a look at some questions we might never otherwise consider. For example, “When was the last time you took a CE class for the sheer joy of learning, not just for getting CE credit?”. Or, “What does including a sale on the adjustment grid say about that property’s highest and best use?”. In our rush to meet deadlines, it is too easy to forget what an appraisal is. It is too easy to forget what an appraisal is supposed to communicate, too. That is the purpose of this podcast: to help you focus on the appraisal and what it communicates. Again, it is too easy to get lost in the details.

So, when was the last time you took a look at your boilerplate to determine if it was outdated or, even worse, wrong?

USPAP and adjustments. Are they facts or just your opinion? USPAP does not use the word adjust or adjustments in Standard One, the appraisal development standard, nor Standard Two, the appraisal reporting standard. Further, USPAP does not require appraisers to make them to anything at any time. They are a function of what the GSE's want from an appraisal report.

So, when it comes to USPAP and adjustments, are those adjustments facts or just opinions? There are appraisers who advocate they are opinions. Why? Because there are no standard protocols to derive an adjustment. There are numerous ways to derive individual adjustments. Because of this lack of standardization, so long as there is market support for the adjustment you make, it is just your opinion, right?

Market support? USPAP and adjustments means you have market support for them. Since there is such support, that means you extracted them from the market. Given that the market revealed to you that swimming pool adjustment, that is a market-derived fact, not your opinion. Any facts we report must, according to SR2-3, be both true and correct. This requires verification. We verify facts. We confirm opinions.

So, with USPAP and adjustments, are they facts or opinions? There are classes you can take to help you answer this question. There are USPAP instructors out there you can contact who will help you navigate your way to an answer to this question. But the point is (and any state appraisal board member will tell you this) be adjustments facts or opinions, they must have market support. Without that support, they are nothing more than guesses.

So, gather your data, do your due diligence, and make your decision. In the end, when it comes to USPAP and adjustments, I think you'll agree with me: there are facts to be found.

When the client demands something of you, do you comply? Why?

Does USPAP demand precision? This is a question few appraisers have raised, so there is no specific answer to it. USPAP itself uses the word precision just once, in AO-23, but in the context of a discounted cash flow analysis. It uses precise only four times. But only one of those is in Standard 1. None of them is in Standard 2. And its use in Standard 1 is in the context of a precise definition of value. USPAP does not use the term in the context of the value opinion itself.

But, does USPAP demand precision anywhere in Standard 2 (the report writing standard), in any context? Directly, no it does not. However, SR2-1 demands the appraisal report be clear and accurate so that it is not misleading. That same SR also makes it clear the client and the intended user(s) must be able to "...understand the [appraisal] report properly..." no matter the reporting format. So, in an off-handed manner, USPAP does demand precision, although that call could be clearer and more emphatic.

So, the question, "Does USPAP Demand Precision?" raises another question: "What is precise?", which this podcast's purpose is to illustrate with a series of questions. For example, in twenty (-20-) words or less, answer this question: "In the final reconciliation, why did sale-X deserve more weight than sale-Y?" Here is another one: "In twenty (-20-) words or less, explain why appraisers develop value opinions, rather than provide estimates of value". There are so many more.

"Does USPAP Demand Precision?" may be too emphatic. Perhaps a more applicable question is, "Does USPAP Encourage Precision?" Given what Standard 2 says about not misleading the client, about writing the report so it is easy to understand, it looks as if the answer is in the affirmative. So, why is it that we appraisers should write precisely? (In the podcast, I mention Einstein's E=MC-squared formula. Here is an explanatory link).

When residential real estate appraisers transform their appraisals and appraisal reports into a combination the public believes, then the public will have reason to trust us, what we do, why we do it, and how we do it.

Real Estate Appraisers write for a living, and writing in communication. So, do we real estate appraisers communicate clearly?

To answer those USPAP and Whatever questions usually means going to USPAP to get an answer. Really, where else would you go? USPAP is not a difficult document to read. What affects us appraisers directly is really in the first twenty-four pages. So, in practicality, the document is not all that long. Its brevity is both a strength and a weakness. Its strength is that it does not get bogged down in the minutiae of telling appraisers how to practice real estate appraisal. What's its weakness? Since it has no practical solutions, it can leave appraisers in the dark about what to do and how to do it. But, if you think about it, that's really a strength.

How is it a strength not to give practical solutions to answer those USPAP and whatever questions? That strength is in the fact that USPAP's restraint makes the appraiser look to USPAP for guidance. Then, with USPAP's guidance in mind, the appraiser comes up with her own solution to the problem. In part, this is what USPAP means by independent, impartial, and objective. Is an appraiser independent if she has to depend on outside influences to answer her every appraisal question?

To answer those USPAP and whatever questions independently, etc. calls for the appraiser to take a number of steps. First is to understand where (if at all) the USPAP document covers this topic. Here's a secret: If the USPAP document does not mention something, even in passing, is it all that important? Here's an example: USPAP does not require the appraiser to measure the subject. Given this indifference, it is safe to assume it does not care about the standard of measurement you use. You can't mislead the client. But other than that, USPAP says nothing.

Therefore, to answer those USPAP questions is, in the main, your call.

In a real estate appraisal, bracketing serves the appraiser well. Unfortunately, our friends the AMCs and lenders don't know how to use bracketing, so what they ask of us is generally wrong.

USPAP and breathing dust should conjure up leaders breathing fresh air, while the followers breathe the leader’s dust. So far, we appraisers have chosen to follow when it comes to what the AMCs and lending industry mistakenly call “appraisal modernization”. Without question, real estate needs to come into the 21st century. But why did appraisers choose not to lead this assault on their own mediocrity? Leaders breathe the fresh air. Followers breathe their dust. But we can change this situation! We can take the lead! This usurpation of the lead is not a matter of capacity. It is a matter of will! In a past podcast I spoke of growing a pair. Will we? When?

USPAP and breathing dust foreshadows that appraisers do not like or want that subservient position. So, how will we reverse it? Education is one key. This means taking challenging, critical thought-provoking classes. It will require us to expand our professional horizons. This will mean taking classes in the scientific method of inquiry, regression analysis, artificial intelligence, adjustment techniques, and other appraisal-specific topics. It might even mean taking university-level classes on logic, reasoning, persuasive writing, public speaking, and time management.

USPAP and breathing dust raises the issue of using artificial intelligence as part of any real estate appraisal and the analytics behind a credible, unbiased opinion of value. If we don’t lead in that area, we will surely breathe the dust of those who choose to make that sacrifice. So, are we going to enter the future breathing the pure air of leadership, or the choking dust of subservience?

USPAP and all information necessary comes right out of SR1-4. But now is the time to learn what “…all information necessary to credible assignment results…” really means. The USPAP document itself does a poor job of explaining it. Our 7-hour USPAP update classes do not even begin to explain this topic. And that’s a shame. If more appraisers were familiar with it, we would likely have less trouble with hollow charges of racism Washington, D.C. so erroneously levels against appraisers.

USPAP and all information necessary means just that. There is nothing hidden here. Yes, it means all of the sales and listing data available to the appraiser/analyst. But that’s not all it means. “All information necessary for credible assignment results…” also means all of the cost and depreciation data necessary. And this does not refer to merely listing these data. Primarily it refers to analyzing these data. And to analyze those data means to engage in all of the protocols of the Cost Approach. Engage in them until you are as comfortable with their indication of value as you are with the indication of value from the sales comparison approach. But it means more, too.

USPAP and all information necessary for credible assignment results means the property’s complete analysis. There are three analytical models, which means we analyze the the subject via the income approach, too. But my subject is not rented, you exclaim! So?! You can stick a “House For Lease” sign in the front yard, right? There are similar houses for lease in similar neighborhoods, are there not? You know there are! Your MLS tells you that! So analyze those houses and then extrapolate those rental and GRM data to the subject.

We avoid bias when we analyze all the data. So, analyze all the data!

USPAP and growing a pair? Really?! Isn’t that a bit risque’ for a YouTube real estate appraisal education post? Yet, it is. But it caught your attention, didn’t it? That’s the purpose. To make you stop and think. So let’s consider this.

USPAP and growing a pair means, in one sense, getting enough courage. Enough courage to do what? Courage to grow a pair and leave the comfortable – and generally lucrative – world of GSE appraisals. This is probably all you’ve done throughout your entire real estate appraisal career. It’s comfortable, isn’t it? You know what answer goes in each box, right? You’ve got your boilerplate down. You’ve used that same neighborhood analysis in the last 30 reports in this neighborhood. Life is good. So why change? That’s the second part about growing a pair.

USPAP and growing a pair makes us ask about what the GSEs have recently done. That comfortable real estate business as some appraisers know and have come to love, it is poised for a tectonic shift. What shifts? Will there be fewer appraisal assignments? That’s a safe assumption. Is the number of appraisers going to decrease? Yes, but not as quickly as the number of appraisal assignments. Are property data collectors going to take from us some of the work we did in the past? It is naive to think otherwise.

So, what are appraisers to do? Read on! The second part of USPAP and growing a pair means growing a new set of skills to transition out of GSE work into other areas of real estate appraisal. It also refers to growing another book or books of business to replace the GSE appraisal book. So, yes, growing a pair has a risque’ meaning. It also has a perfectly logical meaning – growth of new skill sets and books of business. Thanks for listening!

“USPAP – It Ain’t Binary” is a phrase you’ve never heard before. Why? Well, it is not binary. Seldom in real estate appraisal is anything purely a one (-1-) or a zero (-0-). We have choices to make. There are ambiguities to unravel. What happens when we get conflicting data from the listing broker and the selling broker? County data say the subject has 3,327 square feet. But our ANSI measurements shows 3,402 square feet. A plumbing contractor says it will cost $5,823 to repair the damage from the flood in the bathroom. But a general contractor says a minimum of $9,000 to repair the flood damage since there may be damage to the sub-floor joists. This is what the title of this podcast means.

“USPAP – It Ain’t Binary” also means the document itself, while the universal standard for real estate appraisers and real estate appraisals, recognizes ambiguity. How? In some states like New York, compliance with USPAP is voluntary on the appraiser’s part (within limits, of course). But in Illinois, if you express a value opinion about real estate or any interest in real estate, you’d better have a state appraisal credential.

This podcast carries the title “USPAP – It Ain’t Binary” to recognize the fact that, despite what appraisers want, real estate appraisal rarely has a simple “YES!” or “NO!” solution. As USPAP instructors like to say, “Well, the answer to that questions depends…”, with some qualification to the response you never thought of before. But really, this is a benefit to us. This allows us to amass, analyze, and interpret sufficient quantities of data to come to a value opinion or an exposure time estimate via critical thinking and synthesis. In other words, there are no mechanical, rote, or pat answers in real estate appraisal.

USPAP and standing tall? What does that mean? And, how is a competent real estate appraiser like a WWF pro wrestler at a ballerina’s convention? Do ballerinas even have conventions? And why is Tim, a real estate appraisal podcaster, concerned with WWF pro wrestlers and ballerinas? Just where is this going? Believe it or not, there is a relationship. Read on and then listen to the podcast, please.

USPAP and standing tall has to do with more than WWF pro wrestlers and ballerinas. It also has to do with appraisers who are willing to stand up and stand tall in and for the profession. USPAP’s Standard 1 is the appraisal development standard. That is not news. Nor is it news there are still a few appraisers out there who have no clue how to develop an appraisal. There are, however, those appraisers who have taken the time to read and understand Standard 1. As they follow that appraisal development model, they stand tall because they stand out from their peers.

What does USPAP’s Preamble have to do with USPAP and standing tall? Basically, it gives us appraisers our marching orders. What are those orders? They are to promote and maintain a high level of public trust in all facets of real estate appraisal. They are to perform professionally anytime we have our appraiser’s hat on. They are to give the public a genuine reason to trust us. And remember: soldiers do not march while sitting or all hunched over and sloppy. Rather, they stand up to march, then stand tall so they stand out.

So, USPAP and standing tall means professional conduct in all things appraisal any time we have that hat on. It also means we do our best to be outstanding. Thanks for listening!

USPAP and What’s Omitted? What does that mean? Really, we mean what’s omitted from your appraisal and report. It is true, you should omit very little from the appraisal, as well as from the report. Why? A sale is not a comparable sale unless it has the same highest and best use as the subject. So, appraisers cannot omit those analyses. How about neighborhood analysis? Fannie Mae wants answers to thirty-six questions about the neighborhood. There is nothing about the neighborhood the appraiser can omit from the appraisal or the report. USPAP’s SR1-6 calls for a complete reconciliation. So, no, the appraiser cannot omit that, either. Then, just what can the appraiser omit?

USPAP and What’s Omitted refers to unnecessary stuff. What is unnecessary stuff in a real estate appraisal and report? You can probably omit the analyses of the Income Approach if you’re appraising your basic cookie-cutter house (although not always). Most assuredly, you do not need a level-C or -D market analysis to appraise credible a single family residence. According to USPAP, you can omit pictures, too, since there is nothing in that document calling for them to be part of the appraisal or the report. So, yes, there is stuff you can reliably omit from your typical GSE appraisal. But let’s also talk about omitting the really necessary stuff.

Read your report carefully, please. USPAP and What’s Omitted refers to stuff you should not omit from the appraisal or the report. When you listen to this podcast, pay attention to what the State of Alabama did. This appraiser chose to omit from the report a summary for the analyses and market support behind all the adjustments. Omission of these analyses and rendered the appraisal not credible and the report misleading. To omit something this simple violated USPAP.

