Portland Area Real Estate Appraisal Discussion

Happy New Year everyone and sorry my blogging has not been consistent of late.  For appraisers, particularly those in the Portland area, last year was an incredibly busy year.  Fees for appraisals went up by 50% or more in Portland.  This was a shock to home buyers and others looking for appraisal services, but it represented the first raise for appraisers since the 1990s.  Finally, fees in Portland are at a place where appraisers can attract fresh talent into an aging industry.  Let’s hope that these gains do not disappear in the next real estate slump, leaving appraisers looking for other ways to earn a living.

Speaking of other ways to make a living, many of my blog subscribers know that our company, A Quality Appraisal, LLC maintains a home measurement service, in addition to our appraisal business, that provides square footage estimates independent of an appraisal.  Many appraisers also provide similar side services. 

This last year was eventful for our home measurement business.  Luckily, after a little research and not a claim or problem, we found that most appraiser Errors and Omissions (E&O) insurance providers do not cover appraisers when they are doing a measurement that is not part of the development of an opinion of value.

I was shocked when told this by one of the largest appraiser E&O providers because most appraiser E&O policies claim to protect customary professional services performed in the insured capacity as a real estate appraiser, and that many of the services appraisers can provide do not involve an opinion of value.  How much more customary of a service is a measurement when almost all appraisers measure homes on almost every appraisal assignment?

After I pushed back against the E&O provider, a senior underwriter of the company responded that it would come down to the definition of appraiser as described by the insurance policy, and that they would need to decide if the measurement service was “usually and customarily rendered by a real estate appraiser.”  The underwriter explained that square footage estimates are not unique to the appraisal industry and non-appraisers can provide them.  Coverage would only be triggered if an appraisal report underlies the square footage estimate.

The senior underwriter went on to explain that when a real estate agent or broker asks an appraiser for a measurement, it is because they seek to shift liability to the appraiser.  The senior underwriter also said that measurements are considered risky by insurance companies and added that “about 50% of claims presented to our company involve sq. ft. issues.”  This was contrary to what I believed was true — that measurements are only a small piece of the appraisal liability and are easily verifiable.  I knew if we wanted to keep our measurement customers, we needed to fix this problem.

To solve it, we contacted all companies that we could find in the US that are exclusively measurement businesses and asked where they secure E&O insurance.  After chasing down numerous leads and talking to many insurance providers, we found that most home measurement businesses think they are covered through architectural or real estate policies.  However, like appraisal E&O policies, when we contacted the insurance companies, we found out that measurement services are not actually covered.

For this reason, we sought legal advice.  Thus, A Quality Measurement was split into its own business name and website, separate of A Quality Appraisal, LLC.  After committing many dollars and countless hours, we believe that we have resolved our specific insurance and liability problems.  We are not offering legal advice here, nor can we provide the plan our attorney put in place specific for our business.  I merely suggest that if you are an appraiser doing home measurements, contact your E&O provider first to see if you are covered.

Are you an appraiser who does home measurements?  We would love to hear from you.

Did I leave anything out or do you want to join in the conversation?  Let me know in the comments below.

If you find this information interesting or useful, please subscribe to this blog and like A Quality Appraisal, LLC on Facebook.  Also, please support us by making Portland real estate appraisal related comments on our blogs and YouTube videos.  If you need Portland, Oregon area residential real estate appraisal services for any reason, please request appraisal fee quote or book us to speak at your next event.  We will do everything possible to assist you.

Thanks for reading,

Gary F. Kristensen, SRA, IFA, AGA

When consumers buy products like appliances, automobiles, or even food, they are provided with labeling information about energy.  Such labels increase customer awareness and help buyers make the best decision.  With food, shoppers often select the lowest calorie product and willingly pay more for that product.  A car that uses less fuel will be advertised as such and subsequently sell for a premium.  The problem is that when a home is purchased, particularly a used home, buyers know little about its energy consumption and therefore tend to overlook one of the most important costs of ownership.

Portland, Oregon is a city that recognizes energy conservation as an energy resource and, for this reason, encourages home improvements that reduce energy consumption, thereby reducing the need for new power sources.  The problem is that buyers of homes with energy efficient improvements don’t accurately know how much those enhancements reduce energy costs.  To solve this problem, Portland has proposed a Home Energy Score Policy that would require anyone selling a single-family home in Portland to provide a home energy performance report to the city and prospective buyers.

