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Where Do Appraisal-Related Adjustments Come From?

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Appraisal:

By: McKissock

appraisal adjustmentsAppraisal-related adjustments are not just guesses by the appraiser or “rules of thumb.” Nor are they calculated numbers used to mathematically force a preconceived adjusted market value estimate in support of a value conclusion for the subject property. We tend to think of appraisal-related adjustments, as they pertain to residential appraisal assignments, as usually having to do with the sales comparison approach. However, it may become necessary to also provide cost approach adjustments and/or income approach rental adjustments that are not only necessary, but also appropriate, defensible, and reasonable.

Keep reading to learn about specific guidelines for adjustments, where appraisal adjustments actually come from, and a real-life example of adjustments in action.

Common adjustment factors

Adjustment factors that frequently occur with residential properties include:

  • Real property rights conveyed
  • Financing terms
  • Conditions of sale, such as motivation
  • Market conditions affecting the subject property
  • Location
  • Physical characteristics for both the land and improvements
  • Various types of depreciation
  • Use considerations, such as zoning, water and riparian rights, environmental issues, building codes, and flood zones
  • And other factors that may affect the market value of the subject property

What adjustments are not supposed to be used?

The July 26, 2016 Fannie Mae Selling Guide provides some guidance pertaining to what Fannie Mae expects an adjustment not to be. Fannie Mae’s position is summarized as follows:

Fannie Mae does not have specific limitations or guidelines associated with net or gross adjustments. The number and/or amount of the dollar adjustments must not be the sole determinant in the acceptability of a comparable. Adjustments must reflect the market’s reaction to the difference in the properties. Appraisers should analyze the market for competitive comparable sales and apply adjustments with no arbitrary limits on adjustment sizes.

Freddie Mac has stated that adjustments must be sufficiently discussed by the appraiser. Also, without statistical or paired sales analysis, adjustments tend to be subjective and imprecise. If appraisers make precise adjustments to a comparable sale or rent—1, 2, or 7 percent, for instance—sufficient data or discussion should be provided to support their analysis.

So, just where do appraisal-related adjustments come from?

Most, if not all, adjustments should come directly from the real estate market affecting the subject property. The Uniform Standards of Professional Appraisal Practice (USPAP) require appraiser familiarity with the market area where the subject property is located and competence to complete the required appraisal process as stipulated in USPAP. However, there are those occasional unique properties that require the calculation and/or extraction of reasonable adjustments through extraordinary means.

A real-life example

Several years ago, I and another appraiser had taken very separate approaches to determine the actual market value adjustment caused by the removal of 30 beautiful, mature fir trees (50–80 feet in height) bordering an entrance driveway into a 10-acre home site with a high-end, 5,000-square-foot, 3-year-old, excellent-quality residence located thereon.

The trees on the east side of the entrance driveway were thought to be located on the 10-acre tract by the 10-acre tract’s owner. The property owner of the contiguous 50-acre tract argued that the line of trees were on his property. Two independent surveyors were hired to survey the 10-acre property and agreed that the trees were actually on the 10-acre site.

One day, upset, and not believing the surveyors’ findings, the owner of the 50-acre property decided to fell all of the trees in dispute while his neighbor was at work, leaving the stumps, but having the felled trees hauled away the same day to a lumber mill.

The adjustment problem here was that, according to professional tree growers, the only trees that could be used as replacement trees could not be greater than 20–30 feet in height. Trees of greater height could not be safely transported or successfully transplanted.

The question for me and the other appraiser was how could we support the market value adjustment for the now missing trees when it was impossible to replace the removed trees with equal-in-size-and-value trees?

Further complicating the appraisal process was the reality that no comparable sales existed within the subject property’s market area that could be used to extract an adjustment using paired sales analysis.

As stated earlier, two separate adjustment calculation approaches were used. The other appraiser had concluded that the trees should be treated just like the forestry industry considered similar trees being harvested from a stand of similar-in-height-and-quality trees. He stated that the adjustment should be equal to the stumpage value of the trees that were hauled off to the mill and nothing more.

