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WHAT IS USPAP?

The Uniform Standards of Professional Appraisal Practice (USPAP) are the generally accepted standards for professional appraisal practice in North America. USPAP contains standards for all types of appraisal services. Standards are included for real estate, personal property, business and mass appraisal. (www.appraisalfoundation.org)

THREE APPROACHES TO VALUE
There are three ways to determine the value of anything, and each plays a part in property appraisal.

The most widely-used and accepted in residential practice is the Sales Comparison Approach. This approach bases its opinion of value on what similar properties in the vicinity have sold for recently, with appropriate adjustments for time, acreage, living area, amenities and so on. It is these adjustments where the expertise of the professional appraiser becomes necessary -- no computer can tell you how much or little to mark up for a fireplace without knowing the neighborhood or even talking to Realtors and recent buyers in the area about how important that amenity is in that particular location.

Another approach is the Cost Approach. How much would a property cost to replace, that is, rebuild, minus "accrued depreciation," that is, depreciation that has occurred since the property actually was built? The cost approach includes concepts like "economic life" and "effective age" that are mostly of use in determining the value of special use properties, special purpose properties or properties where subsequent structural improvements greatly impact value.

The third approach to value is called the Income Approach. Some properties generate income for their owners -- the most obvious examples being rental properties such as apartment buildings, non owner-occupied houses and duplexes and the like. The rental income an owner might reasonably expect from a property is part of its value. For a purely owner-occupied residential property, this may not be applicable, but it can be important if the property is to be rented out or used otherwise to generate income, such as a storage facility, cell tower rental and office building.

THREE APPROACHES TO VALUE

There are three ways to determine the value of anything, and each plays a part in property appraisal.

The most widely-used and accepted in residential practice is the Sales Comparison Approach. This approach bases its opinion of value on what similar properties in the vicinity have sold for recently, with appropriate adjustments for time, acreage, living area, amenities and so on. It is these adjustments where the expertise of the professional appraiser becomes necessary -- no computer can tell you how much or little to mark up for a fireplace without knowing the neighborhood or even talking to Realtors and recent buyers in the area about how important that amenity is in that particular location.

Another approach is the Cost Approach. How much would a property cost to replace, that is, rebuild, minus "accrued depreciation," that is, depreciation that has occurred since the property actually was built? The cost approach includes concepts like "economic life" and "effective age" that are mostly of use in determining the value of special use properties, special purpose properties or properties where subsequent structural improvements greatly impact value.

The third approach to value is called the Income Approach. Some properties generate income for their owners -- the most obvious examples being rental properties such as apartment buildings, non owner-occupied houses and duplexes and the like. The rental income an owner might reasonably expect from a property is part of its value. For a purely owner-occupied residential property, this may not be applicable, but it can be important if the property is to be rented out or used otherwise to generate income, such as a storage facility, cell tower rental and office building.

APPRAISER LICENSING

Appraiser licensing varies from state to state. To participate in what is called a "federally-related transaction," which is, for example, a mortgage being underwritten by a national bank, an appraiser must be licensed or certified by his or her state. The license or certification is evidence that the appraiser has performed a certain number of hours as a trainee under the supervision of a practicing appraiser, may have passed an examination, and completes a certain number of hours of Continuing Education Training.

Prior to the Savings and Loan crisis of the 80s, which gave rise to appraiser licensing, appraisers had to market their expertise, service, professionalism and association designations. Many feel that state licensing has diluted the appraisal profession. Many consider licensure a bare minimum of what you should expect from an appraiser.

We have worked hard to establish a reputation for quality and prompt work, performed professionally and ethically, with outstanding customer service. You should never just look for a licensed appraiser; you should be discriminating in choosing your service providers. Tour our website for valuable information on the experience we have and the service we provide.

You should always be sure your appraisal service provider is licensed and in good standing. The Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council (FFIEC) maintains a national database of appraisers and their license/certification status. It is available publicly at this link.

Among other things, this database, which relies on reports from each state appraisal board, will tell you if a service provider you are considering has had his or her license suspended, revoked, or whether the license has lapsed. You can rest assured that our license is current and in good standing!