The performance reports that Portland is proposing cost between $150 and $250 and are produced by a certified home energy assessor.  The report would calculate the total annual energy used by the home and estimate the cost of that energy.  Exemptions from Portland’s proposed policy would include foreclosure related sales and hardships.  The cost of these reports have trended downward in cities that have policies requiring them. 

A similar energy scoring policy is already in effect for commercial properties in Portland and there are similar policies or laws applicable to residences in Austin, TX; Berkeley, CA; Santa Fe, NM; Boulder, CO; the United Kingdom; Denmark; and Australia.  If real estate professionals from these other cities have insight into how the policies have affected real estate transactions, I would love to hear about it in the comments below. 

My guess is that buyers, sellers, and real estate professionals do not become educated overnight, but that they slowly start to weigh these factors just as buyers consider other routine purchases.  This has been the case with green and solar in our area.  Some new home builders in Portland started marketing energy efficiency to differentiate themselves.  Buyers started recognizing the value of these qualities before appraisers did.  However, through published studies, reporting of information in the multiple listing service, and more educational offerings, appraisers are now starting to better identify market reactions to energy efficient upgrades.

Voluntary Home Energy Scores have been in Portland for eight years but are being used in very few transactions.  These are mostly just reported on new homes that have been built with green or Energy Star ratings that are energy efficient above code.  Some might say, “If buyers demanded this information, then sellers would provide it voluntarily.”  The problem is that buyers (particularly of used homes) do not know that they could have this information, and individual buyers do not have much power to ask for this information on homes that they are considering.  The City of Portland believes that a policy is needed to more quickly make energy scores a part of the market and subsequently drive more improvements in energy upgrades like is already occurring in the commercial market.

I know that many appraisers and real estate professionals are thinking that if this information is available, no one will care and it will just cost sellers more.  I do not believe that is the case.  The following lists just a few national and local studies looking at certified energy efficient homes, green homes (that are tied to lower energy costs), and PV solar systems completed over the past twenty years.  The reports show a demand for energy efficiency and a clear relationship between lower energy consumption in a home and its value.

• Energy Star Pulse Survey of 2014 reported that 76% of homeowners are likely or very likely to pay more for a home that would result in lower ongoing energy costs.
• More Evidence of Rational Market Valuations for Home Energy Efficiency Appraisal Journal article in 1999 (built on a 1998 article) suggests that energy upgrades have $20 value for each $1 of annual energy savings. The study is old and has its flaws, particularly because it was based on window replacement that could provide value to the owner or home in other ways than just energy efficiency. However, subsequent studies in many other types of energy upgrades have produced similar results.
• Energy Trust of Oregon Valuation Study of 2014 looked at home sales in Portland with solar and energy performance scoring (EPS, like the proposed Home Energy Score) using appraiser paired sales. The study findings showed that solar systems or green certified homes sold for 3.6% or 4% more respectfully than homes that lacked these energy reduction features. One point in the study suggested that the EPS (Energy Performance Score, similar to Portland’s proposed score) is underrepresented in Portland’s local multiple listing service and not marketable due to lack of market understanding.
• An Analysis of Solar Home Paired Sales across Six States Appraisal Journal Article in 2015 suggests that offsetting energy costs using solar results in higher sales prices consistent with other studies or about $4 per watt on average over the combined states.
• The Market Valuation of Energy Efficient and Green Homes of 2015 was done by appraisers in the Northwest. The findings show evidence for increased sale prices of up to 8% related to green certified and Energy Star homes that is consistent with other studies.

Based on the overwhelming evidence in these local and national studies that lower home energy consumption equals a higher sales price, I believe that if buyers have access to Home Energy Scores and are educated about them, they will absolutely be willing to pay a premium for homes that have lower energy costs.  I believe that if Home Energy Scores become policy in Portland, more energy upgrades will be made both by sellers who are motivated to increase the price of the home they are selling and by buyers who generally make additional improvements close to the time of purchase.  Also, more buyers will likely take advantage of new loan products like FannieMae HomeStyle® Energy mortgage and government incentives that encourage energy upgrades.  In the future, if this policy is approved, appraisers in Portland could be reporting the Home Energy Score for each comparable sale and might even be making line item adjustments for market reactions to them.

Are you an Oregon or Washington appraiser interested in seven hours of FREE continuing education about appraising energy efficient homes?  I will be teaching a class in Hermiston, Oregon on December 9^th.  I know it is a long drive for many of us, but it’s otherwise free.  Click here to learn more. 

