The Norris Group Blog

Joseph Magdziarz 2009 Vice President, The Appraisal Institute (Full Bio)

Bruce Norris is joined again by upcoming 2011 President of the National Appraisal Institute, Joseph Magdziarz.

Bruce asks Joseph why he’s teaching appraisal courses in foreign countries. Joseph says numerous foreign countries are asking for the education so they can find out how to write an appraisal that could be understood globally. This will allow them to participate in the global mortgage market.

Joseph says the ultimate goal of an appraisal is to assign a value of an asset in the now. An acceptable margin of error for an appraisal is 3% but no more than 5%. The definition of market value is a buyer and seller under no undue stimulus coming to an agreement on a price to be paid for an asset. Joseph talks about REOs and short sales and how they should not be factored in to appraisals as they are liquidation prices.

Bruce beings up this appraisal issue which investors are having to deal with when they purchase these types of homes and then repaire them in California. Joseph says the banks should not consider REOs and short sales market value because of the repairs being done and the risk the investor takes in this market. Bruce asks if the new buyer of a fixed home is setting the new market value. Joseph says in the open market, it should but the appraisal might be different because of all glut of REO comps. Often times, appraisers are not being fair and many properties are being undervalued which is a problem.

Bruce brings up the typical scenario of The Norris Group when dealing with appraisals in the current California real estate market. TNG purchases the distressed, “as is” property from auction or from an REO agent and spends time and money upgrading the property. If TNG gets multiple offers, why isn’t it considered market value?

Joseph says competent appraisers will say that that does create market value. Submitting those back up offers could really help force the appraisers make that market adjustment.

Bruce asks if there is no similar inventory, what should investors do? Joseph says hire someone with specific experience with an MAI or SRA designation. Bruce talks about an area in Moreno Valley and the glut of vacant REO and “as is” inventory. When TNG fixes something, the appraiser is typically not getting cooperation because there is no similar substitutions in the market. We’re the only fixed up property.

Bruce talks about the appraisal business in 2004-2005 and how they were feeling pressure to get to a certain high number for refinances. Bruce asks if there is now the opposite pressure from banks wanting to loan less thinking the value will continue to decline.

Joseph says lenders can make loans in a declining market at today’s value and shouldn’t feel like there’s excessive risk if there are the three C’s: collateral, capacity to pay, and credit rating. Joseph says he heard that appraisers were using foreclosure and short sales and these DO NOT make market value so are inappropriate. Liquidation value is a better term for these types of inventory.

Bruce brings up review appraisals and how the original appraisers are worried about coming in too high for fear of being blacklisted from doing work for a certain account if the numbers are adjusted. Bruce asks about the review appraisal process and what authority they have to adjust prices the way they do. Joseph says these review appraisals have to come up with their own opinion but to arbitrarily adjust a number up or down 10% without just cause would be a violation. Many times these reviewers are not following the same license laws the appraisers are required to follow. Appraisers could ask for the review appraiser to send to them the review but most probably won’t. They are entitled to a copy of the review appraisal.

Bruce asks if the review appraiser goes out into the field. Joseph says they often do the review behind a desk using AVM. This is not the same and is just an estimate. Joseph says many lenders might be looking for quick and cheap. Joseph says the lending institution or review company they pay does the review appraisal which is also causing a problem.

Bruce asks how difficult it is for appraisers to work in a market with such wide swings in price, sometimes monthly. Joseph says he doesn’t know how they work in states like California. He says only the best people should be doing these appraisals. People need to use a professional appraisers and not AVMs or BPOs.

Bruce asks if there are new rules for appraisals coming down the pike. Joseph say the Home Valuation Code of Conduct (HVCC) says any new loans that are purchased has to have an appraisal and any existing can be less than that. A borrower is also required to get a copy of the appraisal. Joseph said the use of management companies is causing a problem because they are keeping part of the fees that should go to the appraisers so they may be spending less time doing a proper job.

Joseph says an appraisal is typically good for six months but in this market, it’s not as relevant. Bruce asks about improvements on homes above and beyond like pools and upgraded hardscaping. In an inactive market, it’s very difficult to assign a value to these extras. An appraisal will have to try and find similar comps. In this type of market, it is possible for these extras to result in little extra value.

Bruce asks about “standard 3.” Joseph says they are 10 sets of rules that govern the appraisal industry. For more information, visit appraisalinstitute.org.