By contrast, I had concluded that the trees lining the entrance driveway had contributed substantially greater value to the property as mature, growing, beautiful fir trees lining the entrance to a very nice property. But I couldn’t prove that opinion using paired sales that did not exist in that market, or some sort of statistical data which might prove up my position. Unfortunately, such documented statistical data didn’t exist either.

What did exist were six very experienced real estate brokers within the subject market area who agreed to provide me with their independent broker’s price opinions of the 10-acre property hypothetically being sold with the previously tree-lined entrance contrasted with the value of the property as a stump-lined entrance. To that statistical average price difference, I added the cost of the removal of the stumps plus the cost of the planting of the much smaller replacement trees that several local horticultural arborists had agreed with the maximum height that could be transplanted being 20–30 feet in height.

The difference between the two approaches to calculating the necessary adjustment for each appraisal report was substantial. The matter was finally resolved by a civil court judge over one year later, with the decision being in favor of my non-textbook adjustment methodology.

Many years earlier, as a new appraiser, I was taught that generally it is better to remove thorny thistles from your garden bed using a dull hoe instead of your bare hands—when that is all that is available. This adjustment example reminds me of that sage advice.

Even with very creative approaches to extracting adjustments from the market, it is a best practice to always carefully study and then extract the necessary adjustments from the current real estate market affecting the subject property. It is time to set any left-over adjustment “rules-of-thumb” or “guesses” aside—forever!

Article by Robert Grafe.

 Robert Grafe is a Texas Certified General Real Estate Appraiser. Robert began his appraisal career on Kodiak Island Alaska in 1971 while the Owner/Broker of R.E. Grafe & Company Real Estate. He has served as a deputy county assessor/appraiser, as the chief appraiser for two national banks, and as the managing appraiser for Valuation Service Company. Robert has an extensive background in arguing both sides of county and state property tax appraisal appeals. He specializes in real property litigation support, valuing commercial properties in transition, and real property tax assessment consultation, with over 40 years of experience. Visit his website at valuationservicecompany.com or email reg@valuationservicecompany.com.

Commentary on the the U.S. Appraisal Market – Change is Coming

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John Mathis June 13, 2018

This article was first published in the Harbor View Advisors.

About John Martins

John is a Partner and Co-Founder of Harbor View Advisors. He brings over 20 years of experience as an investment banker, investor, equity research analyst and management consultant. John leads Harbor View’s Catalyst for Corporate Development practice where he helps clients fuel growth through acquired innovation. Prior to founding Harbor View, John was a Vice President in the Technology Research Group at Goldman, Sachs & Co. in New York. As a publishing analyst, John’s research spanned companies with a total market capitalization of $100 billion across five industries including payment processing, financial services, travel services, business process outsourcing and business intelligence. Companies under coverage included Accenture, Amdocs, Automatic Data Processing, ChoicePoint, EDS, First Data Corp, Fiserv, Hewitt Associates and Sabre. John’s experience also extends to the “buy-side” as a Partner at Camelot Capital, a hedge fund with targeted investments in public and private software and services companies. John led the investment decisions involving 80 companies in ten industries including business and financial services, payment processing, telecom services and security. Prior to joining Goldman, John worked as Principal for A.T. Kearney in Chicago where he managed global consulting engagements in the U.S., Australia, Brazil, Denmark, Sweden and the United Kingdom. John’s practice expertise included international supply chain, global sourcing, process reengineering and strategic planning. John was active in helping A.T. Kearney establish new offices in Australia and Brazil and facilitated the integration of a consulting firm acquisition in Denmark. A sample of his client engagements includes Visa, Sears, Rolls Royce and General Motors. John received a Bachelor of Arts degree from DePauw University and a Master of Business Administration (MBA) from The University of Chicago. Outside of Harbor View, John is an Ironman, part-time triathlete and a father of three.