USPAP and pending contracts. What does that mean? It means its is perfectly OK to use the pending purchase and sale contract on your subject as a comparable! Underwriters will swear that is a violation of USPAP! Reviewers will need to buy red pens by the gross to mark-up reports if that happens! Heads will explode! GSEs will start to care about appraisers and what they think of the 1004 form! Civilizations will crumble! The Republican party will finally get its act together and elect a candidate to the White House! All of these are stinky hogwash since they will never happen, even if appraisers start to use the purchase and sale agreement as a comp. (OK, if appraisers start using the purchase and sale agreement as a comp, civilizations may crumble.)

In fact, when it comes to USPAP and pending contracts, it may be internally inconsistent not to use contracts as comps. USPAP says nothing about this phenomenon. Actually, the Fannie Mae Selling Guide encourages it. A contract is nothing more than another data point to analyze. So, why not analyze it as if it were a comparable sale? It is a component of neighborhood trends. So why not analyze it as part of neighborhood analysis?

Since USPAP and pending contracts is such an important concept, it is important to understand. That understanding starts here! Thanks for listening!

USPAP and expanding horizons. Now that the appraisal business is slow, it’s time to expand your horizons. This means taking steps you have never taken before. It means engaging in activities in which you’ve never engaged before. We will need to adopt a mindset we have never adopted before. In other words, it means change. Appraisers fight change. We are accustomed to a single set of appraisal protocols. It is common to fill out the 1004 form in the same way as always. We use the same boilerplate.

It was Albert Einstein who taught us that it is insanity to continue to engage in the same activities, yet expect different results from those we achieved before. Therefore, as the real estate appraisal business changes, as the economy changes, we must be ready for those changes.

When we talk about USPAP and expanding horizons, what we mean is change is inevitable. Literally, since the beginning of 2023, the progress of artificial intelligence has increased more than it has in the last two years. AI will continue to integrate into all areas of real estate appraisal, especially into the composition of appraisal reports. Are we going to expand our horizons and adapt AI to real estate appraisal? Or, are we going to fight it while the rest of the mortgage lending continuum takes advantage of it?

USPAP is not a perfect document. However, it is dynamic. It is adaptable to change. So, as we consider USPAP and expanding horizons, are we adaptable to change? Are we going to take advantage of the educational opportunities these changes will demand? Are we going to capitalize on this new technology to improve the way we write our reports?

USPAP and expanding horizons means we have a choice. We can keep our own status quo which essentially means we will be falling behind. Or we can adopt and adapt. Real estate appraisers tend to be smart, analytical folks. If I we’re going to bet the mortgage payment, I would bet that appraisers will adopt and adapt. What do you think?

USPAP and three questions? What does that mean? It means that, in this podcast, we are going to tackle three questions. They are questions appraisers constantly ask. This consistency means that these answers are not cast in stone. That is a shame. Therefore, we’re going to answer them in a manner that is applicable to any appraisal and report.

Uspap and three questions is vital for appraisers. In short, the three questions are, “How do I confirm a comparable sale?”. The next is “What does a state investigator look for in my work file?”. And, finally, “ What is enough support in my work file?”

We are also going to look at these questions from a perspective you’ve probably never considered before. So, uspap and three questions will raise novel issues. It’s also likely that as you formulate your answers to them, you’ll come to understand residential real estate appraisal, and even highest and best use, better than you did before.

There are great CE classes out there. However, you’ll find none of them cover these three questions in any depth. That, too, is a shame since these questions continue to merit straightforward and unambiguous answers.

Contemplate uspap and three important questions. In addition, given the fact that business has slowed for so many appraisers, this may be a great time to sharpen your saws. It might be a good time to ask an expert to audit some of your reports, just to make sure they are as clean and uspap- compliant as they should be.

Thanks for listening! please hit that subscribe button! More of these podcasts are on the way. One comes out about every two weeks. Remember to contact me at tim@theappraisersadvocate.com Thanks! And, as always, my best!

USPAP and (un)intentional omissions? What does that mean? Unintentional omissions makes sense. But why would an appraiser intentionally omit something? And that’s the question. Why would the appraiser intentionally omit the analyses of the cost approach from the appraisal? And why would the appraiser intentionally omit the results of those analyses from the report? These don’t make a lot of sense, right? Yet that is exactly what happens in many residential appraisals.

When it comes to USPAP and (un)intentional omissions, that refers to excuses, not reasons. Excuses? How about, “the cost approach was not utilized since calculation of accrued depreciation in older houses is difficult”? That statement is not the reasoning behind its omission. It is, instead, an excuse to cut a corner. In turn, that is justification to avoid a professionally embarrassing situation. Chances are, that appraiser does not know how to complete the cost approach analyses credibly.

So, to avoid USPAP and (un)intentional omissions, it is first necessary to understand when an omission is OK. But, to omit the cost approach, the appraisers must carry out the protocols. This means concluding a vacant site value. Then analyzing the property’s physical characteristics to calculate its replacement cost credibly. Next, the appraiser extracts market-based accrued depreciation. Now the cost approach is complete.

Since it is complete, does it indicate anything the sales comparison did not already tell the appraiser. If it sheds no further light on the subject’s market value, then omit it from the report. But first, it was necessary to prove it added nothing. A competent appraiser does not merely assume that. Thanks for listening!

USPAP and enough iterations. What does that mean? Really, it relates to what is in your workfile. Or, what is supposed to be in your workfile. OK, what is supposed to be in the workfile? Everything. But that answer is too general and too ambiguous really to mean anything. Let’s see if we can be more specific, more inclusive, shall we?

When it comes to USPAP and enough iterations, we really mean analytics. We mean the quantity of analyses necessary to come to a credible value conclusion. Wait a minute! This sounds as if we are talking a lot of work here! Frankly, we may be doing just that. You see, we cannot really analyze a comparable sale, for example, without exposing it to multiple analyses. Yes. When the GSEs talk about market value, they refer to a sale that meets the criteria in it. Specifically, there are five criteria in the definition. All of these must be present. If they are not, the sale is not a market value transaction. So, in the workfile there must be enough analyses to demonstrate both that and how we determined “…a reasonable time [was] allowed for [the subject’s] exposure in the open market…”. By doing the research to answer those five questions we engage in analytics. We have analyzed a sale to the point we conclude it was or was not a market value transaction. These are the iterations we go through to reach this decision.

So, as we look at USPAP and enough iterations, we mean the extent of our analytics. We look at the extent of what we did to determine it was enough. Then, we keep all those iterations in the workfile. Why? We do that to demonstrate both our knowledge of and compliance with USPAP. You’re welcome!

USPAP and the NICK. What does that mean? Has a reviewer ever told you some part of your report was not right? Gave you a hard time on it? Told you to re-do something? That’s the nick. But there is help! There are ways to avoid the nick in the future. Read on!

When we talk about USPAP and the nick, for example, did that reviewer say your neighborhood analysis was just a collection of facts? It really did not analyze the neighborhood? From reviewers, that is a common comment, as well as one that is entirely avoidable, too! Or, how about the nick from the reviewer that your reconciliation did not meet USPAP’s SR1-6? That, too, is something you can avoid.

So, how do you avoid USPAP and the nick? There is not much you can do to avoid USPAP. That’s cast in granite, right? But avoiding the nick is much easier. And that’s exactly what we cover in the podcast – ways to avoid the nick. This can be easier than you might think. How? Avoid meaningless statements such as, “…the subject is in a good neighborhood”. Why? OK, what’s a good neighborhood? How did you measure that goodness objectively? You avoid this problem by instead telling your client the three, four, or five reasons the market wants to purchase in the subject’s neighborhood.

You avoid USPAP and the nick, for example, by complying with USPAP to use logic and reasoning to explain why you did or did not do something as part of your appraisal. Again, you explain to your client why the market wants to purchase houses in the subject’s neighborhood. You avoid merely telling the client that the market wants to buy in the subject’s neighborhood. You avoid that nick when you communicate with your client, not merely tell the client something.

USPAP and ammunition? What does that mean? We appraisers have made it too easy for our critics to shoot at us. Not only that, we appraisers supply our critics with the ammunition! One of the major points of contention we have with our critics is that since appraisers determine a property’s value then, in neighborhoods of color, why can’t we determine a higher number? After all, it is clear we appraisers determine value. Why is that clear? Because we say so in our reports. What do we say? We say, “…the purpose of this appraisal is to determine the subject’s market value…”, so by our own admission we determine value. But the problem is, we don’t determine value. That is a function of the market, not the appraiser. Our critics are wrong. But we’ve supplied them with all the ammunition they need.

USPAP and ammunition to our critics? USPAP gives us the solution to this problem. Look at the definition of a real estate appraisal. It is the process we go through to develop an opinion of value. There is nothing in that definition about determining anything. So USPAP gives us the ammunition to shoot back at our critics. Since USPAP makes it clear we develop a value opinion, then let’s say so in our appraisal reports!

When it comes to USPAP and ammunition, USPAP really lends a hand against our critics. USPAP provides us with the ammunition we need to fire back! How? Listen to this podcast. You’ll find out! Really, its straightforward. Thanks for listening!

USPAP and sharp saws? What do USPAP have to do with sharp saws? Things are slow right now, right? Volume of orders is less than it was even two months ago, correct? So, now you have some free time. Read some books. Listen to some podcasts. Take some classes. That’s what you do when you have some free time. You sharpen that saw.

When it comes to USPAP and sharp saws, what should you do to sharpen the saws you use everyday? Take some classes. Not just CE classes. Every appraiser takes CE classes. Generally, CE classes do not sharpen your saws. You need something extra. Something that will set you apart. Something that makes your client base stand up and take notice!

When you are sharp, for example, you understand how to use spreadsheet programs. There are plenty of these classes on the internet. Some are free. Some have a modest tuition. All will take some effort on your part. But now you have that free time. Now you can put in that extra effort to educate yourself into excellence.

USPAP and sharp saws also means become a better writer. Appraisers communicate using the written word. But there is not a class in QE or CE to teach you how to write. You need to write clearly, concisely, and persuasively. You produce a credible value opinion. But if it does not lead your client clearly, concisely, and persuasively to your value conclusion, what good is the appraisal report?

All this means you educate yourself into excellence. Start now, while things are slow. In this interim, take the time to learn at least one new skill. Sharpen your saw when there are few trees to cut down. You’ll be glad you did!

When it comes to USPAP and neighborhood analysis, many appraisers think such an analysis is a waste of time. After all, every house in the US is near shopping, schools, houses of worship, entertainment, and recreation, right? But what does Fannie Mae say about neighborhood analysis? She makes her demands really clear in section B4-1.3-03, Neighborhood Section of the Appraisal Report, under “Neighborhood Analysis”. In fact, there are 36 criteria she looks for in this analysis in addition to merely highest and best use. In fact, in this podcast, we cover five of those 36 just to make sure you’re familiar with them.

So, why do some appraisers think USPAP and neighborhood analysis are a waste of time? Well, first of all they are entitled to their opinions, right? Second of all, there is not enough space on that archaic and poorly designed 1004 form. Third, they think the neighborhood section is merely the location for more boilerplate. In reality, it is not such a location. In fact, if the appraiser answers all 36 of Fannie Mae’s questions, it is going to be really hard for someone to call out an appraiser on bias. How so? If the appraiser analyzes the neighborhood, and then answers all 36 of those questions, it will be obvious s/he has considered all the options. When that happens, there is no bias.

So, when we appraisers pay attention to USPAP and neighborhood analysis, we are really (1) giving the client a clear picture of what’s happening in the neighborhood. And (2) we are working to cover our assets, too!

USPAP and the neighborhood. This may be hard to understand. USPAP does not even use the word neighborhood in Standards 1 and 2. So how can neighborhood analysis be even minimally important? For that, we have to forego USPAP and go straight to the Fannie Mae Selling Guide. Section B4-1.3-03 covers the subject’s neighborhood and what Fannie Mae wants to see in this part of the appraisal report. There are at least 36 questions Fannie wants appraisers to answer. These questions are not hard and the answers are straightforward. But the point is, USPAP has nothing at all on neighborhood analysis. Only the GSEs have this. So it pays to be familiar with those requirements.

True, USPAP and the neighborhood screams, “boilerplate in use here!”. But, in the neighborhood analysis section of the URAR form is where we introduce the analytics of the sales comparison approach. How so? Simple. Say, for example, in the neighborhood analysis, you show prices are increasing in the subject’s neighborhood. All other things being equal, then the client has the expectation to see you adjusted the comparable sales upward, too. If the neighborhood analysis has prices increasing, yet there are no upward adjustments to the comparable sales, this is an inconsistency. We do not want inconsistencies.

Your analysis of USPAP and the neighborhood is important to a successful appraisal report. Thanks for listening!

Is it time to expand and diversity your appraisal business? USPAP and non-traditional appraisals may be just the proper answer you've been looking for! In this podcast we do not discuss hybrid or desktop appraisals. We've already done that. Instead, in this podcast we consider expanding and diversifying your business by accepting assignments from other than traditional lenders, evil AMCs and the GSEs. This is because there is another universe of appraisal out there. It has the generic term "private work". But it means appraisal work for other than refinancing an existing mortgage or applying for a first mortgage loan to purchase a house. And what's wonderful is that we can do these private appraisals, too.

USPAP and non-traditional appraisals come into play in times when mortgage work slows down. And given the increase in US interest rates since May of 2022, mortgage and re-finance work have slowed way down and may slow even more. What's more, foreclosure and pre-foreclosure appraisals may increase as homeowners find themselves underwater if they paid too much for their house during the boom. And what about pre-listing appraisals. Our broker friends want to list houses at prices that will earn them commissions. An overpriced house does not fit that bill. Potentially, tax appeals are a source of revenue for appraisers. How so?

USPAP and non-traditional appraisals will be an important feature when real estate values start to fall. Property owners will want a competent, independent, impartial, and objective real estate appraisal when it comes time to appeal their ad valorem tax assessments. Who better than an appraiser to carry this out? Brokers, who live on commissions, will have their impartiality open to suspicion in such appraisals. That's what our mantra should be from now forward! "Appraisers do it Right!" Or, at least, we should!

