Appraiser Talkback Blog

Nationwide Challenge: Review 5 clients that you’ve worked with in the last 2 years

Appraisal Advisor provides appraisers with similar techniques to what banks use before extending credit to someone. Generally, if an applicant has bad or unknown credit, the bank’s rates are higher.

The problem most appraisers face is that they often don’t know about a potential client’s creditworthiness. If they did, the recent ES Appraisal, JVI, and AppraiserLoft debacles wouldn’t have occurred. But banks do have an idea by using credit reports. How do credit reports get created? Banks and other creditors submit all borrower histories to the credit agencies. We’ll be able to establish client payment histories and business practice reviews the same way, as long as appraisers like you submit reviews and invoice data through our system.

Appraisal Advisor provides appraisers with up-to-date, real time interactions with clients. We need your reviews to make that happen. Every time you complete an appraisal, make it a habit to write a quick review about your experience.

We’re challenging every appraiser in the nation to review at least 5 clients that you have worked with in the last two years. Remember that client that was so incredibly hard to deal with that you wanted to pull your hair out? Remember that client that was an absolute pleasure to work with?

We want to hear about them! You can start reviewing by clicking here: www.AppraisalAdvisor.com

Editor’s Note: Jim Park, Executive Director of the Appraisal Subcommittee, explains the reasons for the delay in implementing the recently completed complaint hotline and answers other questions important to appraisers (excerpted from Working RE print).

Why you Should Check your Online Licensing Information
by David Brauner, Editor

Jim Park, Executive Director of the Appraisal Subcommittee (ASC), has valuable information for appraisers regarding their professional information posted publicly on the National Registry of Appraisers and more.

Last year, when Park spoke at the Valuation Expo in San Antonio, many appraisers wondered why the “complaint hotline,” established under Dodd-Frank nearly three years ago, was taking so long to become operational. Dodd-Frank requires the ASC to create an appraisal complaint hotline for consumers, lenders, appraisers, and any other entity to report violations of the Uniform Standards of Professional Appraisal Practice (USPAP) or appraisal independence.

Park told the gathering late last year that the ASC was “working diligently” to establish the hotline and that there were several reasons for the delay. “It is a complicated undertaking due to the coordination required between the ASC, the member agencies and the states,” he said.

The sole purpose of the recently implemented hotline is to refer USPAP and appraiser independence complaints to the proper federal and state authorities for investigation. The individual agencies must then be prepared to appropriately address the complaints each receives.

Check Your Records
Park advises that appraisers regularly review their records in the National Appraiser Registry, located at the ASC website (ASC.gov). Disciplinary actions, license status- active or inactive, and more are posted publically. The ASC is a depository of information reported by the various state boards, and although it is rare, it is not without precedent to have inaccurate and potentially damaging information reported there, according to Park.

AMCs, lenders, insurance companies and others use the Registry to check the status and records of appraisers before doing business with them.

Park also clarifies that the Registry is made up of appraiser credentials and not individual appraisers. Therefore, when you see registry numbers reported, it is important to remember that they reflect the number of active credentials, not the number of individual appraisers, as many appraisers have more than one credential.

Park also notes that the vast majority of appraisers who have exited the profession in the last two years were at the “Licensed Appraiser” level.

Raising the Bar
Appraiser opinions are mixed regarding the recent, more extensive education and training requirements for those entering the profession and wishing to advance. Some feel it enhances the profession to raise the bar, while others caution it will exacerbate the looming “appraiser shortage.” Park indicates that the Appraiser Qualifications Board is looking at various options including working with colleges and universities to bring more young professionals into the business.

Park also notes that the ASC has the authority, with approval of the Federal Financial Institutions Examination Council, to waive any requirement relating to certification or licensing of appraisers, if it or any state agency determines that there is a scarcity of Certified or Licensed appraisers- either in a state or in a particular location, which leads to significant delays in the performance of appraisals.

Lack of Funding for States
The most common problem the ASC sees during its compliance reviews of state appraisal programs is a lack of resources, according to Park. The reason for the lack of funding, in certain states, is that appraiser fees are absorbed into the general funds of those states and used for other purposes. The writers of Dodd-Frank took notice and empowered the ASC to do something about it. The ASC now has the authority to review a state program to determine if there is sufficient funding and to impose sanctions up to and including non-recognition of the state program, if the ASC determines that a state is insufficiently funded to carry out its Title XI requirements.