Joseph C. Magdziarz, MAI, SRA is the 2009 vice president of the Appraisal Institute. He will become the president elect in 2010 and president of the Appraisal Institute in 2011.

Magdziarz has been an active member of the Appraisal Institute for 38 years. He has served in a variety of capacities at all levels of the organization.

At the regional level, Magdziarz has served two terms as Regional Vice Chair and two terms as Region III Chair. He has also been a regional representative for many years. On the national level, Magdziarz served two terms on the Appraisal Institute’s National Board of Directors. He has served as Chair of the Education Committee for five years and has also chaired the National Audit Committee, Instructor and Faculty Committees, and Education and Publications Committees. In addition, he has served on a number of project teams. Presently, he is serving on the ADAPT (MAI demonstration report alternative) project team and the International Education and Designation project team.

Magdziarz has been President of Appraisal Research, Inc. in Rockford, Illinois for 38 years. He resides in Rockford, Illinois with his wife Sandra of 41 years and his bulldog Bella.

Magdziarz is an approved Appraisal Institute instructor for 26 courses in the Appraisal Institute’s QE, AE, CE, and USPAP curriculums. He has also had international assignments in Naples, Italy; Istanbul, Turkey; Seoul, South Korea; and Beijing, Tianjin, and Shanghai, China.

Play Now

Joseph Magdziarz 2009 Vice President, The Appraisal Institute (Full Bio)

This week Bruce is joined this week by Joseph Magdziarz. He is the current Vice President of the Appraisal Institute and he will become the President Elect in 2010 and President in 2011. He has been associated with the Appraisal Institute for 38 years.

Bruce starts by asking what the MAI designation means. MAI used to stand for “Member of the Appraisal Institute” but now means a member holds the highest professional designation for appraisers. The SRA designation is for residential appraisals and once again gives you the highest designation for that profession. These designations are given by mandated educations and experience.

In 1989, the FIRREA Act was passed. The FIRREA Act was put in place to create barriers to entry for those seeking to become professional appraisers and also to standardize the appraisal process. While it didn’t clean up the appraisal institute completely, it did put in place important systems. In 2008, the Appraisal Foundation brought education and review to a new level. This is still a work in process.

Joseph says on-the-job training is probably the most important aspect of a trainee becoming competent in the world of appraisals. Bruce asks what the stimulus was behind the FIRREA Act. Joseph tells him that at the time there was huge losses going on and lenders were able to hire whoever they wanted and they sometimes had no experience. This lack of experience was seen as a huge part of the problem during the S&L crisis.

Bruce talks about the current markets and asks if appraisers are taking some of the heat for the foreclosure problems. Joseph mentions the Appraisal Institute just got back from a Washington D.C. meeting with Congress and other groups in related industries. The Congressional Research Services gave them a copy of a report that was done on all the causes of the current crises. Out of 26 key areas that are listed as the cause of the real estate and mortgage backed securities issues, the appraiser world is not listed. Joseph says it’s good but it doesn’t mean the organization is perfect yet.

Bruce asks if Joseph sees legislative changes coming regardless of who is at fault for the current real estate crisis. Joseph says the Appraisal Institute’s president, Jim Amorin, is testifying before the Congressional Housing and Finance Committee speaking on the Housing Valuation Code of Conduct.

Bruce says in California foreclosures are a huge percentage of the for sale inventory. Often the process starts with a BPO. He asks is appraisers are part of that process. With BPOs, Joseph says there is not accountability and the requirements are different. Joseph says there are different motivations and that appraisers are required to remain unbiased.

Bruce asks how Realtors and appraisers get along and if they typically agree on important issues. Joseph says the two groups differ greatly on the BPO issue and appraisers think Realtors and brokers should be held to the same standards when making real estate evaluations and appraisals. Many states have their own rules and regulations so the National Association of Realtors doesn’t have much control of this issue on a state level. There are 23 states that currently prohibit BPOs for lending purposes. Fannie Mae and Freddie Mac were unaware of this and called their management companies immediately and halted the practice in those states.

Bruce says a few years ago he was at a Five Star Conference and a lender was on the stage when a broker asked why she had never gotten a listing from the numerous BPO submittals she had put forward. The lender admitted to giving the listing to the highest BPO they received. Joseph says that doesn’t surprise him.