Appraisers rightly ask a lot of questions about USPAP and desktop appraisals. These desktop assignments have been around literally for decades. They were not common in non-GSE appraisal work, but were the norm for other types of appraisal and valuation assignments. After all, sometimes the appraiser must put boots in the living room. And other times, no boots are necessary. That decision, simply is part of the appraiser's scope of work. And by the way, the appraiser chooses the scope of work, doesn't she?

When it comes to USPAP and desktop appraisals, some appraisers are worried. Frankly, they are worried desktop appraisals will ruin the real estate appraisal industry. Let's face facts: some assignments simply are not appropriate for desktop assignments. But it is clear the GSE understand this (at least they do now - who knows what stance they will take in the future?). Plus, the appraiser has the right to either decline the desktop assignment, or to elevate it to a full ("typical") appraisal assignment. But the point is, all other things being equal, why not do a desktop appraisal when that is appropriate and it will not mislead the client?

USPAP and desktop appraisals must have a context, however. Some appraisers advocate it is "...the appraiser's responsibility to protect the...public trust." That is what USPAP says, true. But that is not the context of the quote. Rather, in its context, the appraiser has the pro-active responsibility to protect the overall public trust in real estate appraisal and real estate appraisers. It is not our mission to protect the public from itself. Nor is it our championship to protect borrowers from rapacious lenders. Simply our job is to provide the client with an uninterested, competent, independent, impartial, and objective opinion of the market value of the subject property. If our job was to look out for the interests of the mortgagor, then we could not be independent, impartial, and objective, could we?

So, as we look at USPAP and desktop appraisals, remember we are in charge of that decision. So we have the choice.

You ask USPAP: "Are listings important?" This is a question that comes frequently from appraisers - especially inexperienced appraisers. It even comes in from well-seasoned appraisers, too. But the question is valid, especially in a changing market. We all understand the market in the last half of 2022 is different from the market in the first half. How so? Details are not all that important here, since you are familiar with them. But as we see the volume of sales dropping, the volume of listings increasing, and first mortgage interest rates increasing, listings become more important, too. For that matter, so do pending contracts (see the next paragraph). Listings become more important since they reflect what is happening now in any given market. In a hot market, the sales give you this information. But as markets cool, understanding the current competition in the market is a trend the appraiser must analyze. Currently, the market is cooling. Our clients and state appraisal boards expect us to stay on top of these trends and report them clearly and non-misleadingly. So in a cooling market, listings tend to represent the top of that market. Therefore, yes, we analyze listings and show them as the subject's competition on the SCA grid.

So, you ask USPAP, "Are listings important?". That answer is clearly yes. But how about the question, "USPAP, are current purchase and sale agreements important, too?" Yes! Why? Assume you are appraising a property currently under contract of $450,000. Assume, too, this contract meets the definitions of Market Value, was an arm's-length transaction, and so forth. Yes, this contract is another data point to collect, verify, and then analyze as you would any comparable sale.

So, you ask USPAP, "Are listings important?" "Are contracts for sale and purchase important? Now, answer those questions yourself.

USPAP - what's important now? As usual, in a real estate appraiser's life, USPAP is always important. But in this podcast, Tim talks about some of the more important stuff - right now. For example, i-buyers. Because of the housing shortage, investors are buying single-family residences. But not one at a time. Those investors are buying in bulk. So they are paying investment value, not market value. How does this affect you? Please listen to the podcast to find out.

With USPAP, what's important now is changes in market trends. So, how does the appraiser adjust for changes in interest rates over time? Generally, as interest rates increase, the trend is for prices to fall. This is because higher interest rates mean higher monthly payments in which less of the monthly payment goes to principal, while more goes to interest. So, does the appraiser adjust the comparable sales for this trend, or just ignore it? Please listen to the podcast to find out.

When it comes to USPAP, what's important now is also what will happen in the future. Chances are, as prices fall from their unsustainable past high rates, there will be some pain among appraisers. How so? Thirty-six months from now, will that $500,000 house someone bought in a frenzy of offers and low interest rates be worth more than $500,000? Who knows? But ROVs, Tidewater initiatives, upset owners, and those who will play the racist card will be omni-present. How does the appraiser get through such anti-appraiser gyrations? Training. Have a bulletproof workfile is a great way, too.

So, with USPAP, what's important now? Remember, what impresses your state appraisal board is not the accuracy of your value opinion. It is, after all, just an opinion. What is going to impress that Board is the quality of your research and analyses leading to your value conclusion. It will also look closely at your report(s) to make sure they are not misleading.

USPAP's useless cost approach. It is hard to learn. Depreciation is too hard to calculate. The market does not use it. My peers do not use it. So, yes, its useless. Or is it? If you listen to this entire podcast, you may have reason to change your mind. But why?

USPAP's useless cost approach? If you look closely, the beauty of the cost approach is not in its ability to indicate a value to a parcel of real property. Instead, its beauty is an an analytical tool. But, you rightly ask, what is it capable of analyzing? What else can it tell me other than the value of the property via its protocols? Our friends at the GSEs and AMCs have snookered us. They are so set on getting an appraisal in 24-hours. It is possible, they seductively whisper, to turn appraisals around in the impossible time limit if you ignore both the income and cost approaches. Yet the income approach can be very adept at telling you what the property's highest and best use is NOT. As for the cost approach, its analytics can tell us the highest and best use of the site as if vacant, as well as its value as improved. It is very good at extracting depreciation from the market so our adjustments for age & condition are market supported. And it is about the only way to market-extract a market-supported estimate of effective age.

USPAP's useless cost approach is really not useless. With some study and practice you can make it a formidable weapon in your arsenal of appraisal skills.

When it comes to USPAP, facts, and opinions, there is a lot of confusion out there. This podcast helps to unravel the facts from the opinions, the truth from the hype. It follows, then, this podcast points some of these out, right?

Some appraisers think that with USPAP, there is confusion over what is a fact and what is an opinion. As a result of this confusion, the appraiser's facts are often wrong, so the appraiser's opinions lack credibility. USPAP defines an appraisal as "...the act or process or developing an opinion of value...", but it does not define a fact. On the other hand, a fact is a "...thing that is known or proved to be true". From these, it is clear a fact and an opinion are not the same things. To form an opinion, therefore, an appraiser uses facts. Opinions proceed from facts. Indeed, they proceed from the collection, verification, and analyses of facts. It is easy to see that for us as appraisers, an opinion of market value, without a foundation of market-specific facts, is nothing more than a guess.

So, when it comes to USPAP, facts, and opinions, there is a logical and deductive model we must follow. This model leads to a credible value opinion rather than merely a guess. That model is to collect, verify, and analyze property-specific and market-specific facts. Then, from those analyses, draw a conclusion the market supports. Not one the client likes. But one the market supports. And, of course, we maintain that support in the workfile. This demonstrates we did not guess, and that we complied with USPAP. Thanks for listening! And by the way, there are only two opinions in an appraisal: highest and best use and market value. Everything else must be a fact!

When it comes to USPAP and report writing you say, "Tim, I already know how to write an appraisal report!". That's great! Congratulations! Now, ask yourself this question, "Do I know how to write a persuasive appraisal report? How about, "Do I know how to write an accurate appraisal report?". And finally, "Do I know how to write an internally consistent appraisal report?". Then, all of these questions lead to the main question, the crux of this post: "Should appraisers take a university-level writing class?". Now, I hear you grumbling, "I don't need a college education to appraise real estate! I've got 30-years experience!". An apendectomy is not particularly hard, either. But, I bet you want that surgeon who's going to take out yours to have gone to medical school, and then interned in surgery, right? Now you say, "Tim, there are no university-level classes on writing a real estate appraisal report!". You are, of course, correct! But, there are not any university-level classes on appendectomies, either. There are only medical school-level classes on that. So, why did that surgeon take a writing class in college? It was not to be a better surgeon. It was to learn how to express herself clearly, credibly, and persuasively.

USPAP and report writing calls for the appraiser to express herself clearly, credibly, and persuasively. We are, after all, in the communications business. Appraisers communicate for a living. We persuade for a living. How so? Consider this sentence, one that is all too common in reports: "The adjustments are as shown." What did that sentence communicate? Nothing. How could that sentence possibly persuade our clients and intended users of the accuracy of our analyses? Simply put, it can't.

USPAP and report writing. Please complement your 30-years of experience with a university-level report writing class.

What do you need to worry about? There is a lot out there in AppraisalWorld to keep you busy! But since you’ve already got worries enough, this podcast covers some of them for you. However, don’t get all excited! There is no reason to give those away here, so we won’t! Please check out the podcast for details and specifics, though. Some of these may hit close to home. Others will not seem all that much of a problem – at least for now.

This podcast also covers what you need to worry about, and what you don't – at least for now! Here in AppraisalWorld, more has happened in the last two years than in the last 10-years. For instance, Fannie Mae has promised a new appraisal reporting form. Originally, she called for a 2024 roll-out. However, given all that’s going on in AppraisalWorld now, 2026 may be a more doable target date, so don’t worry about it! In addition, how about 2023 USPAP? Well, the ASB’s working on it. But they are under a lot of political pressure to remove the bias and discrimination our critics claim is in it (which really are not). You don’t have to worry about those. But the ASB does.

What you need to worry about does not include interest rates. Those are increasing, so rates of price increases are slowing. Will prices fall? Probably, so don’t worry about those either.

What else do you need to worry about AppraisalWorld? Keep working hard! Please keep writing clear and persuasive reports! Always keep learning! Keep being professional! Keep listening to these podcasts! When you do these, you’ll have less to worry about!

What's a comparable sale? Does USPAP answer this question? (spoiler alert: NO!) Can the GSEs answer this question? (same spoiler alert!). You're an ethical, curious, well-trained and well-educated appraiser. What are you going to do? In this podcast, Tim Andersen, The Appraiser's Advocate takes a stab at the answer! Think highest and best use since that is the key to a comparable sale.

There are sales and then there are comparable sales. What is the difference between them? In essence, one difference is your verification of that sale. You turn a plain-vanilla sale into a comparable sale! How? Use Fannie Mae's definition of market value as your verification model. If a sale ticks all of the boxes in that model, and it has the same highest and best use, you have a comparable sale! When they don't, you don't. It's that simple. Yes, finding comparable sales takes some work.

Now what? You found the sale. You've verified it according to the market value definition model. It has the same highest and best use as the subject. Now you analyze that verified sale. Why? Between your original research and your file data, you may have 15 comparables. Now, analyze them to determine those that are are most similar to the subject. Which of them needed the lowest gross adjustment ratio? Is the most recent sale physically proximate?

What's a comparable sale? Listen!

USPAP and the contract are a great team! Make them part of your appraisal team, and you'll benefit from it, too! Is that a lot of hyperbole, or what? No, it really is not since they do make a great team. But, since you are the Head Coach of that team, you must know how to pair them up. What's your job as Head Coach? It is to know how and when to bring them together. They make a great team - but you have to know when and how to play them.

Typically, we do not think of USPAP and the contract. This is a habit we need to change. Why? Because analyzing the purchase and sale contract is part of the appraisal process. You say, "Tim, I know that already!" Yes, you do - but the problem is in the pairing. When the package of data from the lender arrives, it contains a copy of the purchase and sale agreement. USPAP says we have to analyze it. This is to determine if it is arm's-length or not. Then, the verification is like the verification of a comparable. You talk to somebody and ask some straightforward questions to determine if it meets the criteria of the definition of market value. If it does, you say so in the appraisal report.

But USPAP and the contract have a very unique relationship. Some appraiser do not like having a copy of the contract. They think it is a contract to hit (it isn't). It might bias them toward the contract price rather than market value (it might). Therefore, they say, keep the contract! But USPAP tells you when to read the contract, and its not as the start of the process. OK, so if that does not happen at the start of the appraisal, when does it start?

Read SR1-5, not for what it contains, but for what it means. Given that SR1-5 comes after SR1-4, the proper time to consider USPAP and the contract is after you've formed a preliminary value opinion. When you hold it until then, it cannot influence you one way or the other. Your value conclusion has its base in market data, not in the contract. There is no way to accuse you of the bias of anchoring to the contract. You didn't read it until you formed your value opinion. Then you include that contract as the last comp. In the reconciliation, you then give it the weight it deserves in the final value opinion.

USPAP and the contract are a great team! But you must know when to play them!

Thanks for listening to this podcast on appraisal workfiles. Now, finally, you'll know what needs to be in your appraisal workfile!

Did you mislead your client today? How? Why? You say, "Of course not! That would be unethical!" And you'd be right. To mislead your client, intentionally or unintentionally, would be highly unethical and a major USPAP violation. But, again, did you mislead your client today? You may have done just that. You're wondering how, right? You're wondering how using data right out of MLS could be misleading. That answer is in the podcast, so please listen. (SPOILER ALERT! In the report you have open on your computer right now, did you merely state the subject's neighborhood boundaries, or did you also explain how and why you determined those boundaries? Did you explain why they are important? How do those boundaries affect the subject's exposure time? Or its marketability? How about its market value? If all you did was state them, not explain how and why you chose them, then this podcast is for you!)

So, did you mislead your client today? If you did, that certainly was not your intent! But, good intentions pave the road to hell, right? So, your intentions do not count (at least from a USPAP standpoint). What counts is an appraisal that is credible, accurate, reliable, and reproducible. Thanks for listening!

Is your appraisal house haunted? How about your appraisal business? Are you a ghost? You know what a ghost is. It is the nebulous apparition of a dead person. Usually you can't see them, but sometimes you think you maybe caught just a glimpse of one. But, probably not. After all, we are talking about ghosts here, right?

