DataMaster for Appraisers

The Right Data | The Right Time | The Right Decision

Marty Hamilton

A Message from Rick

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With the uncertainty about the spread of COVID-19, like you, we are concerned about the well-being of our employees, their families, our customers, and the world community. With different sources of news and different perspectives, it can be hard to know who and what you can trust. We want to offer some assurance for you about DataMaster.

We are taking the guidance from federal, state, and local officials seriously and complying with their instructions.

We are taking the following steps to ensure your access to the appraisal data you rely on for your reports.

  • We do not anticipate any disruption in access to DataMaster, MLS data, or public record data. Our data sources all appear to be stable and functioning properly.
  • We have facilitated the ability for most of our employees to be able to telework from home.
  • We will continue to provide customer service during our normal business hours, so you will receive the same level of service you have come to expect.
  • We are attempting to move any continuing education courses online and cancelling in-person visits for the time-being. We will notify you of any changes.
  • We will increase the number of trainings through webinars and online methods.
  • We are rolling out CompTracker now. This amazing tool allows you to find and “recycle” property inspection data for homes you have previously appraised. It merges that data seamlessly with the MLS and public record information for reuse. It also allows you to share physical characteristic in a USPAP compliant way with your selected Peers. It is awesome! Read More
  • DataMaster makes it easy to complete Desktop Appraisals and Exterior Inspection Only Appraisals responsibly and quickly.
  • Look for our enhanced Market Analysis process to be released soon. 
  • Over the next several months, we will be rolling out various other analytical tools.

DataMaster is committed to advancing the appraisal industry.. As the situation unfolds throughout the country, we will continue to monitor and act according to official guidelines. Here are some links to important announcements and guidelines from Fannie Mae. We will continue to make information available to you through email and on our website during these uncertain times.

As an appraiser of many decades, I share all the health and safety concerns associated with the Coronavirus Pandemic, like you do.  Please do what you can to keep yourself and your families safe and healthy.

Sincerely,

Rick Lifferth, SRA MAI
Founder and CEO, DataMaster for Appraisers

Confidentiality in Appraising: Definitions and Guidance

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When I was researching this topic, our chief appraiser gave me a couple stories to illustrate it. I’ll use these stories as we go along.

A few weeks ago, he received an assignment to appraise a property for a pre-foreclosure. In the assignment conditions, it explicitly stated not to have contact with the homeowner.

He inspected the property from his car, so he wouldn’t draw unwanted attention. As he was finishing, the homeowner came out and asked Jared what he was doing. Instead of getting into it with the homeowner, Jared started his car and left.

That might have been the end of the story. But, the homeowner jumped in his car and followed Jared for several blocks before giving up the chase.
This is a reminder of the risks of appraising, especially in sensitive situations. It’s also a great illustration of confidentiality in appraising. If Jared had engaged the homeowner, he would have violated the terms of the assignment.

There are two reasons that must exist for appraisal data to be confidential. You must have both to be confidential.

  1. The client (the lender) specified that the appraisal was confidential. And although the homeowner is a party to the loan, he wasn’t part of the assignment; and
  2. The data is not available from a public source.

Confidentiality in USPAP

If you read through the FAQ for the Ethics Rule in USPAP you’ll see a section on what is confidential and what is not. The Appraisal Foundation issues guidance for appraisers. For a few years, they have included information about what appraiser can, and cannot, share.

Let’s review some of the information about confidentiality in appraising.

Confidentiality Dos and Don'ts

Physical Characteristics and Assignment Results

An easy way to determine what appraisers can (and cannot) share is to categorize the data. You can sort information into two buckets: Physical Characteristics and Assignment Results.

Let’s say you’re asked to provide a copy of a workfile to an attorney for a case. He wants you to work as an expert witness to strengthen his client’s valuation results. As you think about what he’s asking, you think through several implications of his request.

In your workfile, there could be confidential information from other assignments. You have an obligation to safeguard private information. As stated in the confidentiality section of the ETHICS RULE,

“An appraiser must protect the confidential nature of the appraiser-client relationship.“

(emphasis, The Appraisal Foundation).

But the question is which parts of your workfile are confidential and which can are not. Here’s a quick tip: Physical Characteristics are not confidential and Assignment Results are.