APPRAISER ETHICS

Appraisal is a profession, and appraisers are professionals. In our field as with any profession we are bound by ethical considerations.

An appraiser's primary responsibility is to his or her client. Normally, in residential practice, the appraiser's client is the lender ordering the appraisal to decide whether to make the mortgage loan. Appraisers have certain duties of confidentiality to their clients -- as a homeowner, if you want a copy of an appraisal report, you normally have to request it through your lender -- obligations of numerical accuracy depending on the assignment parameters, an obligation to attain and maintain a certain level of competency and education, and must generally conduct him or herself as a professional. At Brunson-Jiu, LLC, we take these ethical responsibilities very seriously.

Appraisers may also have fiduciary obligations to third parties, such as homeowners, both buyers and sellers, or others. Those third parties normally are spelled out in the appraisal assignment itself. An appraiser's fiduciary duty is limited to those third parties who the appraiser knows, based on the scope of work or other written parameters of the assignment.

There are ethical rules that have nothing to do with clients and others. Appraisers must keep their work files for a minimum of five years.

We only perform to the highest ethical standards possible. We don't do assignments on contingency fees. That is, we don't agree to do an appraisal report and get paid only if the loan closes. We don't do assignments on percentage fees. That is probably the appraisal profession's biggest no-no, because it would tend to make appraisers inflate the value of homes or properties to increase their paycheck. We don't do that. Other unethical practices may be defined by state law or professional societies to which an appraiser belongs.

The Uniform Standards of Professional Appraisal Practice (USPAP) also defines as unethical the acceptance of an assignment that is contingent on "the reporting of a pre-determined result (e.g., opinion of value)," "a direction in assignment results that favors the cause of the client," "the amount of a value opinion," and other things. This means you can be assured we are working to objectively determine the home or property value.

With Brunson-Jiu, LLC you can be assured of 100 percent ethical, professional service.

APPRAISER JARGON

Have you heard an appraiser use any of these terms? Here are some examples of common appraiser jargon and their meanings:

Adjustment. When comparable properties have been identified, the appraiser makes adjustments to the Sales Price of each of the comparables to bring them into equivalency with the subject property, accounting for differences in location, construction quality, living area, acreage, frontage, amenities and the like. This is where the professional expertise of an appraiser is most valuable.

Chattel. Personal property that may be on the subject property but which does not figure into the opinion of value in the appraisal report.

Comparable or "comp". Properties like the subject property nearby which have sold recently, used as a basis to determine the fair market value of the subject property.

Drive-by. An appraisal that is limited to an exterior-only examination of the Subject to make a determination that the property is actually there and has no obvious defects or damage visible from the outside. Fannie Mae's form for this type of appraisal is its 2055, so you may hear a drive-by referred to as a "2055."

Fair market value. The appraiser's opinion of value as written in his or her appraisal report should reflect the fair market value of the property -- what a willing buyer would pay a willing seller in an arm's-length transaction.

GLA. "Gross Living Area," the sum of all above grade floor space, including stairways and closet space. GLA is often determined using exterior wall measurements.

GBA. "Gross Building Area," the total floor area of a building, including below-grade space, but excluding unenclosed areas, measured from the exterior of the walls.

Latent defects. A defect on the property that is not readily apparent but which impact the fair market value. Structural damage or termite infestation might be examples.

MLS. A Multiple Listing Service is a proprietary listing of all properties on the market in a given area and their listing prices, as well as a record of all recent closed sales and their sales prices. Created by and used primary by real estate agents, many appraisers pay for access to these databases to aid in comparable selection and adjustment research.

Obsolescence. The value of assets diminishes as their capabilities degrade or more desirable alternatives are developed. Functional obsolescence is the presence or absence of a feature which renders the property undesirable. Obsolescence can also occur because the surrounding area changes, making a feature of the property less desirable.

Subject. Short for the property being appraised -- the "subject property."

Useful life. The time during which a property can provide benefits to its owner.

URAR. Short for Uniform Residential Appraisal Report, Fannie Mae form 1004, it is the form most lenders require if they need a full appraisal (that is, with walk-through inspection).