But, is your appraisal house haunted? You say that makes no sense. But think about it for a minute. Do you ghost your clients? Are you a ghost when it comes to returning the client's emails and phones calls? When that Reconsideration of Value arrives, do you turn into the nebulous apparition of a dead person? Most appraisers have been up-to-their-earlobes busy the last 36-months. So, when the ROV arrives, everything else has to stop to take care of what could be a significant problem. At that point, to keep up with the work load, some appraisers have turned into ghosts. In other words, they are not returning phone calls or emails. These appraisers hope that by becoming nebulous apparitions of dead persons, they can escape the problem of that ROV, so still keep the cash flowing.

Why is your appraisal house haunted? You insist it is not, right? Ask your clients. Can they get you on the phone? Do you answer their emails? Clients are reporting ghost appraisers to their state appraisal boards. Those boards sanction appraiser-ghosts. This usually means a fine and education (that does not count for CE!). Stay ahead of USPAP. Stay out of the jaws of your state appraisal board. There is no reason to be an appraiser-ghost. Conduct business with your clients the same way you want others to conduct business with you. That's the professional way to run an appraisal business!

Random appraisal thoughts? So much is going on in AppraisalWorld right now, its time for some thinking. ANSI measurements standards are not the way we measure houses, etc. Desktop appraisals are here to stay, at least for Fannie Mae. The PAVE Task Force met and all bias and discrimination in mortgage lending is the appraiser's fault. The Waters' Hearing on the PAVE task force. Tate-Austin v. Miller wants to eliminate the sales comparison approach. Where do appraisers stand on this bias/discrimination thing? How about taking on trainees? There is a lot to think randomly about.

Random appraisal thoughts? USPAP always come to mind when you think about real estate appraisal. Do desktop appraisals violate USPAP's Confidentiality section of the Ethics Rule? What does USPAP say about ANSI? (FYI, it says nothing). Are desktop appraisals the future or real estate appraisal? For appraisals going to Fannie Mae, they are. Freddie Mac and the others (FHA, VA, etc.) have not weighed in yet. Who knows! But part of what I do is to keep you informed on all this stuff. There is so much!

So this podcast has some random appraisal thoughts on all sorts of appraisal topics. True, some of them are my own personal rants. Others came in from other appraisers' questions. Thanks for listening!

Ask Why! It's OK! Appraisers have an ethical obligation to understand what they are doing. We call it COMPETENCY. USPAP even has a Competency Rule. Why? Because the client has the right to assume our appraisals are credible, accurate, reliable, and reproducible. Our reports must not mislead anybody. And how do we do all this? Simply, we ask "WHY?" a lot. Our client is going to ask, "Why is my property worth only $350,000?" We are the professionals, the experts. It is our job to be able to explain to the client why their property has a value of $350,000. Nothing says the client has to agree with our value opinion. But we have to understand the appraisal process so we can explain both how and why we came to that conclusion.

Real estate appraisal training does an adequate job of showing us what to do. It does a mediocre job of teaching use how to do something. But, one of the areas in which real estate appraisal education is deficient, is teaching us WHY we do something. Basically, our QE and CE ignore this why question. How so? Have you ever asked your mentor how to calculate a GLA adjustment? If s/he said, "Oh, just use $65 per square foot", you should have asked "WHY?". Then, if s/he said, "Well, that's the way I've always done GLA adjustments", again, you need to ask "WHY?". Then, if s/he says, "Don't worry about it. It works fine!", then you need a new mentor, now!. Ask Why! It's OK!

Why do you need a new mentor? Is your present mentor is incompetent? Does your present mentor know no more than you already know? Is s/he is competent to teach you anything? Is s/he is training you to fail? Ask Why! It's OK!

10 questions Fannie Mae just has not answered? There are probably more than 10, but this podcast covers only 10 of them. Maybe we appraisers have not asked the proper questions? Maybe Fannie Mae does not trust enough to give us the answers. But the point is, we appraisers have questions. Fannie Mae has answers. But she has not gone out of her way to provide them to us. So, Tim Andersen, the appraiser's advocate raises some of them here. This is to give the good folks at Fannie Mae a good goosing - just to get them started.

10 questions Fannie Mae does not answer for for us? How about "How are we supposed to provide a floorplan when we don't put boots in the living room?". Technology helps us answer this question, true. But the fact is, we had to ask it. And, Fannie Mae still has not answered it (as of this podcast). Again, that technology exists, but which technology? Even some of the AMCs are on this bandwagon. Those AMCs ask us to use their software, their apps. Does that put them "in charge" of the appraisal and its reporting? USPAP makes it clear those are our responsibilities. But USPAP does not govern or constrain lenders and their helots, the AMCs.

These 10 questions Fannie Mae does not answer extend to neighborhood analysis, too. From experience, it's likely the appraiser is already familiar with the neighborhood. But what happens when the appraiser receives an assignment in a recently-constructed subdivision? Will staying at a desk help the appraiser who is expanding into new geographical areas? How will the appraiser come to know the nuances of that new town or county?

10 questions Fannie Mae does not answer include the Selling Guide. Right now, it assumes the appraiser inspects the subject's neighborhood. How will that be possible if the appraiser stays in the office? OK, the appraiser can get in the car and visit the new neighborhood, true. But, isn't the purpose of a desktop appraisal to cut the time they appraiser spends outside of analyses? So, if appraisers are out inspecting neighborhoods, they are complying with Fannie Mae's current requirements. But they are not at their desk analyzing. That's not complying with her requirements. Therefore, is Fannie Mae going to change the Selling Guide so it is internally consistent with her adoption of desktop appraisals? When?

So many questions. 10 questions Fannie Mae just has not answered include so many more, too. Let's hope she chooses to heed our call and then answer our questions. Thanks for listening!

USPAP says support everything! That's really great advice, but is it practical? Appraisers have only so much time and money to do an appraisal. That report must get out the door quickly and timely! So, is there really time to explain and support everything? Let's put it this way: there probably is not. But try selling that to your state appraisal board! You won't. Your budget and turn-around time limitations are irrelevant.

There's a reason USPAP says support everything. With support, your value conclusion is accurate, reliable, reproducible, and credible. USPAP demands the appraisal conclusion(s) be credible. Our friends the GSEs, et al, demand accuracy, reliability, and reproducibility. We appraiser can give them both. Yes, it takes more effort, more organization, and more planning. But remember that defending yourself against a formal state charge will cost a lot more than whatever you appraisal fee was. So, how to reduce the chance of such a charge? Support! In the workfile is you support for every statement of fact in the report. That's where you support every opinion and conclusion in the appraisal. Support and explanation are the keys to keeping the state off your back and out of your wallet.

USPAP says support everything! Take USPAP's advice. If you see it, save it in the workfile! If in doubt, DON'T throw it out! Keep it in the workfile. Was a transaction not arm's-length? Keep it in the workfile! It will come in handy when you are appraising to a standard other than market value. Did a potential comp have surplus land? Keep in it the workfile so you can measure how the market handles that issue.

USPAP says support everything. There is no such thing as a workfile too thick!

Real estate appraisal's future? Dare we look into it? Is it not best to leave some elements of life undiscovered? Tim Andersen, The Appraiser's Advocate peers into that abyss. But since the future in unknowable, Tim's guesses are as good as anybody's. Isn't it amazing? Real Estate's appraisal protocols have not changed fundamentally since the 1930s. Yet the technology is changing so fact, we can't keep up with it. That's why its necessary to peer into the future - to makes sense of these changes. A big change is Fannie Mae's adoption of ANSI measurement standards. Property Appraisal and Valuation Equity (PAVE) is another major change coming to real estate appraisal. While PAVE blames appraisers for what are really lending abuses, we must be aware that PAVE's findings are part of our future.

Real Estate Appraisal's Future? It will require more training, education, and practical experience. In addition, the GSEs are now looking for appraisals to be accurate, reproducible, and reliable, not merely credible. So the GSEs are holding us to standards even higher than those in USPAP. For good or ill, that requires we up our game. Fortunately for us, we can. All the education and training we need are out there. But we must choose to take advantage of them so we benefit from them.

So, when it comes to real estate appraisal's future, we know there will be changes. Some will be positive. In any event, we must keep up with them. If we are not moving forward, we are falling behind!

There are more unacceptable appraisal practices?! Really, just how many can there be? Fannie Mae has 16. Freddie Mac has 10. But no matter. There really is a benefit here! What, possibly could that benefit be? That benefit is once you know them, you can avoid them. And when you avoid them, your appraisals are more professional. When they are more professional, there is a far smaller chance of getting that letter from the state board. Sounds pretty good, don't you think? In this podcast, we won't cover all 16 or all 10. This is about Freddie Mac. Even so, we cover only Unacceptable Appraisal Practice #7. Why only #7? Because #7 is about adjustments. And that is a sore topic for many appraisers.

There are more unacceptable appraisal practices that just those covering adjustments. But because an appraiser's qualifying education on them is so poor, there is reason to focus on them. #7 says to avoid inordinate adjustments. Freddie Mac is not really clear on this. It means to avoid making too many adjustments. Let's face it: not every difference needs an adjustment. It also teaches us to make the adjustments that need to be made. But part of COMPETENCY is knowing when and how to make an adjustment, right? These are all important parts of an appraisal that is reliable, reproducible, accurate, and credible. We've got the chops to meet all those requirements, right? So, where do we go to learn about more unacceptable appraisal practices? How about these podcasts?

Here's the link to Freddie Mac's gig on more unacceptable appraisal practices. There are plenty of them. But when we know what to include and what to avoid, life can be sweet!

"Some clown wants a reconsideration of value (ROV)?! ROVs are Satan's own seed, right? Probably, that obnoxious broker told the borrower to file the ROV! This would not be even an issue if that idiot, greedy broker had priced the property correctly! So, now what?! I've got to stop everything else I'm doing to babysit the ego of a cretin real estate broker!? This is BS! I'm going to send that stupid broker an email with two words. The second one will be "you!", but the first will not be "Thank"!"

Has a reconsideration of value (ROV) ever prompted you to react this way (or in one similar to it)? In truth, they are a major PITA (pain in the butt). They take a lot of time away from the money-making of real estate appraisal. They are a tacit accusation some part of your appraisal was wrong. And if you later change your value conclusion, that is florescent orange, flag-waving admission you were wrong! So, what's an ethical, honest appraiser to do?

When it comes to a reconsideration of value, the honest, ethical appraiser complies with the request. Chances are, a timely response to an ROV is part of the appraiser's original engagement contract. Therefore, we as appraisers have both an ethical obligation to comply, as well as a legal one. When we choose not to comply, we'll save some time and money now. But that choice will cost us a lot more time, money, and aggravation down the line. This is especially true if a state appraisal board gets involved. Defense against state board charges can easily run $2,500 to $5,000, even if there are no fines and penalties.

In the podcast, we cover three ways to deal with reconsiderations of value. Actually, the best way is to appraise and report so that idiot broker can't demand an ROV. When we properly explain WHY it is we did/did not do something, it hard to request that ROV. When we don't, its easy.

Thanks for listening! My Best!

Are they market value? Those Zillow purchases and now their sales of the properties they bought. There is a reason to ask. Recently, a state appraisal board took an appraiser "behind the woodshed". Why? That state board sanctioned the appraiser for (among other reasons) using ibuyer sales and purchases as comparable sales. Really?! Yes! As the board explained, those sales did not meet the qualifications of market value. Why? because the buyers were ibuyers, not traditional purchasers. Yet the board did not explain the market evidence it used to reach that conclusion credibly. No bias there, right?

But, are they market value? After all, the ibuyers ballyhooed their purchase algorithm. They based their purchases on it. Not just Zillow, but all of the institutional ibuyers. And the sellers did not need to accept the offers of the ibuyers. They could have rejected them, right? They could have hired an appraiser to tell them their property's market value, correct? Were there no brokers available to advise them on a reasonable listing price? So, to say the ibuyers took advantage of those sellers is an exaggeration.

But, again, are they market value? Did those sales meet the qualifications of the definition of market value? In this podcast, Tim Andersen, The Appraiser's Advocate, examines this question and its possible answers. If they did, then that state board was wrong to sanction the appraiser. After all, the appraiser merely used credible comparable sales. And if those sales were too funky to meet market value? Then the state was right to sanction the appraiser. But who was right, the state or the appraiser? Could they both be right? Is it possible both were wrong? Tim covers these questions in a thought-provoking way. You may not like his answers. But at least you thought about the questions! Thanks!

USPAP and hot sauce? Really?! Yes, there is a connection. That connection is the basis of analysis. So, what is analysis? For appraisers, it is really just a side-by-side comparison. Comparison of what? We compare, side-by-side, attributes of properties. Which properties? What attributes? See, that's the connection. How hot is a hot sauce? There is only one way to tell. You taste a bunch of them. This is that side-by-side comparison. OK, there is the Scoville scale. It tells you how hot a pepper is. But only you can conclude how hot is is for you! And you do that via a side-by-(painful?)-side comparison.

USPAP and hot sauce have other characteristics in common, too. If a sauce you sampled were seriously hot, you'd remember that, right? You'd have that experience stored in a memory bank somewhere. That way, you could access it the next time you tried a new hot sauce. This is also true for our appraisals and reports. We call that memory bank the workfile. There is a workfile for at least two reasons - one practical and one ethical. Both of those reasons are in place to protect us. Really! USPAP exists, in part, to protect us. What's the practical reason? We can't remember all the stuff that went into any particular appraisal. We we have a workfile so we do no need to remember. Everything we said, did, say, heard, smelled, etc. goes into the workfile. All those data and all that information are at are fingertips. And the ethical reason?