Physical Characteristics are usually not confidential because they can are observable or measurable. Physical Characteristics may even be available from a public source. Assignment Results are confidential because they involve professional judgment and analysis.

If you want to share a full workfile, you have to contact your client(s) to get permission. Otherwise, sharing your results violates USPAP guidelines. If you can’t get permission to share confidential information, you must decline the assignment. Or you can provide a sample report or a redacted version.

USPAP states you cannot disclose assignment results to anyone other than

  • the client;
  • parties specifically authorized by the client;
  • state appraiser regulatory agencies;
  • third parties as may be authorized by due process of law;
  • or a duly authorized professional peer review committee except when such disclosure to a committee would violate applicable law or regulation.

Physical Characteristics

What are some examples of physical characteristics?

Remember, Physical Characteristics can be observed or measured. For example, the number of bedrooms or square footage. Physical characteristics are “facts to be found,” which are not open to interpretation.

Other Physical Characteristics include

  • address
  • square footage
  • number and type of rooms
  • dates of construction or improvement
  • wall colors
  • bathroom fixtures
  • heat or air conditioning

Assignment Results

Assignment Results are analyses, opinions, or conclusions based on appraiser knowledge. If you perform a study about the effect of a feature on a property, your conclusions are confidential. If a home has functional problems you determine affect value, it is an assignment result.

To illustrate the difference between Physical Characteristics and Assignment Results, here’s another story.

Jared received an assignment to appraise a home in a small town in Utah. When he got to the home for the inspection, he found that it backs to a busy railroad. It also had no covered parking. He finished his report and provided it to the lender. The appraisal concluded that the value of the property was less than the listing price.

Several days later, he got a call from the listing agent asking about the appraisal. He didn’t share any assignment results with the listing agent. But he did share that some of the property’s unique features could affect value. The fact that the yard backed onto a busy railroad track is an observable fact. As is the fact that there is no covered parking.

The listing agent chose the “comparables” in her CMA to justify the seller’s asking price. She didn’t take into account the obsolescences in the property. She knew the property was recently remodeled and priced it to recoup some of those costs. But she missed that the properties she chose all had covered parking. She also didn’t account for the railroad tracks.

Jared could share that the external obsolescence and functional obsolescence affected the appraisal. He could not share that the effect was negative and the extent to the negative effect. Those were the results of his analysis and were confidential. If the listing agent wanted to see the appraisal, she would have to get permission from the lender.

Sometimes, situations like this become a gray area. Participants [in the transaction] want to understand the steps you take. They’re interested in your analysis, the results, and the impact on the value opinion. But you need to safeguard the client’s confidentiality requirements.

Conclusion

It’s important to remember the Confidentiality section of the ETHICS rule.

  • An appraiser must protect the confidential nature of the appraiser-client relationship.
  • An appraiser must act in good faith with regard to the legitimate interests of the client in the use of confidential information and in the communication of assignment results.
  • An appraiser must be aware of and comply with, all confidentiality and privacy laws and regulations applicable in an assignment.

You may be wondering how confidentiality affects appraisers in the same office. We will cover this topic in a future post. In the meantime, refer to FAQ 50 – 78 in the current edition of USPAP.

*The properties, agents, appraisers and situations depicted in this post are illustrations. Any similarity to actual persons living or dead, or properties, standing or demolished, is not entirely coincidental.

Advisory Opinion 37 – USPAP & Technology

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Advisory Opinion 37, Computer Assisted Valuation Tools was originally included in the 2018-2019 version of the Uniform Standards of Professional Appraisal Practice (USPAP). So, what does it mean for you? AO-37 clarifies the scope of computer-assisted valuation tools related to appraisers and their responsibilities. These tools gather and analyze market data, and when used correctly, can add credibility to completed appraisals. AO-37 also reminds appraisers of their responsibility for the entire valuation process. Appraisers cannot use software or valuation tools to shield themselves from scrutiny.