Park also reminded the audience that the ASC is fully funded by appraiser fees, which totaled just over $2.6 million in 2011, and not taxpayer dollars. The ASC currently employs a staff of 12.

About the Author
David Brauner is Editor of Working RE magazine and Senior Broker at OREP.org, a leading provider of E&O Insurance for appraisers, inspectors and other real estate professionals in 49 states. He has covered the appraisal profession for over 20 years. He can be contacted at dbrauner@orep.org or (888) 347-5273. Calif. Insurance Lic. #0C89873.

Now you can tell if a prospect will be a good client or not, without waiting hours or days for peers to give you a vague opinion. In seconds (maybe even while you put the phone on hold) you’ll have concrete “one to five stars” answers to critical questions. Does your client pay slow, or not at all, and has that changed lately? Do they love silly stips and red tape? Do they understand turn time realities? Are their fees reasonable? It’s all there, clearly organized and presented, like a credit score, but for appraisers like you. And, it’s completely anonymous.

“I would highly recommend Appraisal Advisor to any appraiser. I really like the fact that we actually have a website that all appraisers can see reviews on all companies and also the billing fees” - Dawn R.

What about clients who fail to pay?

You’ll love this story about our Uniform Complaint Form (UCF). The very first appraiser ever to use it, one of our beta testers, was owed over $4,000 on invoices over 120 days old. The client removed the appraiser from their fee panel and refused to return repeated calls or e-mails (you’ve all been there). But then the appraiser’s wife used our UCF system. Our UCF sent a formal, professional e-mail to the client detailing the appraiser’s complaint, and it automatically listed 17 different state and federal regulators, law enforcement, and consumer agencies that the complaint would be forwarded to, automatically, if not promptly resolved.

10 minutes after the UCF went out from our servers, they got a call. within 48 hours, they were paid in full.

“I wanted to see if your product could actually work, so I put into collection a client that ignored all inquiries for payment until consumer affairs for that state called them.To my amazement, I received a check today for the full amount. I do not think I could have done it without your services. I will be sure to sign up.” - Allen P.

Can you afford to be without that? Can you keep guessing whether clients will be good or bad? No, and you shouldn’t have to. We have the tools to solve the problems, but it’s up to you to contribute your ratings.

So sign up, log in, and take back control of your business and the industry. The First 6 months are free, and absolutely no billing information is required. So, you can look up, rate, and review clients without worrying that it will cost you any money.

By Isaac Peck

The U.S. housing bubble and the corresponding real estate market crash of 2007-2008 brought about one of the most severe economic downturns in America since the Great Depression. The fallout was extensive: banks failed, established companies declared bankruptcy, the net worth of American households plunged, and millions of Americans lost their homes and jobs in a great recession that quickly spread globally, submerging the economies of Europe, Asia, and the developing world.

Among the many firms and individuals who acted irresponsibly, and maybe criminally, perhaps none did so with such flair and recklessness as Countrywide Financial. Before its rescue-sale to Bank of America (BOA), Countrywide was the largest mortgage lender in the United States.

Countrywide became a “leader” of sorts in the lending industry, according to numerous lawsuits filed by the Department of Justice, by adopting reckless lending practices, encouraging fudged loan applications, and violating appraiser independence in order to gain market share. A move that, some say, led to other lenders lowering their standards to compete.

A little-known fact is that the original whistleblower at Countrywide Financial, the man whose suit sparked an investigation that culminated in a one billion dollar settlement between BOA and the Department of Justice, is a real estate appraiser named Kyle Lagow.

Kyle Lagow
Lagow was an appraisal manager and assistant vice president at Landsafe, Inc., the appraisal subsidiary of Countrywide, a position which gave him an inside look at the practices which caused the downfall of the largest mortgage lender in America. For his part, Lagow sees Countrywide as being at the heart of both the housing bubble and the real estate crash. In his words, Countrywide, “Started a train and laid the tracks that ran the industry off the edge of a cliff.”

This is his story.

How It Began
Kyle Lagow of Plano, Texas says he was an appraiser running his own firm for 14 years when he was contacted in 2004 by Landsafe and offered a position as an appraisal manager, responsible for building an appraisal division to span several states.

