Appraisal related repurchases


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Appraisal related repurchases

  1. 1. Appraisal Related Repurchases
  2. 2. Questions we will answer: <ul><li>What are repurchase? </li></ul><ul><li>What is the best thing to do when you receive a repurchase? </li></ul><ul><li>What should I focus on when submitting a rebuttal? </li></ul><ul><li>What should I include in my package? </li></ul><ul><li>What if I don’t win? </li></ul><ul><li>What can I do to prevent repurchases? </li></ul>
  3. 3. What are repurchases?
  4. 4. <ul><li>When an investor has found a issue with the original appraisal (OA) and perceives the appraisal as being fraudulent or misrepresentative of the subject at the time of the inspection. </li></ul><ul><li>Because of the perceived fraud they are seeking reimbursement for the file. </li></ul>Appraisal Related Repurchases
  5. 5. <ul><li>Very similar to taking something back to the store. </li></ul><ul><li>They are essentially saying the merchandise they purchased was misrepresented and they want there money back. </li></ul><ul><li>You could imagine with a ticket price of $200,000 this could be a problem. </li></ul>Appraisal Related Repurchases
  6. 6. <ul><li>Just because they are requesting a repurchase doesn’t mean its valid. </li></ul><ul><li>From our experience about 80% of appraisal related repurchases are not factual based. </li></ul><ul><li>With proper documentation a large number of appraisal related repurchases can be rebutted and won. </li></ul>Appraisal Related Repurchases
  7. 7. Receiving a Repurchase
  8. 8. <ul><li>Typically starts with a claim package outlying the issues and providing supporting documentation </li></ul><ul><ul><li>Contents of claims letter </li></ul></ul><ul><ul><ul><li>Claims Letter </li></ul></ul></ul><ul><ul><ul><li>Review Appraisal </li></ul></ul></ul><ul><ul><ul><li>Original Appraisal </li></ul></ul></ul><ul><ul><ul><li>Supporting Documentation </li></ul></ul></ul><ul><ul><ul><li>Other misc. items </li></ul></ul></ul>Receiving a Repurchase Request
  9. 9. Sample Repurchase Package
  10. 10. <ul><li>The process: </li></ul><ul><ul><li>Review All documentation </li></ul></ul><ul><ul><li>Separate facts from Opinion </li></ul></ul><ul><ul><li>Order Review Appraisal </li></ul></ul><ul><ul><li>Contact Original Appraiser </li></ul></ul><ul><ul><li>Gather information </li></ul></ul><ul><ul><li>Write the rebuttal </li></ul></ul><ul><ul><li>Submit the package to the investor. </li></ul></ul>What to do when received
  11. 11. Reviewing the Documentation
  12. 12. <ul><li>What did they provide? </li></ul><ul><li>Packages will vary greatly in details as well as supporting documentation. They could be as small as 3 pages or as large as 150 pages. </li></ul><ul><li>The size and amount of information tell you something. </li></ul>Reviewing All Documentation
  13. 13. <ul><ul><li>Copy of Field Review – Without a field review they might not have been able to get an appraiser to disagree. </li></ul></ul><ul><ul><li>Specific Claims – The more specific the stronger the message. The more general the less they have. </li></ul></ul><ul><ul><li>Original Appraisal – If they don’t provide they might not have it. </li></ul></ul>Reviewing All Documentation
  14. 14. <ul><li>Because of the bias nature of the claim reviewing the claim letter for facts is very important </li></ul><ul><li>This should be done on the front end by someone qualified to ensure the valid important issues are addressed. </li></ul><ul><li>The vital points should be communicated to the appraiser, reviewer and writer. </li></ul>Reviewing the Claims Letter
  15. 15. <ul><li>Shockingly all of the claims are not fact based or even valid. </li></ul><ul><li>Separating fact and opinion and really analyzing what the letter is actually saying is huge. </li></ul><ul><li>About 50% will be fluff and other 50% will be real information that you need to find supporting information to go back to the investor with. </li></ul>Separating Fact and Opinion
  16. 16. <ul><li>Comparables are all over 5 miles away when the subject is marked suburban (conflicts with general appraisal guidelines) </li></ul><ul><li>The subject’s front photo is incorrect (please see attached front photo) </li></ul><ul><li>Permits were not pulled for the rear addition the subject had (please see county records attached) </li></ul><ul><li>Data source was stated as MLS even though the homes didn’t sell through the MLS. </li></ul>Examples of Fact Based:
  17. 17. <ul><li>The subject has a sloping roof and should be 27.5 feet instead of 30 feet as stated on the OA. (the reality is the reviewer didn’t physically measure the house and they don’t really know) </li></ul><ul><li>The tax records are not a reliable source of information and should not be used. (says who? In some areas tax records are the ONLY available information) </li></ul><ul><li>Comparables provided are not the best available. (says who?) </li></ul>Examples of Opinion