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The Appraisal world is under intensifying pressure that will likely accelerate the pace of M&A consolidation.  We see the new “registry” component of the Dodd Frank rollback as another potential catalyst for consolidation in the fragmented appraiser and Appraisal Management Company (“AMC”) arenas.  In this note we highlight where the market is pricing transactions given recent notable deals, including CoreLogic’s high water mark of 13.5X EBITDA. While the larger captive AMCs appear to have satiated their acquisition appetite for now, we see newcomers gaining ground, particularly those with private equity backing, including LenderLive and Class Appraisals or public companies like Altisource (NASDAQ: ASPS) and Real Matters (TSE: REAL).  Further, the savvy independents are sure to make a play at accelerating growth through acquisition including Clear Capital, Dart Appraisal, LRES, Pro Teck and The William Fall Group.

Appraisals Rising

Beware of “small” rule changes

An executive at a leading MortageTech company once told me, “Beware of a seemingly small rule change in a highly regulated market like mortgages.  The impact can be deadly.”  The Appraisal world is facing one of these changes.  We see the new “registry” component of the Dodd Frank rollback as a potentially massive catalyst for consolidation in the fragmented appraiser and Appraisal Management Company (“AMC”) worlds.  The forces bashing this industry have been relentless:

  • Appraiser population demographics leading to supply “shocks”
  • Low margins and limited pricing power has advantaged only the largest providers
  • Domineering government sponsored enterprise rule changes (GSEs – Fannie, Freddie)
  • A fundamental change from a form-driven industry to more data-driven value proposition
  • Looming disruptive technology innovations from drones to mobility

As every AMC tries to navigate these headwinds, along comes the “registry” change whereby an incremental fee is about to hit every AMC’s panel of appraisers.  The larger providers are better positioned to absorb these new requirements and fees, however, basic math for the smaller AMCs suggests a new expense burden with no direct beneficial offset.  Further, each state is likely to implement differently, potentially creating a complex, expensive and risky compliance environment for the AMC industry.

Merger activity is heating up

Expect continued consolidation within the AMC world, and given the permanent economic impact of “registry”, there may be further pressure on sellers to realize the valuation multiples of recent transactions.  A review of recent AMC acquisitions suggests the market is pricing these assets between 6X – 8X EBITDA, with the exception of CoreLogic’s transactions as they were considerably above this range, continuing to set the market high water mark.  In our client work, the key valuation drivers have been scale, diversity of services and technology leverage.  See the table below for recent transactions:

Forces are driving greater scale and technology innovations

U.S. real estate assets are marked to market through a unique mechanism – the appraisal.  While much has been written about the aging population and brain drain among the 40,000+ U.S. residential and commercial property appraisers, little attention has focused on the key node in the system, the AMC.   The AMCs include large captives of loan, title or data service providers and more independent, often regional, companies.

Scale and technology forces will continue to define the landscape of players.  We expect the strong AMCs to strengthen further while the middle market is more likely to consolidate the smaller players.  We also expect technology advancement in key areas like mobility and analytics.  The GSE’s are likely to drive accelerated adoption of these technologies and more efficient approaches – further accelerating industry consolidation.

Expect consolidation to pick up in the middle market

The larger captive AMCs appear to have satiated their acquisition appetite for now and we don’t expect to see much from CoreLogic, ServiceLink or First American in the near term.  However, we see newcomers gaining ground, particularly those with private equity backing, including LenderLive and Class Appraisals or public companies like Altisource (NASDAQ: ASPS) and Real Matters (TSE: REAL).  Further, the savvy independents are sure to make a play at accelerating growth through acquisition including Dart Appraisal, LRES, The William Fall Group and Pro Teck. We have summarized the AMC market segments below:

How to Write a Brilliant Blog Post per Week

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Great observations and tips on how to write a brilliant blog from the fellow blogger Christian Mihai.

Click on writer’s name highlighted in red to see original post.