USPAP. Short for Uniform Standards of Professional Appraisal Practice, USPAP promotes standards and professionalism in appraisal practice, and is often enacted into law in a state. It is promulgated by the Appraisal Foundation, a non-governmental entity chartered by Congress to, among other things, maintain appraisal standards.

Walk-through. An inspection that includes a visit to each part of the interior of the house used in estimating value.

HOW TO PREPARE FOR AN APPRAISAL

For homeowners, a real estate appraisal is the linchpin to buying or selling their home. It allows the property transactions to occur among the buyer, seller, real estate agent and mortgage lender. Re-financing your house also requires an appraisal.
Before an Appraiser arrives, there are a few things you should know. By law, an appraiser must be state licensed to perform appraisals prepared for federally related transactions.
To facilitate the appraisal process, it's beneficial to have these documents ready for the appraiser:

  • Title policy that describes encroachments or easements
  • Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells
  • Brag sheet that lists major home improvements and upgrades, the date of their installation and their cost (for example, the addition of central air conditioning or roof repairs) and permit confirmation (if available)
  • Information on "Homeowners Associations" or condominium covenants and fees.

Once your appraiser has arrived, you do not need to accompany him or her along on the entire site inspection, but you should be available to answer questions about your property and be willing to point out any home improvements.
Here are some other suggestions:
Accessibility: Make sure that all areas of the home are accessible, especially to the attic and crawl space
Housekeeping: Appraisers see hundreds of homes a year and will look past most clutter, but a tidy home will make a good impression.
Maintenance: Repair minor things like leaky faucets, missing door handles and trim
FHA Inspection Items: If you are applying for an FHA loan, be sure to ask your appraiser if there are specific things that should be done before they come. Some items they may recommend might be: Install smoke detectors on all levels (especially near bedrooms); make sure all utilities are on/functional; fill any in-ground swimming pool/spa; install handrails on all stairways; remove peeling paint and repaint the affected area(s); provide inspection access to the attic and crawl spaces.

OUR TECHNOLOGY

Why hire a technically advanced Appraiser

Appraisers are, by far, the most technical agents in the real estate world. By necessity, they have been drawn into the digital world at a pace not seen by their colleagues. The appraisal process is one that lends itself to technology. And technology has paid significant dividends to those appraisers who have invested in it. These dividends are shared with the appraiser's customers, in the form of shorter turn-around times and a much better final valuation report.

Ordering
Let's start at the beginning. Millions of real estate transactions are processed each year in the United States. Almost all of them require some sort of appraisal. Technology has allowed savvy appraisers to reduce the amount of work their client's need to order, track and receive appraisals. In the past, the primary mode of interaction between an appraiser and his clients was the telephone and fax machine. Clients would send requests via fax, and then often follow it up with a phone call to make sure it was received. Tracking the progress of the appraisal meant more phone calls - a disruption for both the client and the appraiser.

But the modern, technologically advanced appraiser has a better method. Using tools like this web site - complete with the ability to order appraisals on-line - allows clients to shave valuable time off the process of ordering a valuation service. Technologies like those utilized at Brunson-Jiu, LLC are advancing this concept even further, giving its users the ability to order appraisals expediently; with NO more annoying games of phone tag!

Data Gathering
The appraisal process is nothing if not a data intensive process. Appraisers spend a lot of their time gathering both specific information about the subject property and general data about the local market and developing trends. Once again, technology has stepped in to help appraisers. In the past, the home inspection process has been the time consuming and difficult. To top it off, appraisers then had to come back to the office and transcribe their field notes into the appraisal file itself. - No longer!

Today's digital appraiser has several tools that can aid in gathering data in the field. Starting with tools like a laptop computer or PDA, appraisers are eliminating the duplicate data entry problems of the past. Tools like the Leica Disto Laser meter are making the measurements more accurate. And a myriad of software/programs available allows the appraiser to sketch the house on the fly. All of this means that the appraiser can get the report done and delivered to the client in a fraction of the time it once took.