“The third time they called they made the opportunity attractive enough and told me that I would be able to build a staff of quality appraisers. So I told them that as long as we do it right, I’ll run it,” Lagow says.

At Landsafe, Lagow was tasked with hiring and training a division of staff appraisers spanning multiple states whose primary purpose was to appraise a growing volume of Countrywide loans. Ultimately, Lagow helped open new markets for the company, expanding Landsafe’s appraiser panel into Utah, Colorado, Arizona, Louisiana, Texas and Oklahoma.

Fraudulent Appraisals
Lagow says it didn’t take long for him to realize that Landsafe’s executives weren’t interested in quality appraisals. The original suit filed by the DOJ alleges that in early 2005, a Landsafe executive called a meeting of appraisal managers and made it clear that (1) they needed to quit thinking of an appraisal as a separate unit, (2) that Landsafe appraisers were there only to “help facilitate closing,” and (3) that they needed to change their “thought process.” (You can find the suit at WorkingRE.com; Sidebar Information (left column); Lagow vs. Countrywide Original Complaint.)

“An appraiser would turn in his or her appraisal. If it was low or didn’t meet value, it went to a reviewer. If the appraiser didn’t meet value, the reviewers were instructed to go and look at the market to see if they used the best comps and to try to discredit the appraiser. The kicker is that I have an appraiser who I trusted, hired and put on my fee panel because I believed they would do a good job. But at Landsafe, the entire review process was designed to ensure the appraisal came in at value. If one of my appraisers didn’t meet value, they were blacklisted. Our own company would turn them in to the state and call them a bad appraiser,” says Lagow.

Unfortunately, extreme internal pressure to meet value and the blacklisting of quality appraisers was just the tip of the iceberg. In 2005, Lagow learned of a joint venture between KB Home and Countrywide, wherein Countrywide would provide the loans for new construction developments of KB Home. Lagow was tasked with hiring appraisers to complete that appraisal work. However, Lagow says that when his staff appraisers showed up at KB’s developments to appraise properties, they were turned away and told that KB had an agreement with Countrywide where it alone would decide who did the appraisals.

Lagow soon learned that a separate appraisal manager at Landsafe was handling all of KB appraisal assignments; the work went to a small number of hand-picked appraisers. The DOJ suit alleges that in Houston, the appraiser chosen by KB Home completed over 400 appraisals in a single month by himself, all at a price of $450 per appraisal.

Shortly after Lagow realized what was happening, he began sending notifications to upper management, even though he had been warned against putting his concerns in writing. On September 7, 2005, Lagow wrote the following:

“In summary: We have a clear attempt to control the market- utilization of one appraiser, a refusal to supply data with outside appraisers, and the appraiser of choice is being paid a fee abnormally higher than what we pay everyone else for the same work. Add in the fact that recent appraisals from outside appraisals have come in low, and I could make a fairly strong case for market manipulation and appraisal fraud. Even if it is not intentional, it looks bad.”

At the end of his email, Lagow warned that the problem would spread if nothing was done to fix it: “I also want to caution anyone who cares to listen, that if we allow this in Houston it will spread through the KB Home markets.”

Lagow says that he personally inspected many of the appraisal reports completed by the Houston appraiser. “I looked at appraisal orders. I could tell you when the inspection appointments were scheduled. One day, one was set for noon and the next one at 12:01 P.M. It was a total fraud,” says Lagow.

See No Evil
Lagow’s words of warning fell on deaf ears as Landsafe executives proceeded to institute a “production-based” pay system where staff appraisers were forced to radically increase their appraisal volume in order to earn the same income, according to the complaint filed by the DOJ. Lagow also says that Landsafe also facilitated a channel whereby Countrywide’s own loan officers could request target “audits” of Landsafe appraisers who were not meeting value.

The original suit filed against Countrywide by the DOJ lists over half a dozen appraisers who were “audited” at the direction of loan officers who were upset that appraisers were not meeting value. According to the suit, one of the appraisers that Lagow hired to add integrity to the appraisal process was told point blank by a KB Home sales manager that KB would no longer require his services if his appraisals came in below contract price. When he refused to go along with the fraud, the appraiser was blacklisted from completing appraisals on any Countrywide loans.

