Appraisal House Blog

October 6th, 2014 6:17 PM

I received an email from a client today informing me that in order to continue to receive business from them, I needed to register for (at minimum) the free account at Clearbox, and they recommended that I go for the one with the background check ($30/year) since they expect that it "will soon become an industry compliance standard."

If you aren't familiar with Clearbox, they are a company based out of Salisbury MD and owned by Joan Trice, the owner of Appraisal Buzz newsletter.  They market to lenders, AMC's and others, promising to ensure that their clients get "the best" appraisers and ensure that the lenders meet the CFPB requirement to provide evidence that they are ensuring that their relationships with outside vendors do not present "unwarranted risks".

Clearbox essentially wants every little detail about you, including recent photo, drivers license, SS# (required to get a background check), home phone numbers, mothers maiden name, etc.  They then check what appears to be every possible source for additional information on you.  Did you get a speeding ticket 2 years ago?  It will be on that record.  Got in a fight in college?  That will be on there.

So here is my problem.  Does the fact that I got a speeding ticket 2 years ago (I didn't, but for arguments sake...) make me a bad appraiser?  Of course not.  But will a client of Clearbox start sorting with the appraisers that have absolutely no marks on their record?  Probably, since that would be the easiest way to choose your appraisers, right?  "Why even mess with this guy?  I see he has a mark against him, why waste the time to figure out what it is, what his side of the story is, or if it has any bearing on his ability to produce a good appraisal, when I can just choose these others that don't have that mark?" 

Secondly, I think Clearbox is doing a great sales job on these lenders.  Just like outsourcing to an AMC allowed lenders to say "Oh look, we don't have anything to do with the ordering process so there is no way we could be pressuring anyone!" (a total lie, they just pressured the AMC to pressure appraisers), this just seems like the same thing.  And does it really absolve them of any responsibility?  If an appraiser -- with a spotless record -- has a bad day and decides to take a swing at the obnoxious homeowner, is the lender any less responsible according to CFPB then if that guy had two previous convictions for fighting?  Not according to any attorney I know.  They will be in court, and paying for it either way.

To some degree I applaud Joan, since she saw a niche, created some fear and doubt, and is successfully selling her product.  It's the American way.  And realistically, $30 is no big deal.  How do you say "No" to a client sending a dozen orders per month over $30? 
But I am NOT happy about providing a lot of personal information that I don't see as relevant in any way to how good of an appraiser I am.  Oh, and did I mention Clearbox wants to test your skills and rate you?  Really?  I can't imagine some of the really senior appraisers out there that have been practicing for 30+ years will be taking an online test so some company they just had to pay money to will benevolently grant them status as a "knowledgeable appraiser". 

Another thing to remember is that Clearbox is not the be-all, end-all in this space.  Many AMC's and lenders contract with her competitors, so it is entirely possible that you will have to register with multiple companies, since they won't accept each others background checks and records.

Unfortunately, this is something the state appraisal boards and the ASC should have been doing for years now.  Every time you renew, they should run a background check on you, and build it into your renewal fee.  Now, once again, we have more people digging into our pockets for the remaining crumbs of money we used to make...

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Posted by Michael Lay on October 6th, 2014 6:17 PMLeave a Comment

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May 28th, 2014 10:29 PM

An occasional letter like this (very rare) makes it all worth it...

From a buyer who's appraisal came in well below the contract price:


"I wanted to thank you for your honest and forthright appraisal. I have read it in detail multiple times and know it is very thorough. It helped to bring me down to reality in regards to price in this area. We are moving from Illinois and don't really know the market. I was hoping the realtor was working in our best interest.

The realtors said it was a conflict of interest that you live in the neighborhood because you want to appraise lower to get lower taxes. I don't believe this to be true. We have always wanted our neighbors houses to sell higher so when we sell we can sell ours higher. If anything, I think you did the opposite of what would have benefited you. That's why I trust your appraisal and what ----you had to say."


Thank you, homebuyer, you made my day!!

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Posted by Michael Lay on May 28th, 2014 10:29 PMLeave a Comment

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June 14th, 2013 8:49 PM

Today I had the misfortune of receiving two appraisals done by "peers" in my area.  The first was sent to me by a builder who is angry that I am not able to justify his most recent "price increase".  Let me set the stage:

This subdivision started in 2008, but new construction (and sales) have kicked up substantially in the past 6 months.  My property was a 3,800sf 5BR/4BA home on a typical lot, with a sales price of around $365,000.  This is one of the largest homes in the subdivison, admittedly, but just barely; a lot of sales are in the 3,500 to 3,700sf range.
In the past 12 months there were 34 sales in the subdivision, 17 of which were over 3,000sf.  17 were similar 2 stories, 4 or 5 bedrooms, all but two were new construction.  Getting rid of the 4 smallest sales leaves me with 8 really good comps, all within 350sf of mine, all in the same neighborhood, new construction, similar bed/bath count, most of which were built by the same builder.  The ranged from $325,000 to $360,000, with only one over $352,000.  My numbers work out to about $355,000 on my property, around $10k under contract.