On the other side of the data gathering coin is the general data. The Internet has revolutionized the ability of appraisers to get quality data in a fraction of the time it once took. Where once an appraiser would spend hours finding the right location maps and then rubbing on decals, the modern appraiser gets his maps with a few mouse clicks, complete with location markers. And flood maps? Likewise, just a few clicks away with a myriad of online flood data services. Standardized addressing, accurate postal coding, census tract information, are all at their fingertips. This ensures that the final report is as complete and accurate as possible, requiring fewer call-backs and revisions. A real money saver for busy appraisal clients.

Report delivery
The report is done. Now how is the digital appraiser going to leverage his investment in technology to improve the delivery process? Modern appraisers have forsaken the old print-and-snail mail route for a much more efficient electronic delivery system. Utilizing Adobe's Portable Document Format (PDF) files, an appraiser can deliver a complete, multi-page report, complete with digital photos and maps, through simple e-mail. Now, instead of waiting for the daily mail, or paying for expensive courier services, appraisal customers can simply log into their company email system and retrieve all the appraisals at one time. Without wasting and paper printing the appraisal, it can be routed to the appropriate loan officer or title company in the blink of an electron.

More advanced organizations are leveraging a network to not only order appraisals, but also to manage the delivery process. Have enough comparables been used? Has the appraiser included a statement of limiting conditions? These items can be checked automatically and the appraiser notified of the deficiency without the client ever getting involved. Now, when the final report is received, the client can be sure the appraisal meets all the basic criteria. Once again, costly follow up and revisions are avoided, lowering everybody's cost of doing business.

Digital Workfile
It would be wonderful if appraisers could complete a report, deliver it and never worry about seeing that document again. But one of the purposes of an appraisal is as a legal document outlining the condition of the property at the time of sale. So appraisers must keep their reports for 5 years, allowing them to recall any appraisal at any time to either defend the valuation or to be used in other legal proceedings.

Here again, the digital appraiser leverages his investment in technology to improve service. By storing every aspect of the appraisal - notes, sketches, supporting documentation and calculations - along with the appraisal, the professional is able to retrieve that report at any time within the five years and recall just what that report was about. And this data is not stored in boxes stacked 5 deep in some rented warehouse. Instead, the digital appraiser uses technology like digital "lockers" to electronically include all supporting documents as part of the appraisal file (workfile). These files are stored securely on searchable media, where the appraiser can find them in a fraction of the time required in the past. This helps appraisal clients by giving them immediate, virtual access to any appraisal they've ordered within the past 5 years.

These are just a few examples of how technologically advanced appraisers are improving the business workflows of their customers. Investing and/or implementing ones office with the right software, services, gadgets and gizmos allows the appraiser to deliver reports quicker, more efficiently and with higher degrees of accuracy. All of which helps keep the appraiser's costs down, and save his clients time and money.

PAYMENT OPTIONS

Brunson-Jiu, LLC accepts:

  • Check or Money Order - Please ensure that all checks are made payable to Brunson-Jiu, LLC.
  • Cash
  • Credit Card – See information/details below.

POLICY: All residential appraisals are C.O.D., where reports will not be delivered until payment has been received and/or cleared bank processing.

In some instances, Net 30 terms may be extended, where customers can arrange for payment terms by contact Brunson-Jiu, LLC; where if agreed upon, Brunson-Jiu, LLC is given the right to assess an interest charge of 1.5% per month on all unpaid balances of all billing statements that are outstanding for more than thirty (30) days.

More on Credit Card payments

Occasionally we receive orders for appraisal reports where payment is required in advance. Whether the report is for a home owner, or just from a client with whom we've not done business before, these instances have been known to cause friction and delays in the past.

No longer! As Brunson-Jiu, LLC now accepts Visa, MasterCard and American Express credit card payments for any transaction. You can use this option to pay for single appraisals, multiple orders or any of our other services.

Is it safe?

Brunson-Jiu, LLC is set-up to provide an e-invoice (provide e-mail address) upon request, where secure online payments may be made through your own personal internet service provider; all but eliminating identity theft.