USPAP and hot sauce have share an element of comparison. We retain those comparisons in the workfile. But we also retain those comparisons to an indication we complied with Standard 1 in developing a credible value conclusion. And the other reason? Well, you make that discovery.

On widgets and doohickeys, you say? And old mother USPAP, too. What does all this mean? Well, widgets are made up of lots of doohickeys. We deconstruct that widget into its component doohickeys. Once we have them all on the workbench we have deconstructed the widget.

Is there more? Yes. Now we look at the component doohickeys. Why do they do what they do? To understand, we get another widget and reduce it, too. Maybe we get a third, a fourth, or even a tenth. But when we have reduced all the widgets to their component doohickeys, what have we discovered? Where and how all the doohickeys fit together! And once we have reassembled them properly, we have a widget!

So all this means exactly what? Old Mother USPAP, in her wisdom, chose not to define to analyze. She left us alone to our own devices. We did just that! Hooray for our side! So, what's with the deconstruction analogy?

Comparable sales are widgets. We break them into their component doohickeys. Now we understand how the doohickeys function as part of the widget. And so it is with an appraisal. We start with the widgets of comparable sales. Then we deconstruct them. When we put the deconstructed doohickeys back together, we understand the subject widget and how it works. And in our case, what it's worth. And what about Old Mother USPAP? She left us alone, remember? And in doing so, she left us alone to learn.

Think on all this when you consider the infinitive to analyze. It means to compare and contrast. You compare doohickeys to understand how the widgets work. Now, aren't you glad she left us alone?

Are there really three USPAP secrets you need to know? What are they? Why are they secrets? Is The Appraiser's Advocate website the only place I can find them? OK! Enough questions! What are the secrets about extraordinary assumptions and hypothetical conditions I need to know?

First, the three USPAP secrets are not really secrets. They are there for anybody willing to do the research to find them. They are not even really hard to find. All you have to do is look! These so-called secrets have to do with their definitions, when to use them, and how to disclose them. For details, you'll need to listen to the podcast. But it is possible to reveal that, by definition, there is no such thing as a generic extraordinary assumption.

Since the three USPAP secrets are not really secrets, why call them secrets? True, they are not secret. But appraisers use them improperly so much of the time, it is as if they were secrets. There are plenty of places to go for advice on appraisal questions and issues. But sometimes, old Mother USPAP is the best place to start. Start where? How about the definitions of extraordinary assumption and hypothetical condition. Then, how about SR1-2(f, g) for a description of the only circumstances you can use one or the other. Then, finally, SR2-2(a)(xiii) for proper disclosure protocols.

See! There aren't three USPAP secrets. They are right there in the open. All you have to do is look for them. Thanks for listening!

What are four things the newbie appraiser must bring to the table? Really, what are four professional attributes the newbie appraiser must being to the table? There are more than four. But a discussion of only four of them will suffice here. OK, what are the four? You'll have to listen to the podcast to discover those!

But, what do you think are the four things the newbie must or should bring to that table? To tell your potential supervisor you've had 75- to 100-hours of qualifying education is not an advantage. All appraisers must have those. Those hours, in and of themselves, are no qualification. In fact, if your supervisor is top-notch, s/he will have to unteach you all the barnyard groundcover you "learned" from those classes. In fact, here is a question you did not cover in your QE classes. "What is the construction model for a typical paragraph in English"?

One of the four things the newbie appraiser must bring to the table is a knowledge of construction. Another is a knowledge of marketing. How about a basic knowledge of statistics? Would it be an advantage to be a (candidate) member of an appraisal society? Maybe you could know and understand more about inconsistencies state appraisal boards constantly find in appraisal reports? Are you familiar with the mechanics of paired-data analyses?

Did you answer "yes" to one or more of these questions? Then you've got a grasp on some of the four things the newbie appraiser must bring to the table. Congratulations! You are well on your way to landing that first position as an appraiser!

Listen carefully! In this podcast, I'm going to share a Freddie Mac Appraisal Secret! If this secret gets out, it could mean the downfall of the residential real estate appraisal industry as we know and love it! I'm completely serious (not)! This secret is so applicable, so practical, you won't believe you've never seen it anywhere else. And really, you haven't. Such a powerful secret should be part of an appraiser's QE and CE. But, as you are well aware, it is not! And that's a shame, too! Since, when you learn it, and put it into practice, your life as an appraiser may get just a bit easier. Let me know in the comments, would you?

This Freddie Mac appraisal secret was not all that hard to uncover. Really! But, since we are all appraisers, and are all in the same boat, I figured, why not share it? As I just wrote, this secret is not part of real estate appraisal QE or CE. There are plenty of webinars and seminars out there that hint at this secret, true. But, insofar as I can tell, this is the only place to get this secret unadorned. You won't find this secret rendered this simple, this straightforward, in any other place on the internet. You won't find this secret in any real estate appraisal text. Not even in the Freddie Mac Single-Family Seller/Servicer Guide.

So, the Freddie Mac Appraisal Secret is out! But you won't be in any danger if you choose to apply it. In fact, apply it! You'll find that you life an an appraiser runs more smoothly. You'll likely get fewer stupid stips from AMC reviewers. And your state appraisal board will likely stay off your case. Those sound like pretty positive benefits, don't you think! But don't tell anybody about the Freddie Mac Appraisal Secret. It must stay between us!

Yes, a highest and best use analysis is part of USPAP. So, that means each appraisal and report must have one. It is true, the archaic 1004 form limits this to a checkbox. That's really dumb! If the GSEs are so hot about one, why not give us some room on the form to put it in? Don't hold your breath, though! It ain't happening! So that means we have to roll it over to the addendum. There's nothing wrong with that, really. But it makes the appraisal report hard to read. But the GSEs blame us for that, not their damnable form. Go figure!

Therefore, how do we do about credibly reporting highest and best use? USAP makes it clear there are five (5) components to it. Because of this, a credible H&BU analysis covers all five of them. How? Well, the first step to credibility is simple. Get rid of the boilerplate we appraisers use so constantly! Yes, boilerplate saves time! But our analyses of H&BU must be property specific! If the subject site were vacant, what are the ideal improvements to put on it? Don't know? Why?! That is part of what USPAP requires we tell the client!

Where do we go to learn more about highest and best use? All of the major appraisal societies offer seminars on it. Don't know how to write a credible H&BU analysis? Don't understand how to tie H&BU and your value conclusion together? What to keep your state appraisal board out of your back pocket? There are consultants out there who will be glad to help!

Really, when it comes to any confusion over highest and best use, there is a place to go for help. Thanks! My Best to you and all of yours!

Want to know how a proper reconciliation keeps your assets out of a sling? Unfortunately, it is too easy to find them in one. Too many people want your assets on a tray. Did you "kill" a deal? That real real estate broker wants your assets in a sling now! Does that homeowner think you did not give enough credit to that poorly-built wood deck in the back yard? She wants your assets in a sling! Your state appraisal board? It thinks appraisers can't do anything right! So, stay off the state's radar!

This podcast shows you five (5) ways a proper reconciliation helps keep your assets out of those slings! What's just one example? Your reconciliation process forces you to go over your appraisal and report at least one more time. Maybe you'll catch an error as your consider your reconciliation. Maybe a flaw in your logic and reasoning will stand out! Is there a convoluted sentence? A review prior to you reconciliation may help your catch it, then re-write it!

A proper reconciliation gives you a chance to fly your own flag, too! Don't tell the client the sales in the report are the best around! Face it, if they weren't, why are they in the report at all? Rather, explain why, of all the sales there were, you chose these as comparable and competitive substitutes for the subject. Your client knows you made adjustments to the comps. You don't need to state that. It's obvious! Instead, in the reconciliation, explain to the client what the market told you. Why and how did the market tell you the GLA adjustment was $93 per square foot? Detail how you coaxed that $6,300 garage-stall adjustment out of a rapidly increasing market. Chronicle to your client your extensive comp search.

Why are neighborhood boundaries so important? Simply put, the concept is one of influence. Whatever influences value is the subject's neighborhood will also influence the subject's marketability. They will also influence the subject's market value. And an appraisal is all about market value, right? It is important, though, to remember that market value does not exist by itself. Market value is the result of a combination of factors. One of those factors is the risk of investing in a neighborhood. We help the GSEs to measure that risk. How? By informing them about what influences marketability and value in that neighborhood.

Want a deeper understanding of neighborhood boundaries and the value influencers in them? This podcast will help! While USPAP does not use the word neighborhood anymore, It expects to see an analysis of supply and demand factors. This is part of SR1-3, USPAP's Market Analysis and Highest and Best Use standard. Why (or why not) are buyers demanding housing in a particular neighborhood? Are builders meeting that demand? Why or why not?

Do you know what Fannie Mae looks for in your neighborhood analysis? This ebook will help you understand! Need some help with adjustments? Click here to get it! Thanks for listening!

In real estate appraisal, there is no standard definition of a comparable sale. There is no formal definition in the literature. Nobody has a practical definition, either. USPAP does not have one. Fannie Mae just assumes we all know what one is. But we don't have a standard definition. That does not make sense, does it? So, what do we do? Do we invent our own definition? It is not that easy!

Since we do not define a comparable sale, what are we appraisers to do? About the best we can do is go with what we have. And what we have is, at best, a description. OK, a description of what? A description of the characteristics of a comparable sale. Fannie Mae, bless her bureaucratic heart, offers that description. She says a comp has the same legal, physical, and economic characteristics as the subject. Really clear, fight? NOT! But we go with what we have since we have nothing else.

Fannie says a comparable sale has a site similar to the subject's site. That means they are highly similar when it comes to exposure, frontage & depth, access etc. In addition, a subject and a comp have similar room counts and a similar GLA. Their architectural styles and modes of construction are similar, too. Finally, the subject and its comps are in generally the same condition. Clear as mud, right!?

You know what's silly? There is no definition of a comparable sale, but all the AMCs know when you picked the wrong ones! And do you know what's even more interesting? The comps you should have chosen just happen to make the deal work! No conflict of interest, no subjectivity there, right! Yep, the appraiser is always wrong and the AMC is always right! Yes, the AMCs always choose the correct comps despite the fact there is no formal definition of a comparable sale!

But doesn't Fannie Mae give the appraiser the discretion and choice to select a comparable sale? Yes, she does! This responsibility falls on the appraiser's shoulders, not the AMC's.

Are inconsistencies in appraisal reports that bad? Generally, yes! This is because an appraisal report must make sense. It is easy to gather facts and then report them. That takes no analyses. But our job is to take those facts, and then make sense of them. Why? So the client can use them to judge risk. We help clients assess and understand risk. An AVM can't do that - it just points our a value. We point our values, too. But then we we tell the client why we concluded that value. An AVM can't do that. Only an appraiser can help the client understand and assess risk.

What are inconsistencies in appraisal reports? Take the 1004 form as an example. Suppose on page 1 you indicate property values are stable. But on page 2 you make a time adjustment. So, which is it? Is the market stable or increasing? It's possible the market has recently started to increase after a period of stability. In that case, an upward time adjustment would make sense. But another inconsistency is that the appraiser won't explain that change in market condition. Why? Its our job to explain the market to the client. From our explanations, clients assess risk.

Appraisers can avoid Inconsistencies in appraisal reports. First, give up dependence on boilerplate. Second, write the report backwards. That means deduce a credible value opinion first, then write the report. It is a lot easier to get where you're going if you already know the way. Ask an associate who knows nothing of the assignment to read the report. After reading the report, if that reader can explain how and why you arrived at your value conclusion, you're home free! Finally, send out every 10th report for a full Standards 3/4 review. Another pair of eyes on a report, eyes that know what to look for, never can hurt!

Appraisers, identify it then analyze it. OK, what does that mean? A clear example is the number of bedrooms. If the "typical" house in the neighborhood has three bedrooms, does a fourth bedroom add any value? We can't analyze the market's take on that extra bedroom if we don't know its there. We can't determine if that extra bedroom is a functional obsolescence until we identify how may bedrooms the market is willing to purchase.

How many times does a report state the highest and best use is the subject's present improvements? Really?! How? Why? First, you have to identify it to analyze it, right? It's not hard to identify a house, is it? But highest and best use is more than merely the physical presence of the house. What are the economic characteristics of the house? What are the legal characteristics of the house? See? You have to identify them, then analyze them. You can't discover the value the market assigns to a legal characteristic until you first identify that characteristic.

So, in this podcast we cover "identify it then analyze it" as a preliminary step in any appraisal process. And speaking of the appraisal process, there are five steps to it. You have to identify 'em to analyze 'em!

Thanks for listening!

What are a property's characteristics? True, they include such things as GLA, quality of construction & finish, number of bedrooms, and so forth. But those are just some of the property's physical characteristics. Really, there are more. The problem is, sometimes appraisers see the physical characteristics as paramount. But we can ignore the other important characteristics, either!

Second of a property's characteristics are its legal characteristics. The big one is the property's zoning. For most single family residential appraisals, this is clear. It's a house, so the zoning is residential. Ok, that's clear. But what about that converted garage? That garage they converted into a ADU. That is a physical characteristic of the property, true. But is it legal? Part of an appraiser's due diligence is to answer that question credibly.

Third in a property's characteristics are its economic characteristics. We appraisers give way too much weight to physical characteristics. We give way to little to economic characteristics. What are some? What would the property rent for? It does not rent since it is owner-occupied, you say?. But that's not the question. What would the property rent for if it were vacant and available? To answer that question is going to take some work. Check out MLS? Yes! Check out CraigsList? Yes! The point is, the data are out there. We just have to look for them. Remember, Fannie Mae (or whoever the client is) pays for more than data. The client can likely access the same data we can. We provide analysis and interpretation.

We analyze a property's characteristics to know they are, true! But we analyze them for more than that! That analysis shows us the characteristics that are important to value and marketability. Moreover, it also shows us the characteristics that are not! Then, we interpret those analyses.