So the builder sends me a few pages from a recent sale (done in the past two weeks) by another appraiser.  His value, for a slightly smaller house by the same builder, is $390,000.  Which amazingly supports the $389,500 contract price.  His two main comps?  From a subdivision 1.6 miles away on larger lots and by a superior quality builder.  His two sales from the immediate subdivision adjusted out in the $360's.   

Appraisal #2:
My friends are buying a new house.  Due to a bidding war, they ended up offering $20k over asking price, knowing that they would likely have to come to the table with cash.  Amazingly, for this $520,000 house that they offered $540k on, the appraisal came in at $560k.  The reason?  Well, their neighborhood is a collection of homes built in the '90's, very similar to each other, on about 1/4 acre lots.  The comps?  All from an adjacent subdivision with superior quality estate homes and lots selling in the $600 - $1M range.  So the appraiser completely ignored the 5 sales from the immediate area, and also ignored the 59 sales from the general market area that were more similar in size/age/quality, not to mention every shred of historical statistical data, and just found a few in the area that would "work".  The previous high sale in the subdivision was $434,000.  The most recent sale (similar size, age, one block away) sold for $423,500.  He valued their 9,500sf lot at $125,000, yet decided that lots ranging 19,000 to over an acre deserved hardly any adjustments (several on greenbelt or view lots).  But he MADE IT WORK!  Happy lender, happy life I guess.

What is the point?  Why not just send the lender an email back 5 minutes after you receive the order and say "It's worth it, that will be $400 please"? 

I'm just incredibly frustrated right now.  Are their any appraisers out there that want to do a good job, and take some pride in correctly valuing a property regardless of whether the lender will be happy or not?

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Posted by Michael Lay on June 14th, 2013 8:49 PMView Comments (1)

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October 18th, 2011 9:26 AM

I have a question for realtors. This is not meant to be confrontational or obnoxious, I would just be interested in what other possible reasons could exist for the scenario I describe below that I must be overlooking.

I am asked to appraise a house for a purchase transaction. The house is listed for $139,000. The house is very typical for the area, a low-end spec home in a neighborhood full of the exact same type of house, many with the same floorplan, same condition, etc. This particular neighborhood has a 40% foreclosure rate, and pretty much has since it was built about 10 years ago. It is predominantly first time, low-income buyers. Right now there are at least a dozen homes that are similar in size, bed and bath counts, quality, condition, and in the exact same area, on similar lots. Almost no discernable differences.

So here is my question. How on earth does a buyers agent allow their client to sign a contract offering to buy this house at FULL PRICE????

There are no seller concessions or repairs rolled in. There are a dozen other very similar homes they could have for less money (foreclosures, which I understand take more work, for under $100k, and "market" listings for $113k to $132k). There is no possible way an agent could do a CMA and justify this price. The last home that sold for over $135k was over two years ago, and it had superior updates.

When I see these deals I just shake my head, and can only figure that their agent is just not working in their best interests. I see this fairly regularly -- full price contracts for houses in very homgenous neighborhoods where it is VERY apparent that the price is well above what other similar homes are selling for. Yet the contracts are full price offers.

Are there really that many buyers out there that just insist on buying that house for a premium regardless of how hard the agent works to dissuade them? Is that what is happening behind the scenes? A hardworking agent pleading with their buyers not to offer full price, since there is no way the house will appraise for that amount and even if they find some crappy appraiser to "make it work" they will likely end up losing money on it; but yet the buyer insists that they write up the contract at full price and submit it? They just love the living room paint color?

The only other answer I can come up with is that the owner refused to budge on their list price (leading to a conversation about the listing agent), and so they are going to see where the appraisal comes in and renegotiate?

How else does this situation occur? When I see these contracts come across my desk, I just want to call the buyers agent and ask them how they came to the conclusion that this was a reasonable offer, but I can't. So educate me, let me know what I am overlooking here...

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Posted by Michael Lay on October 18th, 2011 9:26 AMLeave a Comment

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April 6th, 2011 10:08 AM

Here is an email I got from Streetlinks yesterday.  I am signed up with them and have been for years, but I don't get any work -- my fees are too high.  But I found it interesting that they really don't need me, since their BPO business is doing so well! 