Naturally, if you prefer not to enter your credit card info online or your having computer issues at the time, you're welcome to give us the card information over the phone. - We (just) want to make sure we're doing business in way that makes you comfortable.

If you have any questions about paying for services with a credit card, or any other payment option, please give us a call or send us an e-mail message.

ABOUT AVM'S

7 things an automated or non-appraiser valuation won't tell you
Lenders and brokers using Automated Valuation Models (AVMs), and homeowners using "free online home values" to determine the value of a property, need to know what those results aren't telling them.

  1. Whether the house is really there. A computer can't so much as drive by a house to see if it's actually located where it's supposed to be, has four walls and a roof, and really is a four bedroom split level and not a one bedroom shack.
  2. Whether unique features of a property might add to or detract from market value. So a computer returns an estimated value of $150,000. Did it account for the sewage treatment station next door? The railroad tracks nearby with trains that blow their whistles every night? The school district? The desirability of its tree-lined street versus the next street over?
  3. How long ago the property was assessed. Many AVMs and free online services rely on public assessment records. In many states, for example, assessments may only be required every three years - the value may be nearly three years old in that case. Some states mandate that an assessed value not increase beyond a certain percentage, even if sales activity indicates the property has appreciated far more. When you use an AVM or free online service, you risk a lower value than reality.
  4. What makes the comparables comparable. A computer might compare your subject property to another property with similar square footage sold three months ago a quarter of a mile away. Even if that "comparable" property is in a different, less desirable school district, fronts a four-lane, 55 M.P.H. street, and is flood-prone. Or even if the property was sold under duress, such as in a divorce situation, or not at arm's length, such as to a family member. A computer simply does not know all the adjustments that might need to be made to a "comparable" property's sales price.
  5. Whether a market is declining. Automated valuations use data from recent, nearby sales. If those sales were completed at the peak of a local housing market, the computer will think the trend is going up. Even if a professional appraiser knows that the overall neighborhood is beginning to experience a downturn. As a lender, don't get stuck with a property that's been overvalued by a computer.
  6. Whether there is a conflict of interest. Free online home values are often farmed out to real estate agents in your area, who use the service to get your listing when you decide to sell. The best way to do that is to impress you with their confidence that they can get a higher price for your property. If they tell you your property is "worth" the high end of what they believe they can sell it for, the theory goes, you're more likely to sign a listing agreement. With most things, it's best to "under promise and over deliver" - but the opposite is true when you use a free online home value service.
What qualifications, designations, experience and education the preparer of the value has. When you work with an appraiser, you can be confident we're highly qualified, ethical and prepared to complete your assignment professionally and with good judgment. Most of the time, you don't know the qualifications of whoever is behind those free online values, and they couldn't compare to an appraiser's if you did. And if you're relying on an automated valuation, you're cheating yourself out of an appraiser's education, experience and expertise.
APPRAISAL MYTHS

Some Myths and Realities About Real Estate Appraisals and Appraisers

Myth: Assessed value should equate to market value.

Reality: While most states support the concept that assessed value approximate estimated market value, this often is not the case. Examples include when interior remodeling has occurred and the assessor is unaware of the improvements, or when properties in the vicinity have not been reassessed for an extended period.

Myth: The appraised value of a property will vary, depending upon whether the appraisal is conducted for the buyer or the seller.

Reality: The appraiser has no vested interest in the outcome of the appraisal and should render services with independence, objectivity and impartiality - no matter for whom the appraisal is conducted.

Myth: Market value should approximate replacement cost.

Reality: Market value is based on what a willing buyer likely would pay a willing seller for a particular property, with neither being under pressure to buy or sell. Replacement cost is the dollar amount required to reconstruct a property in-kind.

Myth: Appraisers use a formula, such as a specific price per square foot, to figure out the value of a home.

Reality: Appraisers make a detailed analysis of all factors pertaining to the value of a home including its location, condition, size, proximity to facilities and recent sale prices of comparable properties.

Myth: In a robust economy - when the sales prices of homes in a given area are reported to be rising by a particular percentage - the value of individual properties in the area can be expected to appreciate by that same percentage.