Frustrated at the apparent fraud he was witnessing, Lagow sent this chilling email to his supervisors at Countrywide Governance in February 2006:

“At the risk of losing my job I am forwarding this email to you and want to relay my deepest concern for the situation addressed. I report directly to you but I am also forwarding this to (a superior) because she and I have talked about general concerns in the past.

I have spent considerable time looking over the KB Home situation in Houston, Texas and took some time to drive a couple of subdivisions this weekend and look around. As you are aware, one appraiser controls the orders and the values…I believe that (name redacted) and KB Home are engaged in a fraud to manipulate the local market.

In looking at the appraiser’s reports, when he needs to, for value, he goes outside the market to access superior sales to bump up the market and then uses the same sales in future sales, thus establishing and manipulating the market. The appraisal reports I have examined have a continual characteristic of selective manipulations of the market data in an effort to pump up the market. It is my opinion that, based on very limited data, we could be making 115% loans in the markets and if you examine some KB Home subdivisions you see significant foreclosure rates. I believe that by allowing the situation to continue we are condoning the activity and placing at risk the jobs of our employees at Landsafe and Countrywide. I am even more concerned, and I do not have any supporting data other than the logic that an order has to come from us, that the individuals who mandated that only one appraiser be utilized may be a Countrywide employee and could be implicated in a conspiracy to defraud both the homeowners and the stockholders.

We are charged with the responsibility of protecting our client’s assets. If I am correct on any of this, and if it blows up, the blame will rightly fall on us for failing in our task. This has the potential to be a lightning rod for the demise of Landsafe and we will need to act to make sure every effort has been made to safeguard against this…”

Nothing changed as a result of the letter, Lagow says. Finally, in 2008, Lagow says he sent an email directly to Angelo Mozilo, CEO of Countrywide, urging him to stop the fraudulent practices and warning him that his executives were not reporting the facts to him.

“I really wanted Mozilo to have not been aware of this. I wanted to believe that a guy who spent 40 years building this company wouldn’t want its legacy to be that we ran an industry off a cliff and that we gave our industry a bad name. I couldn’t believe that he could have known about it, I went to everyone else before I went to Mozilo,” says Lagow.

Lagow explains that Mozilo sent someone down to, in his words, “put on a show.” He was even contacted by several of Countrywide’s top executives who seemed concerned, but the “conclusion” of management was that Lagow’s concerns were unfounded.

Fighting from the Corner
By late 2008, Lagow learned that he needed treatment to combat cancer and he was subsequently fired from Landsafe. “I fought inside the company for a long time to stop what was going on. When I left I told them, look, I’m going to fight to fix this either inside the company or outside the company,” says Lagow.

Leaving Landsafe wasn’t easy for Lagow. “At the time, I was pretty defeated. I built their market for them. They took my model and applied it to the east and the west coast. They didn’t have a clue how to hire and manage a staff appraiser division,” says Lagow.

Lagow says he wasn’t even planning to file suit. “I had cancer when they fired me. I just wanted to make it through that fight. I honestly didn’t want to go this route- I was on the list to do work for Bank of America. But then I received a letter from a BOA’s attorney saying that they were not going to put me on their fee panel list,” says Lagow. At that point, Lagow said he had no choice. “I had to fight, there was nothing left. I was broke. I couldn’t do work for them, I didn’t have any money. After all that they put me through, I was ultimately deprived of this little bit of dignity of being able to do appraisal work. I got mad. I picked up the phone and called up some lawyers who were filing a class action lawsuit. I said how can I help?”

The rest is history. In late 2009, Lagow filed a whistle-blower complaint under seal, charging that Countrywide had committed fraud and violated the U.S. False Claims Act.

But things got worse for Lagow before they got better. “Once the lawsuit was filed I couldn’t talk to anybody, not even my family. You go out there to try to help an industry, and no one even knows you’re fighting the fight. Your kids look at you like a failure, you can’t get any work. You’re fighting cancer. I lost everything, I had repo people knocking on my door,” Lagow says.

Lagow’s complaint was among at least five other whistle-blower complaints that were rolled into the $25 Billion settlement between regulators and the nation’s largest banks in 2012. Lagow’s complaint was also critical to a $1 billion settlement between the Federal Housing Administration (FHA) and Bank of America in 2012.