Join the StreetLinks Price Opinion Team!

FACT: Millions of Broker Price Opinions (BPOs) & Competitive Market Analyses (CMAs) Will be Performed in 2011.

If you're an active, licensed real-estate professional with proven experience performing price opinions in today's market, your business could substantially improve in 2011 by partnering with us.

>> Click HERE to Sign Up!

StreetLinks is America's fastest growing valuation provider, currently servicing many of the nation's leading lenders. We experienced 500%+ growth in the "down market" of 2010 as a direct result of our commitment to a business model that puts partnership first - with our clients and our vendor-partners.

We're poised to do the same in the BPO market. We are launching our national BPO platform with great market response. View our recent press release to learn more.

Why StreetLinks:

  • Payment directly deposited to your account within 72 hours of report completion
  • Fast, easy online report completion and submission
  • No fees for signup, membership or marketing
  • Orders assigned right - based on proximity and your historical performance


Maybe we should all just hand in our appraiser licenses and become realtors.  Then we can just run a quick search on a 1-mile radius of the house, determine the average price per square foot in the area, multiply that by the SF of the subject property (which is such a perfect method to value a house that I really don't know why they even use appraisers), and collect our $50.  We wouldn't have to worry about any legal ramifications from being wrong, or from not actually determining the true market value or putting in the time to properly analyze the property and the comparables.  I hear about agents doing 200+ BPO's a month, so at $50/ea that is $10k per month -- not too bad!

PS - No offense to the realtors that do BPO's, but you are never going to convince me that you are doing the analysis necessary to correctly value a house for $50, unless you are working for <$10/hr. 

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Posted by Michael Lay on April 6th, 2011 10:08 AMLeave a Comment

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March 29th, 2011 10:30 PM

I received this exciting opportunity tonight via email (through the Mercury Network, which annoys me):

Dear Appraiser,

I have a unique product my client is interested in ordering. They have used realtors, however they would like appraisers to do this. It is a 2 billion a year industry and appraisers have been cut out on.  I have clients that would be willing to use appraisers for their product. Realtors have been doing these for the past 3 years and do between 20-25 per week and earn an additional $1200-1500 per week. I have clients that are willing to pay $60-70 per order. Realtors give 24hr turn times on these. I have our turn time set at 48hrs with the client.

They are very simple you go to the subject property take 7-8 photos of exterior, if vacant take interior photos if you have access. They also need you to pull MLS comps on the property that you think are the best comparables for the subject property. There is no write-up and they will come in blocks of 3-4 usually at at time. You attach your photos and comps to the form in alamode under General Property Inspection. This form is found by going into appraisal product requirements.

Basically, these are photos of the subject and pulling MLS comps. No write up is needed. This product will start in approx. 2 weeks.

Otto Krebs
Diligent Asset Valuations


So do you know Otto?  All I have to do is provide him with MLS comps on the property, which, if my MLS board finds out, will get me a substantial fine and probably my MLS access revoked, since it is a violation of my MLS agreement to disseminate the MLS information.  But for $60-$70 a pop, for only 2 hours of work (plus gas and the usual overhead), that seems well worth the risk of losing my livlihood! 

The sad thing is that Otto is a certified appraiser in California.  Seems to me that he is selling out his own profession, but that is just my opinion.  What do you think, am I wrong?  Does this seem like a good opportunity to anyone?

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Posted by Michael Lay on March 29th, 2011 10:30 PMView Comments (5)

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I get this condition about every 6 months, and just love responding to it.  One of the dumber questions I get from underwriting.

Underwriter: "Please make a comment on the appraised value of subject being higher (or lower) than the predominant value in the neighborhood."

Me:  "In order to have a predominant, or median, value, it is necessary to have values that are both higher and lower.  By definition, a median has an equal number both above and below it.  In this case, the value is higher (or lower) than the median.  The underwriter will note that the value is well within the typical range as noted in the report and that several of the comparable sales were similarly priced."

I'd like to follow that up with "No adverse effect is noted on the value or marketability of the property due to the limited common sense and/or real estate knowledge of the underwriter", but I try to keep the sarcasm to a minimum.   