Reality: Value appreciation of a specific property must be determined on an individualized basis, factoring in data on comparable properties and other relevant considerations. This is true in good times as well as bad.

Myth: You generally can tell what a property is worth simply by looking at the outside.

Reality: Property value is determined by a number of factors, including location, condition, improvements, amenities, and market trends.

Myth: Because consumers pay for appraisals when applying for loans to purchase or refinance real estate, they own their appraisal.

Reality: The appraisal is, in fact, legally owned by the lender - unless the lender "releases its interest" in the document. However, consumers must be given a copy of the appraisal report, upon written request, under the Equal Credit Opportunity Act.

Myth: Consumers need not be concerned with what is in the appraisal document so long as it satisfies the needs of their lending institution.

Reality: Only if consumers read a copy of their appraisal can they double-check its accuracy and question the result. Also, it makes a valuable record for future reference, containing useful and often-revealing information - including the legal and physical description of the property, square footage measurements, list of comparable properties in the neighborhood, neighborhood description and a narrative of current real-estate activity and/or market trends in the vicinity.

Myth: Appraisers are hired only to estimate real estate property values in property sales involving mortgage-lending transactions.

Reality: Depending upon their qualifications and designations, appraisers can and do provide a variety of services, including advice for estate planning, dispute resolution, zoning and tax assessment review and cost/benefit analysis.

Myth: An Appraisal is the same as a home inspection.

Reality: An Appraisal does not serve the same purpose as an inspection. The Appraiser forms an opinion of value in the Appraisal process and resulting report. A home inspector determines the condition of the home and its major components and reports
MORTGAGE FRAUD

On the front lines against mortgage fraud

Mortgage fraud has made headlines locally and nationally. Most of the time, mortgage fraud involves identity theft or fraud - making a borrower appear to be somebody else, with a better job, more income or fewer debts. Somebody more creditworthy.

But some mortgage fraud involves a broker or loan officer telling the mortgagee - the lender - and the borrower that the house is worth more than it is. This way, they can close a larger loan and make a bigger commission. Since real estate agents also usually make a percentage of the sale as commission, sometimes they can be involved. In reality, most loan officers, mortgage brokers and real estate salespeople are ethical and would never think of engaging in mortgage fraud. But mortgage fraud of this type always originates with one of the parties who makes a commission on a closed sale.

Sometimes, fraud like this can be accomplished without an appraiser involved. Honest, professional appraisal reports are simply altered, or honest, professional appraisers' signatures forged. But in reality, a complicitous appraiser often makes it easier to perpetrate mortgage fraud. At the same time, appraisers are also homeowners', lenders' and the economy's best defense against mortgage fraud.

Appraisers are paid a set fee for their work whether a deal is closed or not. Appraisers are hired by and work for the lender that is considering loaning the money to buy a house. That lender is interested in an objective, third party, professional opinion of the true value of the home. The lender needs to know that if the borrower defaults, the collateral used to secure the loan - the house - is valuable enough to cover their loss.

Appraisers do not work for individual, commissioned loan officers, mortgage brokers or real estate agents. If they did, there would be too much pressure to "make the deal work," rather than arrive at a professional, considered opinion of the market value of the property. Appraisers also do not work for borrowers, at least in the context of a mortgage loan. But borrowers work closely with mortgage brokers, loan officers and real estate agents, and benefit the most from a third party, objective valuation of the home they want to buy.

If something catastrophic happens, such as a job loss, illness, divorce or death, and a borrower can no longer make payments on the home they've mortgaged, they will need to be able to sell the home for enough money to cover the balance of their mortgage. So, nobody benefits more from an appraiser's professional opinion of value on a home than the new homeowner, even though there is no direct client relationship.

Like some mortgage brokers, loan officers and real estate salespeople, some appraisers are "bad apples" and will agree to go along with a scheme to defraud lenders and homebuyers so bigger commissions can be had. Not us, and not the vast majority of appraisers. Again, the appraiser is paid a set fee whether the loan closes or not, and does not work for any of the commissioned parties to the transaction. Appraisers are therefore a homeowner's, and a lender's, best front line defense against mortgage fraud.

 

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