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Archive for January, 2016

Appraiser News: Risk Management for Appraisers

January 26th, 2016


Not Your Mother’s E & O…

​​            It’s fair to say that risk management and E & O coverage did not make the top ten list of appraiser concerns for many years.  Recently, thecombination of an increasing number of lawsuits against appraisers along with unusual requests from AMCs (see below) have raised red flags in the minds of many.  We’d like to thank Bill Smolen, CSA-G, SRA for the following article on errors and omissions issues, a timely subject with appraisers reporting some serious concerns. Appraisers in the Long Island/New York area please note: the Columbia Society is holding an afternoon seminar tomorrow with Landy Insurance in New Hyde Park, New York.  Additional information and links are found below.

E & O: Friend or Foe?

There are a lot of things that we in the real estate appraisal profession take for granted.

One example: digital photography.  It does not seem that long ago that we all were using 35mm cameras, and we were dropping the film off at the 60 minute photo shop, going back to the office to eat lunch or start to write up our reports, then picking up our photos, and putting double-stick tape on the back to fasten them to photo sheets as part of our appraisal reports.   For me there was often the extra step when I did not keep organized track of the order of my photos, and was holding negatives up to the light, trying to figure out how my photos were out of order and which was which.  All it took was forgetting to write one of them down.

How about appraisal software?  Pre-appraisal software we would order our forms from Henry Harrison’s Forms and Worms and type them on typewriters.  And half of our clients would stipulate they did not accept any white-out on their reports.

However, one necessity that has been with us for a long, long time (I go back to the early 80’s when I started my own business) is Errors and Omissions Insurance…aka E & O.  If you worked as an appraiser or ran an appraisal company, you had to have it.

Today, the relationship between the working appraiser and his/her E & O provider is much more complex that it ever has been before, and we find ourselves much more dependent on their expertise, experience, and guidance.

Regulatory issues, state inquiries and complaints by home owners and lenders, confidentiality issues, value and content questions…they all add up to an often vexing situation for appraisers.  “You brought it in too high, you brought it in too low” (both complaints coming on the same appraisal report!),”You did not bring it in quick enough, you brought it in too quick, you really have no clue as to the area you were working in” (so what if you live one block away…that does not necessarily mean you know the area).

Sometimes I wish I worked for an E & O company and had access to all the inquiries they receive from appraisers.  The stories they could tell.

Here is one example: I just received this as an inquiry from one of our Columbia Society member appraisers a few days ago.  The appraiser was asked by the AMC he had received the appraisal request from to include the following:

Per the lender:
The appraiser must include the following statement in the appraisal report:
“This appraisal is made on the basis of a hypothetical condition that the
property rights being appraised are without resale and other restrictions that
are terminated automatically upon the latter of foreclosure or the expiration
of any applicable redemption period, or upon recordation of a deed-in-lieu of

Now, I am neither the sharpest tool nor the dullest tool in the shed.  But I have been appraising a long time, and no matter how often I read that, I cannot figure out what it is saying or what it means, or why it should be in there, especially as a hypothetical condition.  Maybe it is just me, but I have a problem including anything in an appraisal report that I as the author of the appraisal report do not understand.  I guess I could put it in with the Extraordinary Assumption, saying:  “I have no idea what this means but the AMC who ordered this appraisal asked me to include it per the lender, and I am doing so with the assumption that someone, somewhere, somehow understands what it means and why it is supposed to be here.”

So, what was my advice to the appraiser?  Call your E & O provider before you agree to do anything.

That is just one example.  I am sure many of those reading this have ones of their own.  But it is good that we do have someone such as our E & O insurance provider we can go to  inquire and make sure we are not opening the door to a world of troubles down the road.

Tomorrow afternoon, from 3:30 to 6:30, Long Island and New York area appraisers should strongly consider attending the Columbia Society of Real Estate Appraiser seminar in which Landy Insurance will be covering many of the current issues affecting appraisers.   Landy’s John Torvi, an expert in the field, will be addressing many of the issues facing appraisers.  He will be joined by their attorney, Stephen Young.  This will all take place at the Inn at New Hyde Park, NY.  Further information is available through the Columbia Society:

Columbia Society Seminar January 27, 2016 “E&O Insurance as Risk Management Tool for Appraisers”

Recent real estate reports.

This morning, S&P/Case-Shiller reported that their 20 City Composite Index rose by 5.8% in November 2015 from the previous November, an increase significantly higher than what was anticipated.  David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, attributed the quicker pace to low mortgage interest rates, tight inventory and an improving job market.  He noted that “Sales of existing homes were up 6.5% in 2015 vs. 2014, and the number of homes on the market averaged about a 4.8 months’ supply during the year; both numbers suggest a seller’s market”.  Double digit price increases were seen in Portland (+11.1%), San Francisco (+11.0%) and Denver (+10.9%).