Real estate appraisal boilerplate can be an advantage! Yet, it can save time, money, and effort. These are a plus to any appraiser, right? But is there a downside? Are there circumstances when boilerplate could be a problem? Unfortunately, yes, there are. While boilerplate has its advantages, it has some strong disadvantages, too. So strong, in fact, you may want to take a close look at your reports. It is way too easy to let generic boilerplate replace critical thought and analytics. When that happens we are not appraising. We're just filling out a form. An AVM can do that - for a whole lot less money than we charge!

So, which real estate appraisal boilerplate should we avoid? In letters of transmittal, it's common to read the appraiser engaged in an economic analysis of the subject's neighborhood. Really!? That is a statement of fact. Per SR2-23 it therefore must be both true and correct. Really, did that appraiser carry-out an economic analysis of the subject's neighborhood? Maybe. But likely not. With rare exceptions, appraiser are not trained in the econometrics and statistics of such an analysis. To make that statement means those analyses are in the workfile. All the state investigator must do is find them. And if those analyses are not there? Let's just say that appraiser is going to have the opportunity to learn the depth of USPAP's definition of misleading. Is that the kind of learning experience the boots-on-the-ground appraiser really wants?

Is there another example of real estate appraisal boilerplate? Highest and Best Use is another area to be careful of! There are at least three (3) B&BU models. In the 15th ed. of The Appraisal of Real Estate is the traditional four-component model (made even more complex by expanding to to an eight-component model. USPAP [see SR1-3(a)(i-v)] has a five-step model. But it is different from the model in the 15th edition. Fannie Mae has her own model, too. She says stop once you've shown the improvements add at least one net dollar to the value of the underlying site. But she is totally silent on which model to follow to conclude the H&BU of the vacant site. Remember, SR2-2(a)(x) obligates us ethically relative to H&BU. We have to summarize the support and rationale we developed to support those opinions. (Opinions?! Yes, both as vacant as as improved).

Your software does not do this. Only you can write that summary and make it market- and subject-specific

Real estate appraisal boilerplate is what you make available to your state board with every report you submit. You say, "Hello state appraisal board! Here's my boilerplate!" How deeply the state chooses to investigate is the state's call. But before you submit your next report, perhaps you'll want to ask yourself a question? Is that boilerplate relevant to a credible value conclusion? Or is it there because some long-past mentor told you to put it in? Does your boilerplate lead your client step-by-step to your value conclusion? If it does not, why is it in the report? If it does not, are you misleading your client by not leading the client anywhere at all? Think about it!

What is so special about the appraiser's workfile? Just how does it benefit you, the appraiser? Isn't it really just a time killer? Each of these is a reasonable question. Appraisers ask them all of the time. This podcast answers those questions. Tim also encourages you to find your own answers to these questions.

To keep this precise, we'll cut to the chase. Your appraiser's workfile protects you! That's right! It protects you, the appraiser! You rightly ask, "Tim, it protects me from what?". Thanks for asking! A complaint came in from a consumer (not the client). According to the complaint's details, the consumer accused the appraiser of never visiting the property. Long story short, the appraiser went to the workfile. Guess what!? In it was a photo of one of the bathrooms. This photo was not in the report. Why? Because the photo showed the appraiser's reflection in a mirror! Needless to say, that was proof the appraiser really had visited the property (damn consumers!).

How else does the appraiser's workfile protect you? You showed Comp #2 in your report at $375,000 since that's what the MLS printout showed. You called the broker, who verified the purchase and sale at that price. All that you chronicled in the workfile. Yet the property really sold for $350,000. The broker lied (as if that were possible, right?)! That you depended on "reliable" data is what saved you! And, since the recorded deed eventually showed only $350,000, you covered you assets! How? In the workfile were both the MLS printout and a summary of your conversation with that lying broker.

See how the appraiser's workfile benefitted you?

"Newbie, to the table, now!" Now, you want a job as an appraiser, do you!? This firm is willing to help you out. But you gotta wanna help this appraisal firm, too! So show me why, in the next 120 seconds, I should hire you! Start!"

"Newbie, to the table, now!" is not how your job interview is going to begin (you hope!). But whether a senior appraiser or a partner interviews you, you have 120 seconds. Do do what? To give that firm a reason to hire you. That you have taken all your appraisal classes is irrelevant. That's a given! So has every other candidate! How about your bachelors degree in interpretive modern dance? Unless it has taught you how to think, a degree even in chemistry would be irrelevant. Or your burning desire to be an appraiser since you were six years old? OK, but so what? So far, you've merely declared that you want to be an appraiser. You have yet to explain persuasively why you want to be an appraiser. Other than an ardent hope (and a desire for a regular paycheck), what do you offer? What are the short- and long-benefits you can bring to that appraisal firm?

Newbie, to the table you'd best bring some critical thinking skills. Critical thinking skills demonstrate your abilities to understand and solve syllogisms. You solve them through deductive reasoning, a skill you will not get in on-the-job training. Can you Interpret sequences and arrangements and then draw sound and credible conclusions from them? Are you capable to evaluate cause and effect relationships? Can you recognize assumptions and distinguish them from facts? From the typical value range can you synthesize a credible value conclusion? Filling out an appraisal reporting form is a requirement, not a critical thinking skill.

Sales and financing concessions!? What's the problem? If the house sold for $100,000, its worth $100,000, right? This is what our broker friends try to tell us. But we appraisers have a higher calling than brokers. We can't use puffery! We have to tell the truth (even if it kills a deal)! So, what's so special about these concessions? Why do we as appraisers need to be aware of them? How does humanity suffer if we don't account for these properly? Read on, please!

Sometimes, buyers won't buy if the seller does not give them a reason to buy. Mostly, this takes the form of the buyer bargaining for a lower price. True, that is not a sales or financing concession. But sometimes neither of the parties will budge. They are at an impasse. That deal is looking dead. But, at the last minute, the broker proposes the seller pay the buyer's real estate taxes for two years. This way, the seller get the sales price they want and the buyer gets a reason to pay that full price. What a way to save the deal, right!? That broker is a hero!

But we appraisers do not look at individual transactions. We look at, and then interpret, entire markets. When it comes to sales and financing concessions, we also adhere to the definition of market value. We don't merely report to our clients that Smith paid Jones $100,000 for the property. We also interpret to the client why Smith paid Jones $100,000. The public record tells the client (for free!) the property sold. We get paid to tell the client why it sold for $100,000. So, part of our job is to verify the sale, and its numerous details, until we understand what happened and why it happened. No AVM can do that! This verification and interpretation process is why clients are willing to pay us. That a property sold is both obvious and free. Why it sold is not obvious - clients pay us to tell them the answer to that question.

Is the world going to end if we don't adjust the subject and the comparables for sales and financing concessions? Well, the jury is still out on that. But remember this fact, please. That sale above sold for $100,000. But the seller paid two years taxes for the buyer to induce the buyer to pay that price. $100,000 is the price with the financing concession still present. But Fannie Mae and her investors want the cash-equivalent price - the market value. We have an ethical responsibility to give it to her.

Thanks for reading! And THANKS for listening, too! All my Best to you and yours!

What does Fannie Mae want? Can we even provide what she wants? Is it clear what she wants? In a short podcast it is impossible to answer these questions in any depth. Nevertheless, The Appraiser's Advocate will take a stab at it! Why? Because you deserve to know!

What does Fannie Mae want? Among other demands, she wants the ability to measure risk. "What risk?!" you demand? It is no secret Fannie Mae has algorithms to provide her with a value opinion. She has this long before we turn in our appraisal reports. What she does not have, however is boots-in-the-living-room. That's why she hires us. Out job is to look at the subject, in the context of the neighborhood, to tell her what's going on. Is there new construction? Why? Are land uses changing? Why? Does demand well outpace supply? Why? Can the subject feasibly be modified to another use? Why? How soon? At what cost? Is the housing in the neighborhood affordable to the typical purchaser? Why? There are so may questions Fannie Mae has about a neighborhood! She needs all of these answers to measure risk. Risk of what? Risk of loss! Lending money is risky. When you lend other people's money, it is really risky! So Fannie Mae needs us to measure the risks of investing in a mortgage in any particular neighborhood. That's what she needs, so that's what we provide (or what we are supposed to provide, anyway).

So, what does Fannie Mae want? She wants us to amass data, analyze it in the context of the risk of making a mortgage loan, so she can determine how risky any given loan is. We are her boots-in-the living-room, her eyes-in-the-neighborhood, her ears-to-the-ground. As we are, we are far more valuable than any AVM.

"What you can do with these photos" is provocative. I wrote it to get your attention. Appraisal reports contain photos. This is not a USPAP requirement. Nor is it a Fannie Mae requirement. Really, it is the lender's requirement. They familiarize the lender with the subject. So, what is so controversial about photos in an appraisal report?

Know for certain that USPAP has no inspection requirement or standard. Without this, it has no standards for photos, either. What photos does Fannie Mae want? She wants photos of the front, back, and street. Maybe even one or two photos of the neighborhood. But why, then, do we provide the other photos? All of those other photos are the requirements of individual lenders. OK. That's a major pain-in-the-butt. But we're at the property, so we take the pictures. No big deal. And, generally, we like to get paid.

But "what you can do with these photos" keeps popping up. OK, what can you do with them? Recently an appraiser asked me a great question. In this time of Covid-19, could he inspect the subject merely by looking at photos of the interior? It was his conclusion that such an inspection, properly disclosed, was as acceptable as a personal inspection. Nevertheless, this is not "what you can do with these photos". USPAP assumes that if you have certified to a personal inspection, you have inspected it personally. Under USPAP you do not have to inspect the subject. But then you have to disclose you did not inspect it. And, if you do not put boots-in-the-living room, don't certify that you did.

So, yes there is a lot of "what you can do with these photos". Just don't misrepresent what you did or did not do with them.

Who is large and in charge? When it comes a real estate appraisal and report, you are! That's right! You are! While the client wants to think it calls the shots, you do. Really! Have you ever thought why you're in charge?

Think about it! That lender or that AMC needs you! Since you are a properly qualified real estate appraiser, that lender needs you more than you need that lender. Generally, we appraisers have not communicated that need well. Nor have we made it clear to the lending community that we are the answers to their questions. Moreover, We are the solutions to their problems. Given that advantage, yes, we are large and in charge.

So, what problems do we solve? That lender cannot sell that mortgage on the secondary market until we judge its level of risk. But, don't underwriters measure risk? Yes, but the measure the riskiness of the borrower not repaying the loan. We appraisers measure the risk of that lender losing money due to the real estate collateral, or changes in the market. As a consequence, we are large and in charge.

"But", you say, "I have to follow the pre-printed scope of work on the reporting form! I'm not in charge of the appraisal!". I beg to differ. You can expand your scope of work. Merely explain what you did (and why) over the pre-printed minimum. Can you shrink your scope of work from the pre-printed minimum? Yes! All you have to do is explain why you did it and why that did not affect the credibility of the value opinion.

Large and in charge! Yes, we appraisers are! Now, reflect that truth in the quality of your work and your level of professional fees! There is strength in numbers! Are you part of an appraisal organization that has your back? Does that organization help you to be large and in charge?

What a newbie needs is straightforward. A mentor. A supervisor. But, as most newbies know, getting one can be difficult. In fact, getting one may the the hardest part of becoming an appraiser. So, let's talk about this. Let's see if we can narrow down this challenge to some more manageable. Take a huge challenge, then turn it into a series of small challenges. That's how to solve this type of problem.

So, what a newbie needs to bring to the table is a solution. A solution to what, you ask? How about a solution to that supervisor's problems? A supervisor does not need another drain on cash-flow. Those are easy to find. But what happens when that newbie brings solutions to the table? Consider the newbie who is already familiar with the advanced capacities of Excel. This means a basic knowledge of algebra. Why algebra? You need a basic knowledge of algebra to write formulas to make Excel work. Otherwise, nothing more than a calculator is necessary. How about the horizontal- and vertical-lookup functions? Those are real timesavers some experienced appraisers don't yet have. Can you work a pivot-table? That's an intermediate-level function that lets you look at data in a different way. How about natural-log functions? A log-function takes widely dispersed data and compresses it. Sometimes treating data this way makes it easier to interpret. Understand, not of these is really difficult (when Excel does them). But, to master them takes some training and practice. These help solve problems. So, the newbie how brings these capabilities to the table is ahead of the one who does not.

What a newbie needs is, therefore, not a job. She needs a skill set superior to the skill set those merely looking for a job haven't taken the time to get.

Scope of work!? Doesn't the boilerplate on the reporting form cover that? In truth, yes it does. But that may be its biggest problem. USPAP says your scope must be property and assignment specific. So, how can boilerplate be property specific? It can't. See, that's the problem. Boilerplate can't know what you did or did not do. So, you customize your scope of work. You tell your client, in the report, how you came to a credible value conclusion. To do that, you design the scope of work, from scratch, to fit the assignment. Then you execute that design. Finally, you summarize all those in the report.

Scope of work is your effort! Your client does not set it. Remember, your client's AMC does not set it, either. Nor does the reporting form set it. You set it! That is entirely your job! An appraiser, by definition, is independent, impartial, and objective. Because of these, you set the scope of what you do and don't do. It's up to you to choose the scope of what you will and will not do. Those choices are part of your ethics as an appraiser. This is how we promote and maintain a high level of public trust. To promote and maintain that trust are the actions that give the public reason to trust us!