For Lagow, his eventual victory is bittersweet. “As far as being a whistleblower, I wouldn’t wish it on anyone. I got lucky. Without my lawyers, Tom Loeser, Shane Stevenson, and Stevie Berman, who were courageous enough to take the case, I’d be sitting in a house in default.”

For his share of the settlement, Lagow will receive $14.5 million for his role as whistleblower. Lagow is thankful but says that it isn’t as much as people might think. “By the time the government takes its share, and the attorneys take theirs, it’s not as much of a windfall as everybody thinks. If I were working for the rest of my life, I would earn more than that,” says Lagow.

Present and the Future
Appraisers may not be surprised to learn that Lagow doesn’t think much has changed in the industry, even after all he has struggled for. “I don’t think I made much of a difference. Everybody likes to say that there have been big changes. The only change right now is that there aren’t as many loans being done. If you had stolen $1 billion at gun-point, would you still be typing on your computer? I don’t think so. Yet the same people who were in charge when this fraud took place are still here. My supervisor at Landsafe, the area manager, is still there. The appraiser who was completing 400 appraisals a month in Texas still has his license. So you tell me, what’s changed?”

“You still have staff appraisers who know that if they don’t meet values, their name is going to show up on somebody’s do not use list,” Lagow continues. “Volume corrupts because the biggest problem that we had back then was that loan officers who did the biggest volume would say, ‘If you don’t get rid of so and so, I’m going to go somewhere else.’ So loan officers had tremendous weight and influence and they still do. You have the same infrastructure in place so once loan officers start doing millions of dollars of loans again, the same thing will happen.”

“What these criminals did, committing fraud and inflating values, was a felony before and it is a felony now, yet we haven’t put any of the big players in jail- so nobody’s afraid,” Lagow says. “Go out there and look and see how many people have been indicted from small private mortgage companies. Look and see how many have been indicted and tried and put in jail from the largest mortgage companies. You will find that there are numerous individuals in the private sector but when it comes to the big companies, the regulators don’t go after them. Let’s start putting some people in jail and see how quickly the rules start getting followed. Unless there is a profound movement in the industry as a whole, they’re going to do it again. And they’ll put the burden, and the blame, on the appraiser.”

Lagow’s message to other appraisers is simple: do good, honest work. “My message is to do the numbers, do the best appraisal reports you can. If somebody doesn’t like your work, if your values aren’t there, walk away. Have the dignity and self-respect to walk away and go find another client, everything else will take care of itself.”

About the Author
Isaac Peck is the Associate Editor of Working RE Magazine and Marketing Coordinator at OREP.org, a leading provider of E&O Insurance for appraisers, inspectors, and other real estate professionals in 49 states. He received his Bachelors in Business Management at San Diego State University. He can be contacted at Isaac@orep.org or 888-347-5273.

Editor’s Note: It seems many appraisers have shaken the dust from their feet and are moving ahead despite difficult conditions. It feels like the industry has turned a corner. The following is excerpted from the new print edition of Working RE, in the mail to most appraisers nationwide. Look for it over the next two weeks (Am I a Working RE Subscriber?).  

From Publisher: Appraisers Turn Corner
by David Brauner, Editor

As always we have much to be thankful for as Americans on July 4. 

Today, I can’t help but wonder whether the only true independence any of us has, in terms of our business lives, flows from our ability to adapt and survive; to stay positive- to learn and grow, to get up when we are knocked down- to ask questions, seek help, to keep pushing. When it’s all said and done, this is not half the battle- this is the battle. And when an element of control is taken from us, the one thing we are still in charge of is our own effort. No one can force us to do anything halfway or to give up.

If you’re still reading… Here’s a letter excerpted from the upcoming Working RE that sticks with me, written by appraiser Cindy Sizemore. It begins by describing numerous struggles appraisers are familiar with when working with AMCs but concludes with a significant shift in tone and attitude: “To hate the job that I once loved…but at the end of the day, I am the only one who can make a change. And just like all the articles we read that say you can do it, to just say no to low fees and go after other appraisal work- well they are right. I once again love appraising. I found other appraisal work for non-mortgage clients. I have taken back the control of my business. I say no to low fees, I say no to AMCs that treat me badly. I say yes to my independence and to you, I say take your business back and take control of your future.”