Did I leave anything out or do you want to join in the conversation?  Let me know in the comments below.

If you find this information interesting or useful, please subscribe to this blog and like A Quality Appraisal, LLC on Facebook.  Also, please support us by making Portland real estate appraisal related comments on our blogs and YouTube videos.  If you need Portland, Oregon area residential real estate appraisal services for any reason, please request appraisal fee quote or book us to speak at your next event.  We will do everything possible to assist you.

Thanks for reading,

Gary F. Kristensen, SRA, IFA, AGA

Due to the shortage of appraisers in Portland, Oregon (and other places around the country), appraisers are bombarded with requests from Appraisal Management Companies (AMCs) requesting that they fill out mountains of forms; provide copies of identification, licenses, and insurance; submit to background checks, provide examples of work; and apply to be on the AMC’s roster of appraisers.  So how do appraisers know if the AMC will be a trusted client?  How do appraisers know if the AMC will treat them fairly?  Will appraisers be confident that private information will be safe?  The AMCs vet appraisers, but do appraisers screen AMCs?  Perhaps appraisers need to scrutinize AMCs just as diligently before doing business with them.  Here is a list of seventeen things appraisers could do before signing up on that next AMC roster. 

1. Most states require that AMCs obtain licenses. In Oregon, appraisers can go to the AMC Database put out by the Appraiser Certification and Licensure Board (ACLB) to see if the AMC has a license in good standing. Appraisers can also call the appropriate state AMC regulator for information that might not be available online. You worked too hard for your license to work for someone who is not licensed.
2. Ask the AMC if they have ever been investigated by any state AMC regulators or if they have been involved in any lawsuits related to appraisal management. If so, ask them to explain the outcome of the investigation.
3. Obtain the AMC’s list of base or minimum fees paid for common appraisal products in your area. If starting fees are not acceptable, then you do not need to waste your time moving forward with the AMC screening process.
4. Inquire how many days before appraisers can expect to be paid following completion of the appraisal report. Remember money in 15 days is much more valuable than money in 90 days, especially in terms of business operation. Don’t work for AMCs that fund their growth on loans from independent appraisers unless you are compensated appropriately for risk and interest on credit.
5. Request copies of the AMC’s liability insurance and find out what that insurance covers. Would it cover a vendor appraiser who accidentally caused property damage at a subject property?
6. Determine if there are any fees associated with delivery of appraisals to the AMC’s online portal. Many AMCs offset the cost of their technology through delivery fees to appraisers. If the AMC has a “technology fee” don’t worry, you can add this to the price of your appraisal along with the appropriate third-party outsourcing markup.
7. Google the AMC’s name and see what comes up. This might seem obvious, but some AMCs have been in the news for lawsuits related to unfavorable treatment of appraisers. You do not want to waste your time vetting an AMC that has a bad reputation. Even if no lawsuits come up, a quick Google search could result in a feel for the company and let you know if this is a company you want to work for. Remember that homeowners might think you work for this AMC when you show up to do the appraisal. Is this a company that you are okay with if homeowners get confused and think you work for them?
8. Go to national online appraiser Forums like 100% Real Estate Appraisers or I am a Real Estate Appraiser or a local appraiser forum like Portland’s NW Appraiser Forum and search the group for threads about that AMC. If you don’t find a thread, put one out there like, “Anyone ever worked with AnytownAMC? Was it a good experience? Did they pay you fairly and quickly?” You might be surprised how much you find out.
9. Ask for references from other appraisers who have worked with the AMC recently. You can interview those appraisers and ask if they have been treated well. Just remember that the appraisers on the reference list are more likely to speak positively about the AMC.
10. Request that the AMC obtains a business credit report through your favorite business credit reporting company. Reports cost between $30 and $100, but you can ask the AMC to pay for this expense in exchange for your consideration with being on their roster of appraisers. Doing business with an AMC that has poor credit could cost you big. Several years ago, I had to send several threatening letters to one AMC and book flights to visit them before getting paid. Soon after I was paid, the AMC went out of business. I found out through social media that other appraisers had been stiffed by that same company.
11. Obtain temporary access to the AMC’s online appraisal delivery portal. If the AMC has a poor online ordering system, then working for them might be a headache.
12. Review the AMC’s policy on appraiser performance scoring. Suppose that you only accepted more complex assignments (those that tend to raise more quality control red flags and take longer to complete) but you always complete the project on time. Will your performance score look inferior to another appraiser who only accepts easy assignments?
13. Determine if the AMC (not Fannie Mae, we already know what they do with appraisal data) is collecting data from the appraisals they manage and if so, will that data ever be sold?
14. Inquire about AMC’s quality control staff. Questions might include how many quality control staff members are licensed appraisers and if their performance is in any way judged by or linked to how many revisions are obtained from appraisers. Often the best AMCs to work with have a well-trained quality control staff who can act as a firewall between appraiser and the lender. (Lenders don’t always recognize a well-supported and reasonable appraisal that was produced despite limited data. An experienced AMC review department can be an ally.)
15. Ask for a copies of the AMC standard engagement and independent contractor agreements. The appraiser can skim the contracts for non-customary appraisal requirements such as, required interior closet photos on all appraisals. Ask your attorney to review the agreements. It is likely that the AMC engagement agreement moves too much liability from the AMC to the appraiser (you would do the same if your lawyer wrote the contract), so it is important for appraisers and their attorneys to amend the AMC engagement agreement to bring the liability back into balance or avoid working with some AMCs. Amending these long engagements can be costly, but do not forget that such costs will be billed back to the AMC in the form of higher fees.
16. Review documentation concerning the AMC’s request for value reconsideration process. It is likely that if you appraise for an AMC long enough, someone will dispute your value opinion. It is important to know in advance if the AMC has a fair process for value reconsideration, or one that puts undue burden on the appraiser.
17. Check the AMC’s data protection policy and ask what steps have been taken to keep your private information safe. Also ask if the AMC has ever had any data breaches and if so, determine what systems have been put into place to ensure that data breaches do not happen again. Does the AMC have a policy that requires them to alert appraisers if they believe a data breach was possible?