Who sets the reviewer's scope of work? Its just as when you function as an appraiser. When you function as a reviewer, you set that scope! Whatever reporting form you choose to use does not, either! This means you choose whether to include a separate value conclusion. A mere reporting form does not choose that for you. A mere client does not choose that for you. When your client orders a review, you tell the client what you will and will not do. That review, and what you include or exclude, are entirely your choice. Please don't default to the reporting form! If you do, you aren't independent, impartial, or objective as a reviewer. Give the client, and the public, reason to trust your review.

"Write it backwards?! What can that possibly mean? Tim, I have enough trouble writing my reports in the regular way! Now you want me to write my reports backwards? Please, Tim, would you share with me whatever it is you're smoking?"

Really, its not a secret. True, it seems logical to write an appraisal report as you do the research. But this podcast advocates a different process. It advocates doing all of the research first. Then, conclude a value opinion (at least a preliminary one). Get all three approaches done. Conclude depreciation. Decide what the vacant site value is. Do all of these things and come up with a value first. That way, you asked, and answered, all of the questions. So, when you write the report, you're writing from a position of strength. What strength?! Simple! You are writing from the strong position of "having been there before". The trail holds no secrets. There are no blind corners, no hidden curves. You've already concluded a value (at least a preliminary one). So explaining to your client what you did, how you did it, and why you did it, should be straightforward.

Write it backwards? Yes, that sounds counterintuitive. I agree, that's not the way you've always done it. But, if you already know where you're going, it's easier to get there the second time, right? And, take a look at this from a standpoint of your appraisal business. Given this model, it might be possible to get out a few more appraisals per month. Since your overhead is more-or-less fixed, that income would flow right to the bottom line, don't you agree? If following this model results in an easier-to-read report, are your clients really going to argue with that?

Take you next report. Write it backward. It works!

Am I the only one who thinks Ted Geisel (aka Dr. Seuss) was one of the great moral philosophers of the 20th century? He wrote so much about the ethics of excellence. The Cat on the Hat teaches about moral responsibility. Green Eggs and Ham teaches us about the ethics of change when, maybe, we don't want to change. How the Grinch Stole Christmas teaches us about the ethics of service to others. So, what does Horton Hatches the Egg teach us?

Horton teaches us the ethics of excellence and commitment. He teaches us to treat our word as our bond. We learn that honoring our commitments is the true road to excellence. Elephants can't climb trees! Yet Horton, an elephant, does just that. Why? To honor his commitment to that lazy, good-for-nothing Mayzie! Does the seeming impossibility of the commitment overwhelm Horton? Yes, a little bit, at the beginning. But he adapts. Does the heat bother him? Of course it does. But he made a commitment and "...an elephant's faithful one hundred percent!". Does the cold intimidate him? Obviously, but he adapts to honor his commitment. Does he appreciate people gawking at him when he is a side-show oddity? Of course not! Yet, Horton abides.

Horton's commitment to his ethics is his commitment to the ethics of excellence. His commitment to hatch that egg was, by all rational measure, stupid. Yet his ethics committed him to complete that assignment excellently. After all, "...I meant what I said and I said what I meant! An elephant's faithful one hundred percent!"

So what does an elephant sitting on an egg have to do with the ethics of excellence? How does Horton's commitment to that lazy, good-for-nothing Mayzie shape what it is we appraisers do? Does Horton's commitment to his own ethics directly shape how and why we do what we do? No. But that influence is indirect. We, as appraisers, have committed ourselves to USPAP. Are we faithful to it, one hundred percent?

Bias in an appraisal?! You may not realize it. There is the possibility of bias in your appraisal and your appraisal report. How so? An appraiser is competent, independent, impartial, and objective. OK, so what's the problem with bias? According to the experts, there are at least 180 types of bias. We appraisers can engage in may of them. How can bias hurt us? Well, are we independent of outside influences on value? How impartial are we? Are we objective in all aspects of an appraisal? What happens when a state appraisal board levels charges of bias against an appraiser? Appraisers cannot be advocates. Advocates are supposed to be biased - toward the interests of their clients. We appraisers do not share this responsibility. Instead, we have a responsibility to be disinterested. To remain above the fray. To tell our clients the truth, even what that truth hurts.

So, is there bias in an appraisal? Two of the most common biases are selection bias and confirmation bias. There is an explanation of both of these in this podcast. There are other biases to be sure. But these two are a start. As with so much of what we do, the presence or absence of bias is up to the appraiser. Consult The Cognitive Bias Codex. Learn which biases are common in real estate appraisals. Then, work to overcome them! Your appraisal business's future could depend on it. Questions on bias, USPAP, or anything else appraisal related? Contact me at tim@theappraisersadvocate.com. Thanks! Be safe and well!

"Support my opinion? Why?! It's an opinion, not a fact!" It is true that we appraisers are paid for our opinions. What a way to make a living, right? Yet, there is an opinion that is little more than a wild-ass guess. Then there is an opinion based on facts. An appraiser's professional opinions should be based on facts, right? On what else should we base them? How about market evidence? Could we base them on properly verified data? Should those data be relevant to the appraisal question? Should those data be neighborhood-specific? If not, could they be market-general? What about older data? Will those benefit the client?

There are so many answers to these questions? So, must I support my opinion? That answer is YES! OK, you don't have to support a wild-ass guess. But is there a place for a wild-ass guess in a real estate appraisal? That answer is NO! Our lender clients look to use to inform them of risk. What are the risks of investing in a mortgage in neighborhood X? That is what our lender clients want to know. They are not all that interested in our value conclusions. They know a property's value by the time the potential buyer gives the loan officer the address of the property they want to buy. What are clients need is a way to make them smile! How do we do that? By giving the clients the facts, and then telling them why those facts are important to an understanding of the risks inherent in that neighborhood. Not only do we tell them what is happening, but we tell them why it is happening, too.

So, when you ask, "Do I have to support my opinion?, Yes, you do. Because an AVM is after your job!

Things you shouldn't say!? What does that mean? In this context, it means there are things you should not say to your state appraisal board when you reply to it as part of a complaint filed against you. What are some of these? Don't tell the state you did not mean to anything wrong. You just admitted you did! Avoid saying, "That's the way I've always done it!" You just admitted to a history of incorrect appraisal procedures. Really, why would you do either of those?

This is where you need an expert. You're already an appraisal expert, but you know nothing about how to respond to a complaint. Your business plan may be perfection. But responding to a complaint is not part of the typical business plan. You may have killer appraisal software. But software alone won't help you with the state. You may listen to all sorts of appraisal podcasts. But you'll need help with your response to the state. Please, don't do this alone. Your state appraisal board has a stable of attorneys. You need expert representation, too.

Things you shouldn't say are just that! So, don't say them! Get professional representation. No, it is not cheap. But it might save you a lot of time, money, and heartache down the line. You'll be glad you paid for that help!

Do appraisers create value. There are some who think we do. There are some who think we can. As if we wave a magic wand and - poof! - value results. We know that' just not true. At lease on think-tank study concludes we can create value in minority neighborhoods merely by appraising those properties higher. How preposterous! Yet, can we create value?

In one sense ,yes. We appraisers create value in ourselves when we provide our clients with a reason to trust us. As but one example, consider an AVM. An AVM is way cheaper than an appraisal. But if a client orders an AVM does the client get what it pays for? When a client orders an appraisal, do we provide more value that an AVM. If no, then the client would be stupid to order an appraisal. But when we do, the client is wise to order the appraisal over the AVM. How did we create value? We created value when we gave the client reason to trust us, but not an AVM. Our trustworthiness created value when the client learned the appraiser was more valuable than the AVM.

In the podcast, I tell a story about a bicycle repair shop that repaired my flat tire. But, given the attitude of surly employee, that employee created no value. In fact, that employee's attitude earned about $20, but lost hundred of dollars of my future business. That employee created no value. It would have been so easy to create it,. though. Value, in the form of trust, is so hard to earn, yet so easy to squander.

So, do appraisers create value? Yes, we do. Please listen to the podcast to learn more. Thank you! Be safe! Be well! And I look forward to the time we can all shake hands again!

When it comes to the 1004 form, we all know its hard to use. But its all we have, so we overcome its limitations and do our best. When it comes to analyzing the subject's neighborhood, Fannie Mae asks us to answer 36 questions. Yes, there is not enough space on the form. We must roll it over to the addendum. That causes a lot of page flipping. Is that really a help to understanding an appraisal report? And there is no reason to get started on the 1004MC form, which was too confusing to begin with! So, the purpose of this podcast is not to dump on the 1004 form (well, not too much, anyway). But, it is to make sure we understand those limitations so we can work with them, overcome them, and form credible value opinions. Then on the form itself, we need to write a clear, persuasive, logical appraisal report. A non-misleading report leads the client(s)/intended user(s) to the same conclusions we eventually arrived at. So, when it comes to the 1004 form, it has its limitations. But we can overcome them! Check out the links above and listen to this podcast to learn how. Thanks!

So, what is the beauty of the income approach? It probably is not in concluding a market value. More likely, is that (a) it helps the appraiser with a highest and best use conclusion, and (b) it may help to extract from the data the quantity of an adjustment. It will also help the appraiser to understand what is happening in the subject's neighborhood (but that's the topic for another podcast).Want to know how much that pool contributes to overall property value? If, in the subject's neighborhood, it commands no premium in rent over a house without a pool, then it contributes nothing, its depreciated cost not with standing. So, what is the beauty of the income approach? Please listen! This podcast is here to foment critical thinking and provoke debate. Thanks!

Why are Systemic and Critical thinking skills so important for an appraiser? When I was 12-years old and stupid, a two-way barefoot sprint.across a searing parking lot taught me two lessons. I had to plan ahead. And I had to be prepared to live with the consequences of my decisions. Now.most real estate appraisers are not 12-years old. So they do not sprint across infernal parking lots. But Critical and Systemic thinking skills are not part of our basic education. Consequently, these are skills we must pick up "on the job". That can be tough, since we already have too much to worry about. Appraisals already have too many moving parts. And the point is? Most appraisers are busy now. Really busy! So maybe its time to delegate some of appraisal's day-to-day decisions to others. Is there somebody else to take the comp photos? Does your software populate your forms with data, or must you type those data in yourself? Are your reports as well-written and persuasive as they could be?

It is clear most appraisers do not like to do the Cost approach. Generally, we are not too familiar with it. So, it is clear that most appraisers, because of this, do not appreciate the deep analytical power the Cost approach really has. Therefore, I’m going to ask you 10 questions on the Cost approach (and stuff related to it). After you’ve finished reading them, you probably will still not like to tackle the Cost approach. Nevertheless, you just may have a better understanding of, and appreciation for, its powerful analytical capacities.

A great real estate appraiser? What are the five signs? Listen to this podcast! Tim Andersen, The Appraiser's Advocate, explains each of them. The first sign is you understand highest and best use, a big one. Then you understand reconciliation. Who names the intended use and users comes into play here, too (spoiler alert: you, the appraiser, do. This is not the client's call). Then you've got the subject's salient characteristics (as well as those of the comps!). You've analyzed all of them, so you understand them, too. Finally, of the signs you are a great real estate appraiser, there are the four characteristics of an appraiser. All this information all in one place. What more could you ask for? Help with reaching your potential, you ask? That's why Tim's here for you. Contact him at tim@theappraisersadvocate.com. Tim's not here to help you with your appraisal business. Other folks will do that. He's here to help you be a better appraiser. You'll be glad you contacted Tim and learned the five signs of a great real estate appraiser!

Is she a qualified state investigator? She can't be! She's not even an appraiser! She does not understand USPAP! How can a non-appraiser do that? This is a common complaint. State investigators are not appraisers. So, how can they investigate us? This is a misconception many appraisers have. It is illogical to think this way. Why is that? Because investigators do not appraise, that's why! Their job is to gather evidence. Investigators do not judge the appraiser. Moreover, investigators do not help the appraiser. What are the appraiser's main jobs? One is to form the value opinion credibly. For example, proper verification of sales. Another example is a non-misleading report. For example, a clear neighborhood analysis.

So, what does all this have to do with a trip to the moon, etc? Nothing! And how does this tie into a qualified state investigator? Easily! No, state investigators are not appraisers. There is no reason they should be. To investigate an appraiser is not an appraisal! Therefore, why does an appraiser need to do that? So, really a qualified state investigator does that. And remember! The investigator does not care if your appraisal is accurate. Is the appraisal credible and the report non-misleading? Those are what the investigator looks for!

Neighborhood analytics? Really!? That's easy! Just fill in the boxes on the 1004 form. What's the bid deal?! Fannie Mae asks us to answer 36 questions about any subject's neighborhood. Frankly, its not important that we reached a credible value conclusion. What is important is to explain why that conclusion is credible. That's why due diligence is so important. Why are neighborhood values changing? Due diligence helps us understand the answer to that question. What's the subject's highest and and best use as improved? Again, due diligence to details and trends answers that question. Neighborhood analytics is how we determine where the comparable sales are. It's how we determine which properties are the subject's competition. We use it to determine boundaries. From it, we learn the most probable buyer. And, yes, it helps Fannie Mae measure risk, too. So, that's why we engage in neighborhood analytics!

Due Diligence? Is this something real estate appraisers really need to know about? Just get the report back to the client quickly, right? It's likely the client does not even read the report, right? Besides, at $450 a pop, you can't spend a lot of time on the appraisal or report! It is true there are those among us with this mindset. True, clients may not read the report, but state investigators do! And you know what the want to see? They want to see due diligence and due care! Investigators do not care about the appraisal fee. A short turn-around time to an investigator is not important. Keeping the appraiser's client happy is not the state board's concern. What is? That the appraisal comply with Standard 1. And that the appraisal report comply with Standard 2. Basically, then, due diligence is straightforward. Follow Standard 1 when you're appraising the property. Then, follow Standard 2 when you're reporting the appraisal. Will client's appreciate your hard work? Probably not. Expect a thank-you note from a reviewer? Don't hold your breath! Keep yourself from your state board? Oh, and here's a link to Ann O'Rourke's newsletter. That will help with due diligence, too!