Thank you Christian!

Hi guys,

Today’s post is all about writing that great post. The one that is going to attract new readers, build trust with the old ones, and engage every one who stumbles upon your blog to comment…

We’ve already talked about writing a blog post in 15 minutes, which is a great skill to have, and we also tackled the issue of being consistent.

Consistently creating great content is the backbone of any blog.

But how can you make that happen? Well, one option is to caffeinated yourself to the point of near death and stay up late the night before you publish your post.

But the better option is to spread the writing and editing process over a few days. Sounds good?

Quality over quantity

The truth is that publishing a great post once a week is better than posting mediocre content on a daily basis.

That’s what your goal should be: one weekly post that will attract attention, engage readers emotions, and turn them into loyal subscribers.

The idea is that you should be able to sustain the pace. Writing content on a daily basis is not easy to sustain, even if you dedicate a lot of your time on your hand.

So, how exactly do you write a great post a week? Well, let’s all take in day by day.

Day 1: Ideas and headlines

Start by thinking about your topic, and what angle you’ll approach it from.

Think of what the readers has to gain from reading your post. How exactly is your post going to help me? How is it going to make them feel?

What are YOU trying to make them feel?

Think of all these things as you write down as many ideas for a headline as possible. First impressions matter, so you need to create the best headline that is sure to attract attention.

While you’re at it, you can also write down your subheads. The general ideas of the post. Try to get a feel for it, to sense the direction in which everything’s headed.

That’s enough for day one.

The first step is the most difficult, and you’re off to a good start. Move on to the rest of your day, and prepare for tomorrow — it’s going to be a heavy one.

Day 2: The devil is in the details

First off, revise the headline and subheads you wrote yesterday. Do they still make sense? Are they still intriguing? Are you looking forward to filling in what’s missing?

If not, edit. Once you’re satisfied, it’s time to fill in the details. Ready? Set? Go!

I know what you’re saying right now. “It’s not a race.” Actually, it kind of is.

Don’t think, just write.

Don’t try to analyse your writing, don’t linger too much on any one paragraph. Write as fast as you can.

Punch the damn keys!

Write from the heart.

Finally, before you wrap up working on your post for the day, look for an image, something that will capture what your post is all about.

Now, it’s time to walk away. Stop thinking about your post. Take a break.

Day 3: Writing is rewriting. Also, editing.

On day three, read through your first draft to see how it looks today. You might want to read it out loud in a monotone voice to be sure it still makes sense and sounds good, even with no inflection.

Now, it’s time to rewrite and edit. Move text around, keep reading, keep tweaking.

When you’re pleased with the final result, it’s time to format your post. Add bulleted lists where you can. Add excerpts using block quotes. Break up long paragraphs into smaller chunks to make them easier to read on screen.

Last thing on your do-do list should be about checking a few more things:

  • Does the headline make a reader want to know what your post is all about?
  • Is the image intriguing enough?
  • Do the subheads tell your story all by themselves?
  • Have you asked an engaging question at the end to encourage comments and conversation?
  • Did you add a call to action for a product, service, or your email list?

Ideally, you should be answering yes to all of these questions.

Day 4: This is the day

Now, don’t think that if you get to hit that “publish” button that your job is done. No. You also need to promote your post.

How can you do that? Try:

  • Making yourself available to respond to comments, answer questions and converse with your readers
  • Promoting your post across the social media channels you use
  • Include it in your e-mail newsletter.

It’s not easy to write epic posts week after week, but dividing the work up over several days will make it a lot easier.

Building time into your schedule to get away from your post will make you a better editor.

What’s your writing schedule?

This is one way to write brilliant posts, but there are many others.

Do you have a favorite technique?

Let’s talk about it in the comments.

3 Major Credit Bureaus

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What do you think, will it boost real estate sales?

Will it help dying appraisal profession?