I hope that you find this list helpful even though it is written partly in jest.  My goal is to elicit thought and discussion about the imbalance of power and liability in our industry as it relates to appraisals done for AMCs and lenders.  Remember that if an AMC fails in parts of your vetting process, the appraiser could charge a complex client fee to account for the shortcomings.  If you missed my interview with The Appraiser Coach Dustin Harris, about my blog and how our business focuses on non-lender (non-AMC) type appraisal work, Click Here.

Did I leave anything out or do you want to join in the conversation?  Let me know in the comments below.

If you find this information interesting or useful, please subscribe to this blog and like A Quality Appraisal, LLC on Facebook.  Also, please support us by making Portland real estate appraisal related comments on our blogs and YouTube videos.  If you need Portland, Oregon area residential real estate appraisal services for any reason, please request appraisal fee quote or book us to speak at your next event.  We will do everything possible to assist you.

Thanks for reading,

I just returned from a daytrip to Las Vegas where I addressed the attendees of the Appraisal Summit and Expo.  It was such an honor to speak at this event alongside my business mentor Roy Meyer and to meet some of the most involved and inspirational people in the appraisal industry.  My only wish is that I would have been able to stay longer to build more connections and listen to more of the speakers. 

Also while in Vegas, I was interviewed for an upcoming episode of the Appraiser Coach Podcast with Dustin Harris, I got to meet Jeff Bradford and demo the new Bradford Technologies Appraiser Mobile App, and I received a live a demo of ANOW appraiser business management software.  Talking directly to the people behind these brands and seeing them in action is so much more valuable than visiting a website.  It was definitely a worthwhile trip.

If you were at Appraisal Summit and Expo, hopefully we got a chance to meet.  If we did not connect, please get in touch with me online and perhaps we can meet up at the next big appraisal event.  One of the things that I most enjoy about being an appraiser is meeting appraisers from all over the country.

Did I leave anything out or do you want to join in the conversation?  Let me know in the comments below.

If you find this information interesting or useful, please subscribe to this blog and like A Quality Appraisal, LLC on Facebook.  Also, please support us by making Portland real estate appraisal related comments on our blogs and YouTube videos.  If you need Portland, Oregon area residential real estate appraisal services for any reason, please request appraisal fee quote or book us to speak at your next event.  We will do everything possible to assist you.

Thanks for reading,

Last week, I wrote about how difficult it is to schedule an appraisal in Portland, Oregon right now.  The backlog has resulted in recent appraisal fee increases.  Subsequently, more people have been contacting me seeking someone willing to train them and pass the largest hurdle of becoming a Certified Residential Appraiser – the two-year apprenticeship.  If you’re an appraiser looking to find an assistant, please contact me, I will connect you with some good candidates.