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Posted by Michael Lay on March 9th, 2011 9:02 AMLeave a Comment

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I received an email today from LRES, which I assume is some type of appraisal management company and/or settlement services provider.  Anyway, they were kind enough to notify me that they are now offering new products, and did I want to sign up to provide these services?  Below is the text of the email:

We Are Now Offering Our Clients a New Product!
Update your vendor profile to be eligible for these new products

Dear Vendor,

LRES is now offering a new product, please read the descriptions below:

Subject Data Report: Focuses entirely on the subject property and asks for 10+ exterior subject photos and completion of a brief questionnaire about the subject and subject market area. If interior access is obtained, 20+ interior photos should be provided of all rooms, damages, needed repairs and upgrades. A value determination will not be required. No comparables necessary. Turn-time will be 24-48 hours.

o Subject Data Report – Exterior - $20.00

o Interior Data Report – Interior - $30.00

Comparables Data Report: $15.00 - The agent runs local MLS for the best 15 comps in the subject market, selects the 15 best indicators of value for the subject property and prints these 15 full agent MLS "WITH" photo galleries to a PDF. Preferred 10 sales and 5 listings. The agent then selects the best 6 comparables (3 sales, 3 listings) and enters these 6 to a form. No visit to the property is necessary. A value determination will not be required. Turn-time will be 24 hours.

Subject Data Report with Comps: $35.00-$45.00 - This report will be a combination of the Subject Data Report and the Comparables Data Report. Turn-Time will be 24-48 hours.

If you are interested in the above products, please log on to your vendor profile at and provide your fees for each service. Due to call volume, please refrain from calling LRES.


Now, call me crazy, but you really want me to drive across town to take a bunch of photos, drive home, log in, complete a questionairre, and upload these photos...for $20 bucks?  Or add the hassle of scheduling an appointment for $30?  The guy digging a ditch in my front yard is charging $10/hour, and I have to think that, depending on the location of the house, that is at least 2 hours of my day -- plus gas!  WHO IS WORKING FOR THIS????

Even better, I can compete the Comparables Data Report for $15.  This only requires that I determine "the best 15 comps in the subject market", print the MLS data sheet with photos for them (which is illegal with most MLS's since it is proprietary data), then select "the best 6 comparables" and enter these into a form for them.  Well, if I come up with what I think are the "best 15 comps" or the best 6 comps, then HELLO, I have just provided you with my opinion of the probable range of values, and so I have just completed an appraisal -- for $15??? 

Can anyone explain to me who would be (a) willing to work for this pittance, and (b) dumb enough to actually risk your license completing a $15 appraisal? 


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Posted by Michael Lay on February 10th, 2011 12:25 AMView Comments (3)

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“What is the price per square foot?” In my job as a residential real estate appraiser, I hear this repeated almost daily. Other variations include “my neighbor sold for $ (x) per square foot”, or “the average in my neighborhood is $(x) per square foot”. Almost always, these comments and questions come from people who are unhappy with the valuation of their home. Unfortunately, the price per square foot method is very rarely a reasonable indication of the true market value of a property.

Let’s look at the basics: The price/sf is determined by dividing the sale price by the number of square feet of living space (also known as the GLA, or Gross Living Area, which is the attached air-conditioned space of the house). So a 2,000sf house that sells for $200,000 has a price/sf of $100. So does this mean that all houses in the area should sell for this multiplier? Of course not, because there are many variables to consider beyond the total square footage. If one house is on a larger lot, it should be worth more. If one house has a pool, it should be worth more. If one is substantially newer or is of superior original construction, it should be worth more.

An appraisal, at its root, is simply the methodology used to determine the value of the sum of the parts based on what “the market” (buyers) are willing to pay for those parts. So for every feature of your property, imagine that the exact same house sits right next door. It was built the same day, using the same materials, by the same builder, on the same size lot, with the same views, is the same floor plan, has the same number of bedrooms and baths, the same floor coverings, cabinets, appliances, garage spaces, etc. The only difference is (for example) that yours has a fireplace and the other one does not. It is our job to determine how much value the market gives to that fireplace. Or perhaps the differing feature is a 3rd garage space, a covered patio, an extra bathroom, etc. The point is, your house may be very similar to other recent sales, or it may be vastly different. The more unique your home, the less valuable neighborhood price/sf statistics are.

Many people in the industry will say that the price/sf is not supposed to exactly zero in on your home’s value, but it can be used to give you a pretty good “ballpark” idea. I disagree. To prove my point, I analyzed the last 30 appraisals my company performed and calculated the low and high range of price/sf for each comparable sale used, the average price/sf, and the differential from the actual price/sf of the subject property. The results show that only 66% of the properties were within 10% of the average price/sf of the comparable sales. So as a home seller, would you be comfortable using that method, knowing that you had only a 66% chance of being within 10% of the market price of your home?