On the 8th of June, there will be changes on how your credit is reported. These include:

• Collections that aren’t at least 180 days old will be rejected by the 3 major credit bureaus. You will now have time to pay them off before it is even reported.

• Medical collections will no longer show on credit reports as long as it is being paid (through either you or insurance)

• Collection accounts that have not been updated in six months or more will not be factored into scores.

• Any collection that did not result from a contract or agreement to pay by the consumer, will be removed.

 

What Does The Partial Rollback Of Dodd-Frank Mean For The Largest U.S. Banks?

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Trefis Team , Contributor
Last week, President Trump signed into law a partial rollback of the Dodd-Frank Act after the proposed changes cleared legislative hurdles in the Senate and the House. The Crapo bill dilutes some of the stringent regulations imposed by the Dodd-Frank Act on the U.S. financial system, and is primarily aimed at making things easier for small- and medium-sized U.S. banks, which were seen as being affected by the tougher rules in a disproportionate manner compared to their larger rivals.

But the bill did have things to offer to some of the largest U.S. banks – especially the two U.S. custody banking giants, BNY Mellon and State Street. Based on the changes proposed by the new bill, and using our interactive dashboards for BNY Mellon and State Street, we expect these two banks to return more cash to investors in the near future, as their profits improve marginally over coming years. As this will increase net margins and reduce outstanding shares for the banks going forward, this implies a small upside to these banks’ valuations.

A Quick Summary Of The Changes Implemented By The Bill Aimed At Banks
The Crapo Bill, formally signed as the Economic Growth, Regulatory Relief, and Consumer Protection Act, introduces changes on several aspects of the U.S. financial industry. The following is a summary of changes that target the bank holding companies:
Increase In SIFI Threshold

• Current regulations label all banks with more than $50 billion in assets as systemically important financial institutions, and subject them to higher regulatory scrutiny, in addition to stricter capital requirements. The bill increases the SIFI threshold to $100 billion, and will raise the threshold further to $250 billion after 18 months.

• Which Banks Are Affected? The Federal Reserve Board currently includes 38 banks with assets worth more than $50 billion in its rigorous annual stress tests. This figure will fall to just 12 given the new threshold, as nearly all regional banks will now be exempt from stricter regulatory oversight. Notably, investment banking giants Goldman Sachs and Morgan Stanley will not get any respite because of their identification as Global SIFIs by the Basel Committee

• Why Does This Matter? While the banks with $100 billion to $250 billion in assets are not completely off the hook (and will be subjected to stress tests periodically), they will save millions in regulatory compliance costs linked with the stricter scrutiny.
Boost To Supplementary Leverage Ratio Figure of Custody Banks

• Current regulations require banks to leave out any deposits they have with central banks of developed nations (like the Fed and the ECB among others) while calculating their supplementary leverage ratio. Overall, this requirement has a negative impact on this key ratio figure. However, the new bill allows only the custody banks to include these deposits in their calculation of supplementary leverage ratio – resulting in an immediate boost to this figure

• Which Banks Are Affected? This change is a welcome one for BNY Mellon, State Street and Northern Trust. Despite being the third- and fourth-largest custody banks in the world, JPMorgan and Citigroup will not benefit from this change because of their diversified business models (with significant investment banking exposure).

• Why Does This Matter? BNY Mellon and State Street have regularly fared among the best at the Fed’s annual stress tests in terms of impact of a severely adverse economic conditions on their profits and capital ratio figures. As their capital ratio figures are already very strong, the relaxed leverage ratio requirements should free up considerable amount of cash for these custody banks – allowing them to return a sizable chunk to shareholders through dividends and share repurchases in the near future.
Change In Treatment Of Certain Municipal Obligations
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• The current classification of securities held by banks does not allow U.S. Municipal Securities to be included as a part of high-quality liquid assets. The bill makes these securities admissible as a level 2B liquid asset (which can be included as a part of the Tier 2 capital ratio figure, with a haircut of 25-50%) provided they are investment grade and are marketable.