Bruce asks how much of a problem coercion is for appraisers. Joseph says it’s been a real problem lately and especially in states like California. There was recently a lawsuit about an appraiser getting blacklisted because he didn’t give a lender a certain price. The Home Valuation Code of Conduct should address this as a new hotline will be created so appraisals can report this when issues like coercion arise. Joseph says there could be a penalty if an appraiser was caught adjusting numbers or was influenced. The other side is not currently help accountable and that should change.

Bruce says he had read that appraisers may soon have to be bonded and asks how that would change the appraiser business. Joseph says it would be devastating to the business. This would raise an appraiser’s overhead $16,000 and that would be passed on to the customers. The lenders should be the one with the bond since they approve the loan.

Bruce talks about the cramdown in which a current appraisal is necessary. Joseph says it’s excellent for appraisers but it hasn’t passed it yet. Too many people did home valuation models and BPOs and not professionals appraisals. It would have helped. There is a downside to cramdowns so he’s waiting to see what happens.

Bruce asks about valuations models. Joseph says sometimes they are very good and sometimes they are really bad. Areas like San Diego where there are a huge amount of dissimilar properties in a neighborhood make these models less effective. AVM is a type of regression analysis reliant on historical data so it’s not always current. Sometimes these models aren’t updated for sometimes months. Bruce asks if this is the issue with review appraisers. Joseph says this is more of an opinion and not a real estimate. AVM stands for automation evaluation model.

Fannie and Freddie say they test and update their systems often but to not give details. Every time new data gets in the model changes. But once a downward trend starts, it will predict lower and lower numbers much like it did when the market was booming. It works best when markets are flatter.

Bruce asks Joseph what changes he would like to say in the business. Joseph would like to see more education and higher standard of competence for all appraisers.

Listen in next week as the interview continues. To read more on the Appraisal Institute, see appraisalinstitute.org.

Joseph C. Magdziarz, MAI, SRA is the 2009 vice president of the Appraisal Institute. He will become the president elect in 2010 and president of the Appraisal Institute in 2011.

Magdziarz has been an active member of the Appraisal Institute for 38 years. He has served in a variety of capacities at all levels of the organization.

At the regional level, Magdziarz has served two terms as Regional Vice Chair and two terms as Region III Chair. He has also been a regional representative for many years. On the national level, Magdziarz served two terms on the Appraisal Institute’s National Board of Directors. He has served as Chair of the Education Committee for five years and has also chaired the National Audit Committee, Instructor and Faculty Committees, and Education and Publications Committees. In addition, he has served on a number of project teams. Presently, he is serving on the ADAPT (MAI demonstration report alternative) project team and the International Education and Designation project team.

Magdziarz has been President of Appraisal Research, Inc. in Rockford, Illinois for 38 years. He resides in Rockford, Illinois with his wife Sandra of 41 years and his bulldog Bella.

Magdziarz is an approved Appraisal Institute instructor for 26 courses in the Appraisal Institute’s QE, AE, CE, and USPAP curriculums. He has also had international assignments in Naples, Italy; Istanbul, Turkey; Seoul, South Korea; and Beijing, Tianjin, and Shanghai, China.Bruce Norris is joined this week upcoming 2011 President of the National Appraisal Institute, Joseph Magdziarz.

Bruce starts by asking what the MAI designation means. MAI used to stand of “Member of the Appraisal Institute” but now means a members holds the highest professional designation for appraisers. The SRA designation is for residential appraisals and once again gives you the highest designation for that profession. These designations are given by mandated educations and experience.

In 1989, the FIRREA Act was passed. The FIRREA Act was put in place to create barriers to entry for those seeking to become professional appraisers and also to standardize the appraisal process. While it didn’t clean up the appraisal institute completely, it did put in place important systems. In 2008, the Appraisal Foundation brought education and review to a new level. This is still a work in process.

Joseph says on-the-job training is probably the most important aspect of a trainee becoming competent in the world of appraisals. Bruce asks what the stimulus was behind the FIRREA Act. Joseph tells him that at the time there was huge losses going on and lenders were able to hire whoever they wanted and they sometimes had no experience. This lack of experience was seen as a huge part of the problem during the S&L crisis.

Bruce talks about the current markets and asks if appraisers are taking some of the heat for the foreclosure problems. Joseph mentions the Appraisal Institute just got back from a Washington D.C. meeting with Congress and other groups in related industries. The Congressional Research Services gave them a copy of a report that was done on all the causes of the current crises. Out of 26 key areas that are listed as the cause of the real estate and mortgage backed securities issues, the appraiser world is not listed. Joseph says it’s good but it doesn’t mean the organization is perfect yet.