  18. 18. <ul><li>No interior photos were included and even though the appraiser made commentary the subject was renovated there is no proof and thus the appraiser is considered misleading. (The reality is not taking interior photos is very common in some area and the fact the appraiser didn’t take interior photos means nothing to the credibility of the report.) </li></ul><ul><li>Appraiser user comparables that were too old for the subject market area. </li></ul>Examples of Opinion
  19. 19. <ul><li>101% rule is where they will find the 1% wrong with the appraisal and give that 100% of the attention on the letter. </li></ul><ul><li>Because of this you must pay extremely close attention to what is actually being said in context to everyday appraisal guidelines , rather than what they are just writing to add credibility to their letter and discredit the appraisal. </li></ul>101% Rule…
  20. 20. <ul><li>When reviewing the appraisal for the first time you are looking for what they are stating is wrong with the OA. </li></ul><ul><li>Remember just because the appraisers says something is wrong doesn’t mean that it is really wrong. </li></ul><ul><li>It could be that they have wrong information, maybe the information has changed since then (zoning, lot size, square footage etc) and because of this it shouldn’t be looked at as the truth (at least initially). </li></ul>The Review Appraisal
  21. 21. <ul><li>Look for inconsistency which will add to the credibility of the original appraisal. </li></ul><ul><li>Did the RA use similar comparables but make different adjustments? </li></ul><ul><li>Did the RA use all REO sales? </li></ul><ul><li>Did the RA appraiser sales suck as much as the OA? </li></ul><ul><li>Did the RA state information was wrong even though they can’t prove it? </li></ul><ul><li>Did the RA take a picture of the wrong house? </li></ul>The Review Appraisal
  22. 22. <ul><li>This can work to your advantage, when a position is taken too strong it enables a “reasonable” counter offer which typically will be in your favor and will enable you to speak rationally. As long at the appraisal was not intentionally mis-represented or the appraiser didn’t just lie. You have a case for discrediting there review and also further backing up additional information. </li></ul><ul><li>Some investors are notorious for being extremely conservative. </li></ul>Too Conservative of RA
  23. 23. Ordering Your Review
  24. 24. <ul><li>Ordering a review is one of the most important steps in the rebuttal process. The appraisers needs to be provided a set clear appraisal instructions as to what the review is for, why it is being done, what information you need as well as the extended scope of work beyond your typical Fannie Mae 2000 review. </li></ul><ul><li>It’s important to let the appraiser know that this is not for an origination review or internal QC as there will typically be several other parties relying on the information and using it for or against the client. </li></ul>Ordering your review
  25. 25. <ul><li>Ordering a review is one of the most important steps in the rebuttal process. The appraisers needs to be provided a set clear appraisal instructions as to what the review is for, why it is being done, what information you need as well as the extended scope of work beyond your typical Fannie Mae 2000 review. </li></ul><ul><li>It’s important to let the appraiser know that this is not for an origination review or internal QC as there will typically be several other parties relying on the information and using it for or against the client. </li></ul>Ordering your review
  26. 26. <ul><li>When ordering a review the appraiser should be verbally told what to do as well as in written format to ensure full understand of the information needed. Everything needed should be explained in detail as to exactly what is needed as well as what is important to focus on. </li></ul><ul><li>As much detailed information as possible. You want to focus on data and as much information as possible when completing the review. </li></ul>Ordering your review
  27. 27. <ul><li>As much written information as possible </li></ul><ul><li>Copy of the MLS Listings </li></ul><ul><li>Additional supplemental comparables that could be used in addition to the ones on the OA. </li></ul><ul><li>A value conclusion </li></ul><ul><li>Facts based information on the appraisal, what he did right and what he did wrong. – You DO NOT want check box information. As much specific statements as possible will be your shoein for a defense or offense. </li></ul>What you need..