• Which Banks Are Affected? As all banks hold some proportion of municipal securities, this move is likely to have a positive (albeit small) impact on all U.S. banks

• Why Does This Matter? Banks with a sizable portfolio of eligible U.S. municipal securities on their balance sheets should be able to report a small uptick in their capital ratio figures thanks to this amendment. Clearly, the positive impact will be more for banks with a larger proportion of these securities.

These charts were made using our interactive dashboard platform, which is used by CFOs and Finance teams, private equity professionals and more to build interactive models and create, share and present scenario analyses.

Original article with original foot notes is here.

Image not mine, source not known. From internet

No, Dodd-Frank was neither repealed nor gutted.

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Editor’s Note:

This report is part of the Series on Financial Markets and Regulation and was produced by the Brookings Center on Regulation and Markets.

The largest legal change to financial regulation since passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 just occurred. This new law neither repeals nor replaces Dodd-Frank as House Speaker Ryan claimed nor does it ‘gut Dodd-Frank’ as some of its opponents argue. Here are five false narratives promoted about the new bill, along with a surprising ramification of what passage of this legislation likely means: Dodd-Frank is here to stay.

False narratives:

1. The bill repeals and replaced Dodd Frank.

To the contrary, the legislation leaves intact the core Dodd-Frank framework: increasingly tougher regulation on larger banks, new authority and discretion for the Federal Reserve, enhanced authority for the federal government to unwind a failed financial institution, and the creation of new federal regulators, including the Consumer Financial Protection Bureau (CFPB). The legislation itself does not touch the CFPB, a key requirement for Democratic congressional support.

The House of Representatives did consider a true repeal and replace, the CHOICE Act, which passed the House with no bipartisan support in June 2017. The core of that legislation was rejected by the Senate, which reached a different bipartisan deal that attracted the support of 17 Democratic Senators.[1] The Senate bill passed verbatim by the House, where almost all Republicans joined 33 Democrats to pass this law. Congress rejected the CHOICE Act’s repeal and replace and instead embraced the Senate’s modifications of existing law.

2. This law ‘guts’ Dodd-Frank.

The major change cited in this argument is the increase of the so-called ‘Bank SIFI’ threshold, which increases the size at which a bank is subject to enhanced regulation by the Federal Reserve. Dodd-Frank set this line at $50 billion, unindexed for inflation or economic growth. The law raises this figure to $250 billion, with an important caveat that the Federal Reserve retains the discretion to apply enhanced regulatory standards to any specific bank greater than $100 billion, if the Fed feels that is warranted.

Dodd-Frank attempts a difficult balancing act in regulating large banks. The idea is to internalize the negative externalities that a large, complex financial institution creates through the imposition of higher regulatory scrutiny, specifically through higher capital standards and other forms of enhanced regulation. This was Dodd-Frank’s solution to the debate raging at the time, between nationalizing and breaking up the largest banks or allowing the market to determine proper bank size. Dodd-Frank delegated, largely to the Federal Reserve, the important task of how to set the scales to achieve this balancing act. The new legislation goes further down this path, granting the Fed greater discretion in how to set those scales for institutions between $100 and $250 billion, including providing the option of essentially no penalty for size. Congress is changing the weights on the scale, and is empowering the Fed even more, but it is continues the Dodd-Frank structure.

3. Major new lending is coming to individuals and small businesses.

This is the argument put forth by many in Congress and within the banking industry. As the Independent Community Bankers Association argues: “The new law will spur greater consumer access to credit and business lending in Main Street communities nationwide.” There is no direct provision in this law that accomplishes this and the argument that reduced regulatory costs for a subset of banks will translate into more lending as opposed to greater profits is just speculation. Bank profits just reached a record $56 billion last quarter, and small business lending by community banks is already growing twice as fast as that by large banks, according to the FDIC. The new tax law and this new bank de-regulation law will continue to help boost profits, what trickles down in lending is less clear.