Here’s another letter excerpted from the new issue: “It is so busy during the first four months of 2012 you do not have to accept low fee work. I have successfully raised my price with the couple of AMCs that allow you to set your own and I have aligned myself with two new AMCs that pay higher. You appraisers who are complaining about low fee work and are setting the fee at $225, are you kidding me? Leaving $100 on the table for every appraisal is stupidity. You’re not going to undercut anyone but yourself. I am happy to report that life is good, I will make over $100k this year and I ride my bicycle a minimum of three-four days a week to my assignments. I’m going green. We are fortunate to have enough requests to focus on the local work and turn down the more distant orders. I have denied more than five appraisals this week alone. Good luck out there and love what you do.”

How’s Business? Survey Results- Business is Good!
According to the OREP/Working RE survey How’s Business?, most appraisers are as busy or busier than last year. There is lingering discontent to be sure but the silent majority of appraisers seem to be back to work and busy. We talk to many appraisers every day at OREP, to place their insurance, and many say they are scrambling to keep up with orders- though things do slow down this time of year. We hear that AMC fees are rising in general, especially for those who ask for more/refuse to work for less. Many are diversifying into non-lender work that is more satisfying and provides greater security and stability (webinar: Other than Lender Work). The transition is slow but progress is being made. Many of you are becoming more comfortable firing clients who are more trouble than they’re worth or who refuse to pay you what you’re worth. AMC ranks are thinning, and as appraisers become more savvy and sure-footed in dealing with these middlemen, the more that AMCs will have to compete for the best appraisers.

What You Can Do
Many are learning their rights and responsibilities under new state and federal regulation. It is a double-edged sword: appraisers have more protections and rights than they may realize but also are under closer scrutiny to do creditable work- one mistake can end a career. It’s important that everyone knows what is expected of them because the consequences are severe: for lenders, AMCs and appraisers who run afoul of the rules. How do I know? We host the webinar, How to Limit Liability, Maintain Independence, & Fight Influence (three part series), presented by Richard Hagar, SRA as part of the OREP/Working RE webinar series, and they are an eye opener.

Many appraisers are reorganizing, hiring help or increasing their know-how of technology. Many are becoming more “mobile” and exploring other ways to increase productivity and their bottom line (learn more from these webinars: Mobile Appraising and Can you Increase your Appraisal Volume and the Quality of your Work?). While it’s well documented that fees have not risen over the years, all small businesses have enjoyed significant increases in productivity and hourly compensation made possible in leaps and bounds by technology advances. If you’re not using these tools to the fullest to speed up your processes, you are not as profitable as you could be. In a recent OREP/Working RE webinar, 39 percent of the attendees surveyed did not have a website!  How much good business are these appraisers forfeiting? This webinar offers valuable (and simple) techniques to increase the flow of local non-lender work (Webinar: Building Your Business and Gaining Clients). Kudos to those who attend this webinar and to everyone who is taking steps to improve their business.

In our current print magazine, now in the mail to most of you, and to every OREP insured, we take up these topics in the hope that you will explore a new idea, understand new protections to fight illegal pressure/harassment, learn how to avoid liability or pursue a new opportunity to make a change in your practice that may make all the difference to your bottom line. This is what you’ll find in the new issue of Working RE, in our online stories and in our webinars. And there is no time like the present to begin.  �
  �
Moving Ahead
The profession has suffered an unprecedented assault; most appraisers lost something, some lost everything.  But today we can report that many are still standing- a few are stronger than ever. As the ranks thin, fees and opportunities are growing for those who remain. No matter what happens with customary and reasonable fees or any other regulatory issue which may or may not restore fairness to the profession, it feels like we’ve turned some kind of corner and are moving ahead. Appropriate for this Independence Day.

If you’re not as busy as you’d like or not making as much as you want, consider these resources and others to take back control of your business.

Typist services offered: Retired Certified Licensed Appraiser after 22 years: relapprais@aol.com.

About the Author
David Brauner is Editor of Working RE magazine and Senior Broker at OREP.org, a leading provider of E&O Insurance for appraisers, inspectors and other real estate professionals in 49 states. He has covered the appraisal profession for over 20 years. He can be contacted at dbrauner@orep.org or (888) 347-5273. Calif. Insurance Lic. #0C89873.