Green Eggs and Ham?! What can those possibly have to do with real estate appraisal in the first-quarter of the 21st century? From a purely literal standpoint, nothing. But let's look past the literal. Is there a metaphorical meaning? Is this Dr. Seuss book a moral parable? What can we adults learn from this book? Is this book, on one level,a metaphor for change? In the last two years, we have seen so many changes! We've got evaluations. How about AVMs? Is regression analysis worth the effort to learn and implement? Is highest and best use easier to understand? Are bifurcated appraisals merely the spawn of Satan? Green Eggs and Ham gives us the opportunity so see these as changes. Now, are we ready for those changes? Are those changes even necessary? Moreover, if we make them, how will we benefit? Blaine Feyen advises us to dig a well before we're thirsty. Mark Skapinetz urges us to make positive adjustments. They are urging us to make changes. Change is the sub-topic beneath Green Eggs and Ham. While not all change is positive, change is necessary. That's how we progress. Thru change, we stay relevant. Thanks for listening!

When it comes to neighborhood analysis, what does Fannie Mae want? That's all clear in B4-1.3-03 of the Selling Guide. Really! It's all there. No reason to guess! No reason to worry over it! What Fannie Mae wants is all there! Of course, that means we appraisers have to read it. We must be familiar with it. We must must understand it Oh, damn! Actually, there are 36 questions to answer in a properly done neighborhood analysis. Answers to these questions help Fannie Mae assess risk. "What?!" you say. You thought Fannie Mae needed an opinion of value? Au contraire, mon frere appraiser! Via its algorithms, and the historical sales data we've provided, she already knows what the property is worth. We, rather, inform her of the risks of investing in mortgages in a particular neighborhood. That's why a well-written neighborhood analysis is so important. It is also why just-a-bunch-of-boilerplate can be dangerous! Fannie Mae wants to see facts in a neighborhood analysis. She wants to see analyses of those facts! Fannie and her investors want to see the interpretations of those facts. And they want us to interpret these, too.. So we cover a small area of this analysis. Thanks for listening!

Stats and Graphs! George Dell, MAI, CRE, ASA explains these to us. In other words, he clarifies them for us. Why use them? Do they explain what we do better than we can explain it? Do they paint a picture of the data in the client's mind? Do they provide the client with essential information? Above all, do they explain what we did and why de did it? Tim Andersen, The Appraiser's Advocate, interviews George on the proper use of stats and graphs. George makes clear their strengths, weaknesses, opportunities, and threats. He makes it clear when we should use them and when we should not! What about AVMs? Are those the state of the appraisal art? George makes it clear they are not! On the other hand, he makes it clear they are a great appraisal tool. Stats and Graphs? In short, George Dell explains them!

Why HOORAY for our side? USPAP did not have a definition of "misleading". As of January 1, 2020 it did. Nevertheless, that definition was confusing. It said a typo in a report was the same a violation of ethics. Consequently, a simple mistake was the same as choosing to violate ethics. Certainly, that had to change. That was not the situation we appraisers should be in. So, The Appraiser's Advocate, other concerned appraisers, and various appraisal organizations complained! Some of them very loudly! The definition either had to change or go! Our efforts got results! HOORAY for our side! In the 2022-2023 PROPOSED USPAP, the definition of "misleading" is gone. There is no replacement! So, HOORAY! A win for our side! See what happens when we work together? See what happens when we stop trying to throw each other under the bus? So, HOORAY for our side! Be sure to get in touch with The Appraisal Foundation to thank them for listening to us! Thanks for listening to Tim Andersen, The Appraiser's Advocate!

Falling off my bike. What a terrible way to learn some life lessons. Especially when that fall takes place in the rain! Consequently, there are lessons here for you to learn without having to fall from yours. On the other hand, fall from your bike in the rain if you want to. But, learning from my mistakes is quicker - and way less painful. Moreover, there are even some real estate appraisal lessons to learn from, too. What are they? Preparation. Gratitude. Asking for help from experts and consultants when you need it. Love of and for family. The important stuff. And oh, yea. Pavement is really hard, so don't fall on it. That's another lesson. Take it from Tim Andersen, the Appraiser's advocate. There are better ways to learn life's lessons than falling off a bike. More fun, too. That's something I'm going to do my best to avoid! So should you!

In an interview with Rachel Massey, SRA, AI-RRS, it is clear Rachel comes from a background of rich experience. So, she brings the perspective of an appraiser. For instance, she has been a reviewer. Rachel has worked with lenders in buy-back situations. She's been a screener for SRA candidates seeking their designations. She writes extensively on appraisal matters. (Full disclosure: Rachel and Tim have written articles together). Above all, she's a USPAP instructor. And she writes and teaches classes for the Appraisal Institute. As a result, Rachel is a recognized expert! In this interview with Rachel Massey, she tells us what reviewers look for in an appraisal. Therefore, she tells us what state investigators look for, too! Fannie Mae's 16 unacceptable appraisal practices? She knows them cold and explains them for us. Want to know how to recognize a functional obsolescence factor? Rachel explains it! Is misusing the 1004 form going to come back to bite appraisers? Rachel thinks it could. Moreover, she explains why! An interview with Rachel Massey is one you do not want to miss!

Riding a horse is supposed to be fun and a great way to relax!. But what can that have to do with real estate appraisal? As it turns out, more than you'd think! Tim Andersen, the Appraiser's Advocate, shares a life lesson. It is easy to get caught-up in your own comfort zone. To grow, you have to leave that comfort zone. You accomplish this by putting yourself into an uncomfortable situation. Is riding a horse leaving your comfort zone? It was for Tim! But, as this podcast shows, you'hear how Tim found a way to overcome that fear. He hopes you'll find this story humorous as well as uplifting! The purpose of this podcast is to give you reason to think critically about what you do everyday, how you do it, and why you do it. Because of the times we live in, change is inevitable. Some will resist it. Some will go along with it. And some will get ahead of the curve to benefit from it. Since change is inevitable, we must change as we journey into the future. The time to start that change is now! Thanks for listening! And remember that riding a horse is really fun - when you know how!

State investigator questions. What are they? How should appraisers answer them? Do they get at the truth? Or do they just incriminate the appraiser? These are all legitimate questions! So Tim Andersen, The Appraiser's Advocate, put them to Melissa Bond, appraiser and instructor extraordinaire. Melissa knows what these questions are. As a former state investigator, she asked appraisers those questions. She knows that the answers should be! Do you? Learn from the best! It is so easy to say something stupid in response to those questions. In this podcast, you'll learn what the state looks for. You'll learn that your answers lie in due diligence, proper analyses, and clear and precise writing. Don't stress your use of boilerplate, traditional answers, or your "...30 years of experience..."! Frankly, those are so unimportant as to be trivial! You're welcome!

Appraisers are essential. They bring to the table services nobody else has. An AVM can analyze a column of numbers. But that analysis indicates only price. The appraiser, though, states value. Is the lender lending too much? Is the buyer paying too much? Has the seller left some money on the table? To answer these questions, and others, is what appraisers do. Tim Andersen, The Appraiser's Advocate, considers these issues. Tim's podcasts are typically on appraisal issues. But sometimes you must leave your comfort zone. In this podcast, Tim does. He looks at the philosophical side of real estate appraisal. Why? Because appraisers are essential! To lead appraisers to the Big Picture. There is more to real estate appraisal than crunching numbers! There is critical thinking, too! Appraisers are essential! This podcast urges you to leverage that!

USPAP has a new definition of misleading. Since it has no wiggle-room in it, even a minor error can metamorphose into an ethics violation quickly. How will state appraisal boards interpret this very broad definition? What are the ramifications for the real estate appraisal industry? Tim Andersen, The Appraiser's Advocate, takes on the challenge of advising you to cover your assets! This new definition should scare all appraisers!

What are value, accuracy, and misleading when it comes to an appraisal and report? Can an appraisal be accurate? Can the appraiser's value conclusion ever be "right"? What is a misleading appraisal report? Tim Andersen, The Appraiser's Advocate, takes on these issues in that podcast. Thanks for listening!

Misleading appraisal reports are a potential problem! State appraisal boards routinely sanction appraisers when the appraiser's report is misleading. Tim Andersen, the Appraiser's Advocate, explains the differences between an appraisal report and a restricted appraisal report. These are areas confusing to some appraisers, so Tim clears up this confusion. Understand how and why these two reports differ so you'll avoid writing a misleading appraisal report. These differences can be subtle and may surprise you! Thanks for listening!

Woody Fincham, one of the gurus of Green real estate appraisal, is in the house! He has great information. Thanks for listening

Craig Morley, a savvy and well-connected appraiser, as well as the former Chair of the Utah Appraisal Board talks about C-19, changes in real estate appraisal we can anticipate, and takes a peak into the future from the Mexican crystal ball he has. Thanks for listening!

Yes, it's easy just to check the box. But Tim Andersen, the Appraiser's Advocate, describes to you the ins and outs of a proper Highest and Best Use analysis. Thanks for Listening!

Even though he's freezing his butt off during this interview, Craig Capilla, Super-lawyer Extraordinaire still answers questions to help us boots-on-the-ground appraisers. Thanks, Craig!

Is the road to Hell paved with Good Intentions? Is USPAP that road to Hell? Only you can decide that for yourself, but Tim Andersen, The Appraiser's Advocate, is willing to go along with you for the ride! Thanks for listening!

SWOT means Strengths, Weaknesses, Opportunities, and Threats. The real estate appraiser certainly has those right now! Craig Morley spells them out for us!

Ever think of AFFORDABILITY as on of the areas of analysis for a client? Tim Andersen, The Appraiser's Advocate and recognized USPAP expert takes on this challenge. AVMs can't handle it, BPOs don't include this analysis, and evaluations do not even consider analyses to this depth. Only appraisers can do this! Thanks for listening!

Trees typically do not move very far, very fast, or very often. However, is there something in your appraisal report that suggests they could? Do your reports always communicate what you want them to communicate? In this podcast, #Tim Andersen, #The Appraiser's Advocate, without being too wooden in his narrative, helps you add strength and timber to your reports and covers these solid yet moving real estate appraisal report issues. Thanks for listening!

When Diana Jacob speaks on USPAP, or any real estate-related topic, the wise listen. Tim Andersen, The Appraiser's Advocate, interviews Diana. She covers a wide variety of topics with her typical intelligence and down-to-earth sense of humor. Thanks for listening!

Confused over SR2-3, the Certification Standard? Tim Andersen, The Appraiser's Advocate, helps to alleviate that problem...and explains the difference between a fact and a conclusion, too

Want to hear about what's going on in appraisalworld from somebody who knows? Tim Andersen, The Appraiser's Advocate, interviews Craig Morley, the former chair of the Utah appraisal board. You'll enjoy his remarks!

Tim Andersen, The Appraiser's Advocate, and Dustin Harris, The Appraiser Coach consider California's AB5, as well as appraisal changes the VA recently made. You'll want to hear Dustin's take on both of these controversial topics! Thanks for listening.

Is it a USPAP violation to omit something from an appraisal or report? Tim Andersen, The Appraiser's Advocate, tackles this question to give you some insight into what your scope of work should be.

Just how detailed are questions from the state appraisal board? Tim Andersen, The Appraiser's Advocate, provides you some details, as well as a secret about whistling!

Do toddlers drive you nuts? Actually, they may set an example for us appraisers. The Appraiser's Advocate, Tim Andersen, shows you why. Thanks for listening!

What is in your certification? Does it help you or hurt you? One of the benefits consulting Tim, a USPAP expert, is learning which parts of your appraisal and report are USPAP compliant. Your certification is full of information! Do you know what it is you're certifying?

Just what is an appraiser's responsibility on a Purchase and Sale agreement? Is the number on it what we are supposed to hit to keep the client happy? Or is it merely another data point to analyze on our way to a credible value opinion? Tim Andersen, The Appraiser's Advocate, covers this timely topic so you can answer the question!

Really! Appraisals and Appraisal Reports are confidential, even though the borrower gets a copy. And Tim Andersen, The Appraiser's Advocate, shows you how that confidentiality helps to protect you!

Are your appraisal reports internally consistent? Tim gives you some advice on the matter

What a broker or the seller thinks about the price of real estate is, to us appraisers, about as useless as steaks at a vegan's birthday.

So, what IS in your workfile? Why it is there (or not there, as the case may be)? Tim Andersen, The Appraiser's Advocate, breaks it all down for you in this podcast. Tim makes it clear what MUST be in your workfile, as well as why it must be there! And why must all that important stuff be there? To keep you out of the clutches of your state appraisal board!

YOU know what you mean when you write your appraisal report. But is what you meant clear to the Client? If it's not, and the Client nicks you for it, do you take it as a leaning experience, or bitch about it on social media? Tim Andersen, The Appraisers Advocate, USPAP instructor and guru, and all around convivial guy give you his take on these real estate appraisal and USPAP current issues. Oh, and he quotes Shakespeare, too. WOW! Whoever thought you'd get all of that and Shakespeare, too, in one USPAP-oriented podcast?

Tim discusses what happens after the state appraisal board gets finished with another appraiser. While it is true anther appraiser has bitten the dust, there is life after the appraisal board's judgement. Basically that means, get up, dust yourself off, and get on with life and all its joys!

It's okay to accept data from a broker. The reason is because it is up to the appraiser to analyze the broker's data to determine whether they are truly comparable sales. Appraisers don't take the brokers word for it. Per USPAP, they analyze their own data and come to their own conclusions.

Some say the residential real estate appraisal industry is dead. This is not true! There are too many opportunities out there for appraisers who are willing to take advantage of them. We ain't dead yet!