Consider two provisions of the new law: the repeal of Truth-In-Lending Act protections for certain mortgages on mobile homes, and the exemption of small banks and mortgage lenders from enhanced reporting of data to detect racial discrimination (known as HMDA+).

The mobile home provision does not even touch banks, big or small. Instead it exempts manufactured home retailers and their employees from TILA requirements, ultimately perpetuating “the conflicts of interest and steering that plague this industry and allow lenders to pass additional costs on to consumers,” according to the Center for Responsible Lending.  Mobile home buyers will have less visibility into true costs, making it harder to shop for the best deal. An argument that boils down to the extra profit generated by steering consumers to products not allowed under Truth-In-Lending, may produce more marginal mobile home purchases, is weak.

The second provision targets banks that originate between 100 and 500 mortgages a year, exempting them from collecting enhanced data used to detect predatory and racially discriminatory mortgage lending. Those banks originate only around one out of seven mortgages and are competing with other national mortgage lenders who are subject to this data-reporting requirement. In the scope of a nationally competitive mortgage origination business, with far greater costs and inefficiencies than this additional data, it is hard to see how any savings will translate to borrowers, or how additional mortgages will be made. However, it could allow for greater undetected steering of minorities to higher cost mortgages – which was prevalent during the housing boom – as well as create more false positives where traditional information show discrimination but enhanced data would demonstrate otherwise.

These two provisions are both bad policy and unlikely to spur greater overall lending. Instead, they are likely to generate higher profits for the providers of credit and potentially worse terms for borrowers.

4. This law fulfills President’s Trump promise to ‘do a big number’ on Dodd-Frank.

A bill signing ceremony is a natural moment for a President to say he has delivered on a campaign promise. The lack of major legislative achievements for President Trump and the Republican Congress only compound the pressure to argue that this bill does more than it actually does. This is Congress’s likely only bite at the apple on financial reform.  Dodd-Frank survives Trump’s first two years.

To the Trump Administration’s credit, its thinking has evolved to see the benefits to major components of Dodd-Frank. For example, the Treasury Department’s report on Dodd-Frank’s failure resolution regime (Title II of Dodd-Frank) recommended keeping it with only minor modifications. This stopped efforts in Congress to repeal Title II, which remains in place.

Ultimately, the success of the Dodd-Frank framework depends on the prudence and judgment of the financial regulators who are generally given substantial authority and discretion in applying the Dodd-Frank framework. As Trump finally assembles his regulatory team – the last major piece of which was the Senate’s confirmation of the new FDIC Chair McWilliams on the same day the new law was signed – the efficacy of Dodd-Frank under a new regime will be tested.

Trump may still deliver on his promise, not by legislation, but by the actions of financial regulators he appoints. Appointing his top budget staffer, Mick Mulvaney, as Acting Director of the Consumer Financial Protection Bureau, has resulted in a series of major rollbacks and revisions of key rules and regulations to protect consumers and prevent many of the abuses that were at the heart of the financial crisis. If the CFPB is the cop on the beat patrolling against unscrupulous lending, Mulvaney, as the new chief of police is ordering the force to take a nap.

5. The legislation meaningfully addresses #EquifaxScandal.

The Equifax scandal broke during consideration of the legislation, pressuring Congress to do something. Unfortunately, the legislation does not address the fundamental problems inherent in the credit reporting system, including that 1 out of every 4 readers of this piece has a material error on their credit report. Congress settled on a small provision regarding the right to freeze credit reports without cost, while also providing Equifax and the other bureaus a major victory by limiting their liability for certain lawsuits regarding credit monitoring services they provided.

In financial regulation, scandals are often the drivers of legislation to fix problems both exposed from the scandal and long festering. This bill does neither for credit reporting agencies nor for other recent financial scandals, such as the Wells Fargo fake account scandal.