I cannot hire everyone that contacts me.  So, what advice do I give to someone looking to find a supervising appraiser?  I generally tell them to seek out and attend local appraiser functions and organizations.  In Portland, the local NAIFA meets monthly for lunch and a guest speaker.  (Click here for more information about the chapter luncheons.)  The Appraisal Institute (AI) also has local events, but the mixes are not as regular as with the NAIFA.   However, the meetings in both organizations are welcoming to guests and are a great way to meet appraisers, particularly the ones who might be able to hire or otherwise help you. 

When you are looking to find an appraiser to train you, they are much more likely to hire you if they feel like they know you.  This takes shaking hands, sending out resumes, and phone calls.  It is said in sales that it takes seven touches or interactions to make a sale, so don’t get frustrated if you don’t get a job right away.  Here is a plan to use on every appraiser that you think might be able to train you or get you into contact with someone who can.

1. Meet appraisers in person at an appraiser function. Introduce yourself, shake hands, ask for business cards, and ask for advice on finding a supervisor. You want the appraiser you meet to help you find a supervisor rather than feel like they are being pressured to hire you. You can also cold call appraisers and ask to meet with them (here is a link to a directory of appraisers). Alternately, ask your friends on social media if they know any appraisers. Be sure to have a resume and a cover letter ready if anyone requests it (see below).
2. Send a follow-up email to appraisers you have met or spoken to, tell them how excited and thankful you are to be making contacts.
3. Follow up by phone to discuss your progress in meeting other appraisers. Be sure to thank that person for any time, help, or kindness they have given you.
4. Connect on social media like LinkedIn or other sources if the appraiser you met has an online presence.
5. Send a note (multiple forms, but handwritten can be effective) checking in with progress you have made in your search or people you have met. Again, don’t forget to be thankful for all the time that a person has given you, even if it is just a moment.
6. Start over at step one. On the second trip through these steps, your prospects will start to be quite aware of you. If any of your prospects are thinking of hiring or know someone who is, you will likely be on the top of the list. If you can connect with your best contacts on a personal level like families or hobbies, you will have an additional edge. Also, you will be on the top of your contact’s mind if you can find a way to help them. (See: Give And Take: How The Rule Of Reciprocation Binds Us.)

The more appraisers that you can interact with, the better your chances are at finding a job.  When you’re interacting with appraisers, you never know when someone will ask for your resume and cover letter.  Here is a listing of some things that I look for in an appraiser assistant.

1. The ability to communicate in writing. An appraisal is essentially an argument in favor of your opinion of value. If you can explain things simply and argue effectively in writing, highlight this on your resume. Be sure to have several people proofread your resume. You don’t want your resume to have errors, particularly when you’re applying for a job that requires writing skills.
2. A capacity to research online. A large part of what appraisers and appraisal assistants do is research online. People who are good at finding things online can make great appraiser assistants and appraisers.
3. The aptitude to master computer programs. It can be difficult and frustrating for your trainer and for an appraiser assistant if you cannot troubleshoot simple computer problems. Appraisers use many computer programs and dealing with issues as they arise is just part of life as an appraiser. If you have computer skills, even if you think they are basic, highlight them on your resume.
4. A talent to work independently. Most appraisers spend a great deal of time working from home and need to have the self-discipline to meet deadlines.
5. Do not provide the same resume to an appraiser that you would provide for any other job. Make sure that your resume gets to the point and highlights your key skills that relate to appraisal. If you had a prior unrelated job, point out the skills from that job that will be helpful to an appraiser.
6. Clean up your social media or online presence by deleting posts that you would not want a future employer to read or changing your privacy settings. I always Google candidates looking for a job. On several occasions, I have not contacted a candidate simply because of something ignominious on social media.

For additional information, here is a link to another article that I wrote about How to Become a Real Estate Appraiser.  Did I leave anything out or do you want to join in the conversation?  Let me know in the comments below.

If you find this information interesting or useful, please subscribe to this blog and like A Quality Appraisal, LLC on Facebook.  Also, please support us by making Portland real estate appraisal related comments on our blogs and YouTube videos.  If you need Portland, Oregon area residential real estate appraisal services for any reason, please request appraisal fee quote or book us to speak at your next event.  We will do everything possible to assist you.

Thanks for reading,

Gary F. Kristensen, SRA, IFA, AGA