  28. 28. <ul><li>Photos of front, side , street, any view or adverse site conditions and rear (if available). </li></ul><ul><li>Map of Comparables used in original report, labeled OC for Original Comparables </li></ul><ul><li>Map of supplemental comparables added to the report, labeled SC for supplemental comparables. </li></ul><ul><li>Copies of ALL MLS Sheets on the OA and Supplemental comparables </li></ul>Review Standards
  29. 29. <ul><li>5-10 day total turnaround – The focus should be on accuracy and not rushing the issue. If the appraiser takes a day or two extra to complete the report it is well worth the extra wait. </li></ul><ul><li>Fee: $250 – 550 depending on area and level of difficulty. </li></ul>Review Standards
  30. 30. <ul><li>Does the appraiser agree or disagree with the value estimate? </li></ul><ul><li>If they agree – If they agree you really need to know why they agree. Having the appraiser simply agree with the value estimate is not enough to build a strong case in the rebuttal process. Specifically why they agree is the most important thing. </li></ul><ul><li>If they disagree – Same thing. Doesn’t mean your dead in the water but the WHY is the most important. </li></ul>Reviewing the Review
  31. 31. Contacting the Original Appraiser
  32. 32. <ul><li>Contacting the original appraiser for information should be done one a case by case basis. </li></ul><ul><li>If you decided to contact the original appraiser it is best to present them with the facts. Send a copy of the claims letter, appraisal review and really layout as to what exactly is going on. </li></ul>Contacting the Original Appraiser
  33. 33. <ul><li>What you are looking for the original appraiser to do is re-state his position and provide additional commentary as to why the original opinion of value is supported. Sometime they will be able to provide additional information and documentation as well as provide commentary to better understand the home and the market. </li></ul>Contacting the Original Appraiser
  34. 34. <ul><li>They will often (free of charge) provide in depth information as to what happened and why the valuation of the property is accurate. </li></ul><ul><li>They also have direct access to the original information that wasn’t included in the original report such as additional photos, proof of renovation, MLS listings, additional MLS Listings etc. </li></ul>Contacting the Original Appraiser
  35. 35. Writing the Rebuttal
  36. 36. <ul><li>Writing the rebuttal is just as much of an art as it is a science and its something that should be taken extremely. </li></ul><ul><li>Only experienced professionals who have direct experience in writing rebuttals for repurchases should attempt this feat. </li></ul><ul><li>More often than not using a third party due diligence firm to compose the rebuttal is the best option. </li></ul>Writing the Rebuttal
  37. 37. <ul><li>Gather all important information </li></ul><ul><li>Rebut every claim made by the investor directly. </li></ul><ul><li>Provide additional supporting information. </li></ul><ul><ul><li>Review Appraisal </li></ul></ul><ul><ul><li>OA Response </li></ul></ul><ul><ul><li>QC done at time of origination </li></ul></ul><ul><ul><li>Underwriters notes </li></ul></ul>Writing the Rebuttal
  38. 38. <ul><li>All comparables were in the subject’s subdivision </li></ul><ul><li>All comparables information was properly presented via MLS and tax record which are attached. </li></ul><ul><li>The subject was recently renovated per interior photos provided by original appraisal and comments on appraisal </li></ul><ul><li>Two local appraisers agreed with the value of the property being $xxx,xxx on the same day. </li></ul><ul><li>Review appraiser provided three additional closed comparable sales that were not on the original report that are similar to the subject and reflective of the subject’s original appraised value </li></ul>Example Rebuttal Statements
  39. 39. <ul><li>Process should be completed in NO more than 21 days. This timeline is to be used to assist in the process and ensure things are on track. </li></ul>Timeline of process
  40. 40. <ul><li>Review Letter </li></ul><ul><li>Separate Fact vs. Opinion – On Paper </li></ul><ul><li>Gather information - AVM’s, Review Appraisers notes, Reviews done at time of origination, Original appraisal (your copy),You underwriting guidelines, Original appraisers information </li></ul>Summary of Process
  41. 41. <ul><li>Order Field Review - Coach appraiser on what is need, Send appraiser original appraiser, Send appraiser specific instructions on what to do for appraisal </li></ul><ul><li>Compose Rebuttal - Gather all information, State your position in the field review, Provide fact based analysis, poke holes in claims letter, respond to every claim, conclude with rationale. </li></ul><ul><li>Submit the package </li></ul>Summary of Process
  42. 42. <ul><li>You can set-up your company so that it greatly limits your collateral risk exposure. </li></ul><ul><li>QC done at the time of inspection is huge and is worth its weight in gold. </li></ul><ul><li>Desk Reviews - Typically cost $75 - $100 and are worth every penny. Having two appraisers agree with an appraisal at the time of inspection is huge. </li></ul><ul><li>Field Reviews – Typically $250 - $350 and are extremely valuable. </li></ul><ul><li>AVM’s should be used as a filtering tool to see if a desk or field review should be ordered. </li></ul>A Proactive Approach
  43. 43. Sample Claims Letter and Package
  44. 44. Sample Rebuttal with Field Review
  45. 45. Q & A
  46. 46. Coester Appraisal Group Solutions <ul><li>Nationwide Appraisal Management </li></ul><ul><li>100% Guarantee on all valuations </li></ul><ul><li>Custom account management </li></ul><ul><li>Reverse Mortgage Special Program – </li></ul><ul><li>Staff and Fee Appraisers Nationally </li></ul><ul><li>ValueSafe Appraisal Program – </li></ul>
  47. 47. Contact Info: <ul><li>Bud W. Ryan </li></ul><ul><li>E-mail: [email_address] </li></ul><ul><li>Phone: 888-485-1999 ext 700. </li></ul><ul><li>Brian C. Coester </li></ul><ul><ul><li>E-mail: [email_address] </li></ul></ul><ul><ul><li>Phone: 240-667-7694 </li></ul></ul>