Appraisers & Reconsiderations of Value
This month’s newsletter article from IVG’s Chief Appraiser Barry Locke covered Reconsiderations of Value (ROVs) for our internal team. Keep reading to learn more about these types of requests, they’re growing in popularity, and being prepared is an appraiser’s biggest advantage!
A Brief History of ROV
As it turns out, ROVs are not a recent concept. VA appraisers are familiar with VA's Tidewater Initiative, which has been in effect for many years and essentially serves as an ROV before the appraisal is finalized. However, ROVs became more prominent following the implementation of the Dodd-Frank Act in July 2010. This legislation aimed to alleviate lender influence on appraisers, ensure fair and precise property valuations, and improve transparency in the property valuation process. It also aimed to empower consumers to challenge inaccurate appraisals, fostering transparency and accountability in theory.
As a result of the Dodd-Frank Act, the emphasis on Reconsiderations of Value has grown significantly in the appraisal industry. The act not only sought to enhance the integrity of property valuations but also aimed to provide a mechanism for consumers to voice concerns and challenge appraisals that they deemed inaccurate. This shift towards greater transparency and accountability has encouraged appraisers to be more thorough in their assessments and has empowered individuals to actively participate in the valuation process. Ultimately, the focus on ROVs serves to uphold standards of fairness and accuracy in property appraisal, benefiting both consumers and the industry as a whole.
The ROV debate intensified when GSEs (FNMA, FHLMC) introduced the UAD, allowing vast market data extraction from appraisal reports. This led to the identification of 'potential comparable sales' through the CU (Collateral Underwriter) in 2015, benefiting lenders. Consequently, there has been a notable rise in ROV requests to appraisers. Whenever a valuation falls below a contract price or the owner's expectation, a ROV request promptly ensues.
Appraisers found themselves at the center of increased scrutiny as the ROV (Review of Value) requests poured in following the implementation of the UAD (Uniform Appraisal Dataset) by the GSEs. The CU (Collateral Underwriter) became a pivotal tool, enabling lenders to access a wealth of market data for identifying potential comparable sales with ease.
As a result, the landscape of the appraisal industry underwent a significant shift in 2015. The demand for transparency and accuracy in property valuations surged, leading to a surge in ROV requests whenever discrepancies arose between the appraised value and either the contract price or the seller's expectations.
This wave of change brought both challenges and opportunities for appraisers as they grappled with navigating a progressively intricate, data-centric, and closely examined landscape. Adapting swiftly to these fast-paced advancements emerged as not just important but imperative for appraisers seeking to maintain their reputation and adeptly tackle the evolving requirements of the dynamic real estate market scenario.
Procedures and Requirements To Submit ROV Reports
1. Requestors may provide a maximum of 3 ROV comps which must be on a grid with pertinent data.
2. Requestors must include supportive documentation and verification sources: MLS sheets, maps, public records, etc., for the ROV comps they are providing.
3. Requestors must include a narrative explanation as to why the comparable sales provided are superior to those selected by the appraiser.
4. If disagreement with appraisal analysis or data (adjustments, measurement/area calculations) is the reason for the ROV, the requestor should provide a narrative explaining the items of disagreement and the reasons for believing the information provided in the report is incorrect and documentation provided to support the disagreement.
According to FNMA, VA, and other guidelines, there are in fact procedures and requirements for submitting ROV’s, as seen to the right.
Of your last 10 ROV requests, how many met these procedural guidelines? A few may, most don’t. In the rush for reconsideration, it can appear that any number of ‘comps’ are thrown back at an appraiser, like so much mud, to see if any of it will stick or to simply check off an underwriter’s liability box.
What today’s appraisers can do
Give the ROV serious consideration: there are some ROV’s that have identified a relevant sale that was missed. Several factors can result in a sale being missed: incorrect entry in the MLS, over-limiting comp search parameters, etc. Look seriously at the ROV, revise the report to include any missed sale, if relevant, or provide a brief professional statement as to why the ROV comp was not included in the report.
Begin to educate: Keeping in mind that most letters of engagement contain verbiage that, by accepting the assignment, we agree to respond in a timely manner to any revision or ROV requests, we can (professionally) remind the requestor of existing guidelines, especially when more than 3 ROV comps are sent back to us. In the process of educating, ask yourself: ‘do I want this client to send me more work?’ and educate accordingly.
Be proactive: we can provide feedback to our local appraiser boards, GSE’s, FHA & VA, legislators-lobbies, as to real-time implications of current guidelines and practices. Change is typically slow but does not happen at all unless we speak up and get involved.
See opportunity: responding quickly and professionally to ROV requests separates us from our competitors and makes us more of an asset to our clients. Reacting in frustration, ‘punishing’ the client by delaying or sending back an inadequate or unprofessional response will result in the client looking elsewhere for better customer service; the client doesn’t like ROV’s either.