A wide variety of factors influence the value of your home besides the actual size. Do you have a better view than other recent sales? In some neighborhoods one-story homes sell for more than similarly-sized 2-story homes. If your home has only 2 bedrooms, it will not likely sell for as much as a similarly-sized 3-bedroom home. Do you have a large covered patio? A 3-car garage when most have only 2? Do you have a pool? Is your landscaping significantly better or worse than most of your neighbors? Is your house on a busy street while other recent sales are on quiet culdesac lots with little traffic? As you can see, there are a wide variety of factors that influence the value of your home.

When is it a useful indicator? If can be a reasonable indicator when you have a home that is very similar to every other house in the neighborhood. If your subdivision was built by one or two tract home builders over a short period of time, with few options or upgrades available, then it is likely that your home’s value is in line with other recent sales in the area. If most of your neighbors have 2-story homes with 1-side brick veneer, 4 bedrooms and 2 & ½ baths, carpet in the living room and bedrooms and sheet vinyl flooring in the kitchen and baths, the same size lot, and are pretty similar in size and age, then it is probable that you are pretty close to them in terms of price/sf.

However, if you are in an area where the sizes, ages, levels of original construction quality, or levels of updating and condition vary greatly, I would highly recommend getting a formal appraisal done, or at least get a detailed CMA (competitive market analysis) from a trusted and knowledgeable Realtor.

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Posted by Mike Lay (Austin Area) on August 13th, 2009 10:57 PMLeave a Comment

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June 1st, 2009 11:21 PM

I was perusing the June issue of Money magazine when I came across a short article entitled "The Benefits of a Beautiful Outdoors".  The gist of it was that good landscaping adds about 10% to a homes value according to a Michigan State study.  Normally I would have just laughed at that and moved on, but several days earlier I was reading a blog post on Activerain where a realtor had asked a similar question, that she had heard that 10-15% statistic (although from a different source).  So now I'm going to have to post something to make sure everyone understands that 10% is NOT a good figure to be telling homeowners.

First of all, lets use some common sense here.  If you are selling a $500,000 home with typical landscaping (typical for the neighborhood), and your next door neighbor has the exact same house, exact same finish, etc., but has really done some nice landscaping, do you really think he is going to get $550,000 for it?  Very doubtful.  In most neighborhoods the differences are relatively minor.  The only way I can see that large of a difference occurring is if your yard is a weed-invested, dead grass, no shrubs or trees, dusty mess with a bunch of wrecked cars on blocks in it -- very inferior to the "average" home in the neighborhood.  And the neighbors house would have to be substantially above average.  Maybe in an ultra-premium neighborhood where everyone has their own gardeners, but for the 99% of the homes out there, not so much.

The problem with extensive landscaping is the upkeep.  I've done appraisals on homes where the homeowners insisted on giving me a map of the plants and shrubs along with a history of the design and implementation of the landscaping.  These people are pretty much professional gardeners, and they enjoy spending 10 hours a week pruning and maintaining -- it's their hobby.  MOST BUYERS DO NOT WANT THAT COMMITTMENT.  So the fact that you spent $25,000 in landscaping your $150,000 home, while a testament to your love of horticulture, doesn't mean that you will get that much additional value out of it.  For most typical subdivisions, I doubt it would get you more than maybe an additional $5,000 in value.  Sorry, but that's what the market tends to show.

Now, about that study.  I found the synopsis of it here.  In a nutshell, they took a picture of a house, then computer-enhanced the yard in multiple designs to show a variety of options; large shrubs, small shrubs, intricate designs, standard designs, etc.  They then surveyed people at home and garden shows across the country and asked them how much more they would pay for the different versions than from the base house. 

To me that is a pretty flawed methodology.  You're asking random passerby for a definitive number concerning a property that is not in their market, that they have no familiarity with, and that they have no particular attachment to -- no "skin in the game".  I think most realtors would agree that if you picked up a random person and drove them through a neighborhood and asked them how much they would pay for some of the houses, the difference between that and someone who actually wanted to buy in that neighborhood would be substantially different.  Similarly, asking an interested buyer standing in front of two duplicate homes, one with superior landscaping, would likely not get you an offer with a 10% premium. 

So in summary, DO NOT tell sellers to spruce up their yard in order to add 10% to it.  As most realtors know, you want to be similar to or SLIGHTLY above average to get top dollar.  As long as the landscaping is similar to the neighborhood, there is no need to add to it other than some flowers for curb appeal - the "petunia factor".  If you enjoy gardening and love to work in the yard, by all means go ahead, just understand that like a pool you will not get a high percentage of your money back out of it, so do it for the enjoyment.  

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Posted by Mike Lay (Austin Area) on June 1st, 2009 11:21 PMView Comments (1)

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