Appraiser in his office

History

The history of Advisory Opinion 37 starts way back in 1997 when the Appraisal Standards Board (ASB) adopted Advisory Opinion 18. This AO set forth guidance for the use of Automated Valuation Models (AVMs). AO-18 clarified that appraisers can use AVMs as the basis for appraisals, although the output alone is not sufficient as an appraisal. AO-18 went into effect in the 1998 version of USPAP. As the ASB reviewed AO-18 for the upcoming version of USPAP, they considered replacing it. However, after receiving feedback from key stakeholders, they decided against replacing because it is specific to AVMs and still applies.

Rules referenced by Advisory Opinion 37

They decided to issue a new advisory opinion to address a broader range of technologies. The new AO became Advisory Opinion 37, Computer Assisted Valuation Tools. AO-37 clarifies appraisers’ responsibilities while completing an appraisal using online or stand-alone software tools. AO-37 cites fourteen sections of USPAP, advising appraisers on more sections of USPAP than many other Advisory Opinions. Here are some important takeaways.

Advisory Opinion 37 Interpreted

AO-37 cites issues appraisers face when relying on software or online resources to complete their appraisals. The AO addresses two broadly-used technologies — Regression Analysis and Multiple Listing Services — to illustrate the role of software tools in the valuation process. The main message of this AO is that technology can build credibility in appraisals as long as appraisers apply it correctly to support their decisions. Conversely, they can hurt credibility and valuation results if used incorrectly.

Supporting Adjustments

As mentioned in the AO, tools can support adjustments if appraisers are aware of the information used as the input and how to properly apply the output. Some tools offer data analysis or data visualization to assist appraisers in the valuation process while providing support for their decisions and conclusions.

Some tools offer data analysis or data visualization to assist appraisers in the valuation process while providing support for their decisions and conclusions.

Scope of Work

One major responsibility for appraisers is determining the scope of work for the appraisal assignment. Because of this, appraisers must understand the assignment to make informed decisions regarding the process required. Appraisers must control the process, selection and input of information based on their knowledge and experience. If appraisers allow their software or tools to control the entire process the output may result in less credibility and/or misleading and unreliable results. Instead, appraisers should control determination of the process, data selection, parameter analysis and interpretation of the output.

Competency

According to the USPAP Competency Rule, appraisers must identify the problem being addressed; maintain the knowledge and experience to complete the assignment, and recognize and comply with laws and regulations that apply to the appraiser or the assignment.

multiple regression formula
Multiple Regression Formula

The AO states that the Competency Rule applies to appraisers’ familiarity with specific types of property or assets, market, geographic areas, intended use, specific laws or regulations, or analytical methods, etc. Appraisers must also understand how to apply their knowledge with or without computer-assisted tools. Basically, appraisers must understand the basic tenets of appraisals. Appraisers must be able to use tools properly. Luckily, appraisers don’t need to know the formulas used by their tools or any algorithms and/or proprietary information about, or contained in it. AO-37 states “However, the appraiser should be able to describe the overall process and verify that the computer-assisted valuation tool is consistent in producing results that accurately reflect prevailing market behavior for the property that is being analyzed.”

Responsibilities

Appraisers are responsible for selecting the input parameters AND for affirming the inputs are entered correctly. This demonstrates that appraisers understand the market and has tested the software to make sure it works. Appraisers must also understand how to apply the results of the calculations. For example, appraisers must be able to determine what constitutes a strong relationship between variables from supporting materials such as graphs and tables. Appraisers cannot simply rely on the results of a given software or other tools unless they have reviewed it to ensure its reliability.

Terminology

Appraisers must understand the terminology used by their computer-assisted valuation tools. Terms like standard deviation, coefficient of variation, degrees of freedom, etc., have specific meanings and specific applications. The best-case scenario if you use terms like these incorrectly is loss of credibility. The worst-case scenario is incorrect or unsupported value conclusions and reports. One review appraiser recently told me that he often sends reports back to appraisers because they use terms incorrectly or in a misleading way.

Conclusion

When using computer-assisted valuation tools make sure the outputs or results make sense with respect to prevailing market behavior.  They’ve got to pass the eye test. Remember, no software can replace your knowledge or experience. The AO states “Regardless of the tool chosen, the appraiser is responsible for the entire analysis including…controlling input, the calculations, and the resulting output.”