Also this morning, the Federal Housing Finance Agency (FHFA) released their November Home Price Index (HPI) which reported year to year increases nationally of 5.9%.  Significant regional variances were seen with the Middle Atlantic division reporting an increase of just 2.6% while the Mountain division jumped by 10.0%.CoreLogic reported earlier today that foreclosure inventory fell to its lowest level in eight years, dropping 21.8% in November from the same month in 2014.  The current rate is 1/3 that found at the market peak in January 2011.  The number of completed foreclosures also fell substantially year to year, with an 18.8 drop in November 2015.  The number of mortgages classified as “seriously delinquent” by CoreLogic declined 21.7% in November from the same month in 2014.  Five states made up almost ½ of all completed foreclosures: Florida, Michigan, Texas, California and Georgia.

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AppraiserNews is a FREE publication, supported by advertising and sales of products designed to help appraisers support and grow their businesses. Please consider supporting us today by seeing what we and our sponsors have to offer.

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AnchorRates & Dates

Freddie Mac, the Mortgage Brokers Association (MBA) and HSH Market Trends all reported falling mortgage interest rates last week.

In their survey on January 21st, Freddie Mac reported that 30-year fixed-rate mortgages fell from 3.92% to 3.81%.  They also noted that last year at this time the 30-year rate was 3.63%.

Sean Becketti, chief economist of Freddie Mac reported that:

“The Freddie Mac mortgage rate survey had difficulty keeping up with market events this week. The 30-year mortgage rate dropped 11 basis points to 3.81 percent, the lowest rate in three months. This drop reflected weak inflation — 0.7 percent CPI inflation for all of 2015 — and nonstop financial market turbulence that is driving investors to the safe haven of Treasuries. However, the survey was largely complete prior to Wednesday’s Treasury rally that drove the yield on the 10-year Treasury below 2 percent, down 29 basis points since the end of 2015.”

The MBA reported on January 20th (for the week ending January 15th) that 30-year rates with conforming loan balances ($417,500 or less) moved downward, from 4.12% to 4.06%.   The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased from 4.02% to 3.93% while rates for FHA backed mortgages also fell, from 3.90% to 3.86%.

Mortgage applications jumped 9% from the previous period.  Refinance applications as a percentage of all applications rose from 55.8% to 59.1%. The FHA share of applications declined to 13.7% from 14.4% and the VA share also moved downward, from 12.2% to 10.8%.

On January 22nd, Market Trends reported that 30-year mortgage rates dropped from 3.97% to 3.88% while rates for FHA-backed mortgages fell to a lesser degree, from 3.76% to 3.72%.

The HSH news release commented that:

“The stanching of equity market bleeding as the week came to close means that mortgage rates have halted their fall and are probably poised to take back a few basis points of the three-week decline. No matter. Even though we are closer to the bottom than the top of it at the moment, rates continue to remain in a well-worn rut; 30-year fixed rates in the three-eighties and three-nineties were seen regularly in 2015 (and even at the tail end of 2014, too). In general, rates have been going nowhere very fast or very far, and that will continue to be the case as long as the world can’t get its financial feet under it”.  HSH’s projection for next week: a 3 to 5 basis point increase in their FRMI.

Additional information from Freddie Mac can be found by going to: Primary Mortgage Market Survey PMMS – Freddie Mac

Additional information from the Mortgage Bankers Association can be found by going to their site at: Research and Forecasts – Mortgage Bankers Association

Additional information from HSH can be found by going to: HSH.Com

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Appraiser Help has Released its 2015 Directory of AMC’s and National Appraisal Companies. Click the link above to learn more and to download your copy today!

AnchorAsk Angie

Angie would like to congratulate the winners of her last contest: Oregon appraiser Bryan Merideth and Georgia appraiser S. Robert Masoudpour.  They were the first to answer correctly that President Gerald Ford was the author of the quote “I must say to you that the state of the Union is not good”; and President George W. Bush exclaimed “As we gather tonight, our Nation is at war; our economy is in recession; and the civilized world faces unprecedented dangers. Yet, the state of our nation has never been stronger.

Today’s Questions:

1. Who said: “The Eskimos had fifty-two names for snow because it was important to them: there ought to be as many for love.”

a) Sarah Palin
b) Ralph Waldo Emerson
c) Margaret Atwood
d) Cyrano de Bergerac

2. Who said: “There are two kinds of people I don’t trust: people who don’t drink and people who collect stickers.”

a) Lily Tomlin
b) Sarah Silverman
c) Chelsea Handler
d) Tina Fey

3. Who said: “If you die in an elevator, be sure to push the ‘Up’ button.”

a) Woody Allen
b) George Carlin
c) Sam Levenson
d) Henry Youngman

The first to respond with the correct answers win a choice of one of the following:

One Free Regular Listing on

A Free Copy of the 2015 Directory of Appraisal Management Companies (Available to Members of and FREE!)

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AnchorTell us what you think!

We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: with your thoughts!

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AnchorWe really hope you find our newsletter to be informative!  If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue.  If you want to look back at past issues you can see our archive at


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