Bruce asks if Joseph sees legislative changes coming regardless of who is at fault for the current real estate crisis. Joseph says the Appraisal Institute’s president, Jim Amorin, is testifying before the Congressional Housing and Finance Committee speaking on the Housing Valuation Code of Conduct.

Bruce says in California foreclosures are a huge percentage of the for sale inventory. Often the process starts with a BPO. He asks is appraisers are part of that process. With BPOs, Joseph says there is not accountability and the requirements are different. Joseph says there are different motivations and that appraisers are required to remain unbiased.

Bruce asks how Realtors and appraisers get along and if they typically agree on important issues. Joseph says the two groups differ greatly on the BPO issue and appraisers think Realtors and brokers should be held to the same standards when making real estate evaluations and appraisals. Many states have their own rules and regulations so the National Association of Realtors doesn’t have much control of this issue on a state level. There are 23 states that currently prohibit BPOs for lending purposes. Fannie Mae and Freddie Mac were unaware of this and called their management companies immediately and halted the practice in those states.

Bruce says a few years ago he was at a Five Star Conference and a lender was on the stage when a broker asked why she had never gotten a listing from the numerous BPO submittals she had put forward. The lender admitted to giving the listing to the highest BPO they received. Joseph says that doesn’t surprise him.

Bruce asks how much of a problem coercion is for appraisers. Joseph says it’s been a real problem lately and especially in states like California. There was recently a lawsuit about an appraiser getting blacklisted because he didn’t give a lender a certain price. The Home Valuation Code of Conduct should address this as a new hotline will be created so appraisals can report this when issues like coercion arise. Joseph says there could be a penalty if an appraiser was caught adjusting numbers or was influenced. The other side is not currently help accountable and that should change.

Bruce says he had read that appraisers may soon have to be bonded and asks how that would change the appraiser business. Joseph says it would be devastating to the business. This would raise an appraiser’s overhead $16,000 and that would be passed on to the customers. The lenders should be the one with the bond since they approve the loan.

Bruce talks about the cramdown in which a current appraisal is necessary. Joseph says it’s excellent for appraisers but it hasn’t passed it yet. Too many people did home valuation models and BPOs and not professionals appraisals. It would have helped. There is a downside to cramdowns so he’s waiting to see what happens.

Bruce asks about valuations models. Joseph says sometimes they are very good and sometimes they are really bad. Areas like San Diego where there are a huge amount of dissimilar properties in a neighborhood make these models less effective. AVM is a type of regression analysis reliant on historical data so it’s not always current. Sometimes these models aren’t updated for sometimes months. Bruce asks if this is the issue with review appraisers. Joseph says this is more of an opinion and not a real estimate. AVM stands for automation evaluation model.

Fannie and Freddie say they test and update their systems often but to not give details. Every time new data gets in the model changes. But once a downward trend starts, it will predict lower and lower numbers much like it did when the market was booming. It works best when markets are flatter.

Bruce asks Joseph what changes he would like to say in the business. Joseph would like to see more education and higher standard of competence for all appraisers.

Listen in next week as the interview continues. To read more on the Appraisal Institute, see appraisalinstitute.org.

Joseph C. Magdziarz, MAI, SRA is the 2009 vice president of the Appraisal Institute. He will become the president elect in 2010 and president of the Appraisal Institute in 2011.

Magdziarz has been an active member of the Appraisal Institute for 38 years. He has served in a variety of capacities at all levels of the organization.

At the regional level, Magdziarz has served two terms as Regional Vice Chair and two terms as Region III Chair. He has also been a regional representative for many years. On the national level, Magdziarz served two terms on the Appraisal Institute’s National Board of Directors. He has served as Chair of the Education Committee for five years and has also chaired the National Audit Committee, Instructor and Faculty Committees, and Education and Publications Committees. In addition, he has served on a number of project teams. Presently, he is serving on the ADAPT (MAI demonstration report alternative) project team and the International Education and Designation project team.

Magdziarz has been President of Appraisal Research, Inc. in Rockford, Illinois for 38 years. He resides in Rockford, Illinois with his wife Sandra of 41 years and his bulldog Bella.

Magdziarz is an approved Appraisal Institute instructor for 26 courses in the Appraisal Institute’s QE, AE, CE, and USPAP curriculums. He has also had international assignments in Naples, Italy; Istanbul, Turkey; Seoul, South Korea; and Beijing, Tianjin, and Shanghai, China.