3 Articles to Read Today to be a Better Appraiser

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As appraisers, we don’t often talk about delighting our clients and customers. We rely on our businesses to let us know whether our clients are satisfied through the number of orders we receive. We also rely on underwriters to give us feedback by suggesting additional comps (which we’ve probably already considered) or accepting the valuation without question.

If we plot our appraisals on a scale from unacceptable to delighting our customers, the middle point is neutral. And neutral is just keeping your head down and doing everything the way you’ve always done it.

How do you get past neutral? You can focus on customer service – let’s call this the Airbnb model – you go above and beyond for every client.

Or you could focus on providing as much data as possible, so you elevate your standing with your client.

Lastly, and perhaps most importantly, you have to improve yourself by understanding changes in the industry, whether it’s keeping up to date on trends, legal proceedings, threats to the appraisal industry, or exploring and integrating new technologies.

Are You Violating USPAP Every Day?

It seems like every time we create a list of must-read articles, George Dell makes an appearance. In this article, he explores the methods appraisers use to choose comps.

Now that data is so readily available online, suddenly all sales are available and that can affect the way you choose comps and which comps you include in your reports. Are you violating USPAP if you don’t include all sales you have access to?

This article is great food-for-thought if you’re examining how you gather comps.

Click here to read George’s article about USPAP Violations

Future Illustration

Will AVMs Create a World Without Appraisers

This article comes to you from the let’s-worry-about-the-future department. Instead of making the case that more automation will push out traditional appraising, this article makes the case that there’s a case for traditional appraisals.

Peter G. Miller walks through some of the perceived alternatives to an appraisal, including BPOs, CMAs, Online Home Value Estimates, etc. Miller recognizes that appraisal fees often come when a borrower has the least financial flexibility. He argues that there are three reasons an appraisal is worth the cost.

First – and of huge importance – appraisers actually spend time at the property, go inside, and are local valuation experts. Borrowers are getting something for their money.

Second, the appraiser’s job is to establish a property value, a value which may prevent buyers from paying too much and lenders from accepting too much risk.

Third, there can be a major difference between what borrowers pay for appraisal services and what appraisers actually collect, a point that doesn’t get much attention.

I particularly liked the way Miller examined different subjects related to appraisals and doesn’t shy away from the proposed changes to the appraisal exemption.

While this article is very pro-appraiser, it’s worth putting yourself in the borrower’s shoes and the information they have access to (usually online) and the questions they have when they’re faced with the cost of an appraisal.

Click here for more about AVMs

4 Areas for Appraisers to Focus Their Professional Efforts in 2019

This short article from McKissock gives the results of a survey that’s part of their 2019 Appraisal Income Guide. It covers some of the recommendations for building your appraisal business and what advice established appraisers would give to newly-minted appraisers.

There are several subjects in this article that are near and dear to our heart here at DataMaster. And we actually covered them in a recent webinar. Click here to see the webinar.

They identify two opportunities for appraisers across the industry: technology training and non-lender assignments.

Click here for professionalism tips.

I’m sure there are other articles we missed, but we wanted to make this a simple list to introduce a few good articles. If there are other articles, blog posts, infographics, etc. please let us know in the comments.

6 Ways to Grow your Appraisal Business

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Pattern of Growth
Grow Your Business

When it comes to your appraisal business, there are a number of things you can do to make yourself stand out. Although they probably won’t work overnight, they can help you establish a culture of grown and to home in on what’s important to you. I’d encourage you to experiment where you feel comfortable and find out what works for you. Here is a list of 6 ways to Grow your Appraisal Business:

Become Internet-savvy
  1. Use the Internet – we are lucky to have a tool that connects us to other people. One key to running a successful appraisal business is to have a presence on the Internet. If you don’t have a website, it’s time to build one. Make sure potential customers have a place to contact your appraisal business on your website. Make sure to describe your services so customers know exactly what to expect. Another way to grow your appraisal business online is to start a blog. I know what you’re thinking: I don’t have any ideas to write about and even if I did, I don’t have time to sit down and write. I understand, but blogging doesn’t need to be onerous. You can write short posts about the trends you’re seeing in the real estate market and about things homeowners can do to raise the value of their properties. Need more proof that blogging is useful, check out this graph from Internet-marketing company ___ on how many more leads companies get from blogging and not-blogging. The time you take to write your blog can increase the number of customers that find you, and they’re more likely to share what they know about your company if they’ve read and trusted your work. One last thing before moving on – if your appraisal business doesn’t have its own URL and email address, create one now. It’s better for business if your customers send an email to ralph@firstchoiceappraisals.com than everybodyralphs@gmail.com.
  2. Keep Track of EVERYTHING! – There are probably some things you don’t like to do while you’re working. That’s not really a problem, it’s human nature. Some of us are better at detail work than others or doing paperwork or any number of things.
    When I say Keep Track of Everything, what I mean is to keep data on everything and make decisions based on data. I know that you don’t have time to sit down and write out your expenses and/or processes all the time, but your appraisal business needs to be run using the most efficient methods. Create a schedule where you take a few minutes to go over your processes, especially your business processes. This is one way to strengthen your appraisal business and stay consistent. And that will please the regulators.
  3. Hit the Pavement – as the business owner, you’re in a unique position to grow your appraisal business because it’s your livelihood. If you’re not willing to put yourself out there to potential clients, you can’t expect your assistant to do it, either. Join the local chamber of commerce or business group (or organize a meeting, if your area doesn’t have a group that meets regularly) or simply visit the businesses in your area. If you work from home, get in touch with businesses where you appraise and find out their needs. Once you become a resource for them, your appraisal business will begin to grow. Before you start hitting the pavement work on your elevator pitch. Make sure that you know how to differentiate yourself from other appraisers and that you can state it in 30 seconds or less.
  4. Increase your Knowledge – as we talked about in the previous blog post, you need to sharpen your ax by gaining the knowledge and skills you need to be successful. If you don’t know how to market your business, you can search for small business marketing tips online. Find interesting courses to enrich your business outside of the continuing education courses you have to take. One valuable source of knowledge is your peers and the people you interact with. Which brings us to the next topic…
Your Appraisal Business Running at Precision
Stay in the Jet Stream
  1. Seek Advice and Stay in the Jetstream – you already know other appraisers, underwriters, inspectors, etc. Think about who you already know – who could you grab a cup of coffee with and pick their brain on things happening in the industry or ways you can increase your business? Think about people you’ve heard of but haven’t met. Is there anyone you could reach out to for advice? Then stay in their jetstream. If you’re lucky enough to snag a mentor you can trust, make frequent contact with him or her. Most successful people leave a trail of success in their wake – if you can position yourself correctly – you can stay in the jetstream and make everything a little easier for yourself. Just make sure to be grateful. Don’t take advantage of people or expect them to create value for you if you’re not willing to put forth the effort. It may seem intimidating to get out there and find a mentor and it’s not something to be taken lightly. What if the person you reach out to doesn’t have the time or interest? Why would someone more experienced want to help you out? Here’s a story to illustrate why you can feel confident talking to people who may not be in your regular peer group. In the movie Bambi, there’s a scene where a young buck looks across the meadow and sees an older buck standing there with large antlers and a weathered look. The young buck says that the old buck is someone who has probably been through a lot and could teach him how to fend for himself. But he relents because he doesn’t think the old buck would want to talk to him. Meanwhile, the old buck looks across the same meadow at the young buck and says ‘There’s a young buck, I wonder what he knows about how things are changing, I bet I could learn a lot from him.” He relents as well stating that he probably doesn’t have anything that would interest the young buck. Both bucks defeated themselves by imagining what the other deer might be thinking.
  2. Tend to Every Aspect – this is kind of the rapid-fire section of building your appraisal business. There are a lot of ways to grow your business, there are probably some that you don’t feel have to do with an appraisal business, but thinking about them can help you become more successful. Your content – show the public what you’re doing, do you specialize
    • Yourself – take time to Sharpen Your Ax
    • Marketing – what methods are you using to reach out and what messages are you using?
    • Tech – are you up to date with new products in the market, have you tested any of them to see if they would fit your workflow
    • Legal – do you know the rules and regulations you have to follow?
    • Your team – how are you helping those who you work with reach their goals? do they know they’re appreciated?

These are just a few of the ways you can work on your own appraisal business, although there are many more. What do you do to build your business? Has anything been effective for you? Let us know in the comments.