Key takeaways from the new financial law

Despite Republican control of Congress and the White House, Dodd-Frank’s structure remains largely intact. If this legislation is the largest change made to Dodd-Frank during Trump’s time in office, then Dodd-Frank will have survived its first major political test. The failure of the Republican Congress to alter significantly Dodd-Frank does not mean that it will remain effective. Personnel changes are a far greater threat to Dodd-Frank’s success than this new law. And just because the law’s impacts are not likely to threaten financial stability does not mean that they are not problematic and will not result in significant problems for certain borrowers (check back for scandals where the CFPB pulled back or in mobile homes in a few years).

Finally, it is important to note that even for those who disagree with many provisions of the new law, there are some that are positive. The law changes a definition by the Federal Reserve on the treatment of certain municipal debt to allow it to count for a regulatory requirement for greater liquidity. It also creates a reasonable parity with the treatment of corporate debt, striking a better balance for the financial system and ultimately allocating more capital to municipal governments. Hopefully they will use to build more infrastructure as it has become clear that is another campaign promise that Trump will not fulfill this year.

 

Original article with original foot notes can be found here

 

This image not mine. Source not known, from internet.

The Home Buying Process

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Today we feature our guest blogger, Bret Engle article.

Image courtesy of Pixabay

Many first-time home buyers consider purchasing a fixer-upper. While you may think a fixer-upper is an inexpensive way into your first home, or a fast track to easy money, it could turn into a money pit. Take these points into consideration so you can make a smart choice.

The home-buying process. Before you do anything else, you need to know the ins and outs of the home-buying process. CNN explains the basic steps:

Save for a down payment. Typically this is around 20 percent of the purchase price.

  • Know your credit score. The better your credit rating, the better your chance of getting a loan and securing a good interest rate.
  • Talk with your bank. Your lender can tell you how much you can borrow.
  • Explore the market. Find out what’s available in your price range.

Special funding. Depending on your situation, you may qualify for special loans to buy a fixer-upper. There are government-backed home-renovation loans available through Fannie Mae and the Federal Housing Administration. These loans are determined in part by your credit rating, along with other factors affecting eligibility.

House hunting. You need to research the homes available in your area, becoming familiar with all the local market offers. You should explore what is in your price range, decide if you can afford repairs, and think about whether it’s appropriate to invest your time, money, and energy in a fixer-upper. For instance, homes for sale in Stamford, CT have a median listing price of $570,000.

As Bob Vila explains, if you’re pooling all your funds for a down payment, it may not be reasonable to consider a home you can’t afford to fix right away. Some repairs are cosmetic, and you can live on-site and do the work yourself. In that case, you can probably take your time and make repairs during evenings and weekends. If a house has structural issues or needs major renovations, consider where you will live and whether you have the skills to do the work. When determining repairs, some items may be difficult for a layperson to evaluate. Before you fall in love with property, some experts note it’s wise to pay for appropriate inspections, which may mean hiring more than the traditional certified home inspector. There are specialized inspections for roofs, sewers, pests, and geological issues, and you might even be able to get the seller to pay for them.

Smart decisions. If you elect to take the jump into purchasing a fixer-upper home, you’ll need to invest in appropriate tools and materials. You won’t want to pinch pennies by buying poor-quality items because good tools such as drills, sanders, and jigsaws make your work much easier. Better quality equates to better efficiency and a lighter workload on your part. You also need to prioritize properly. For instance, HGTV notes you want to make any major repairs to kitchens and bathrooms first because those rooms are of high use and value.

Sell or stay? This is a big question, and there are many determining factors. One of the biggest factors in whether to flip your fixer-upper is the expense involved in your renovations. If quick, cosmetic repairs are all that’s needed and a home is located in a desirable location, you can potentially turn a profit flipping a home. However, expensive repairs, a downturn in the market, or a location that isn’t so marketable can all factor into whether your investment will pay off. Some professionals warn that for many first-time home buyers who purchase fixer-uppers, bankruptcy can be the outcome instead of a tidy profit. Weigh the pros and cons carefully before your dream of flipping a fixer-upper becomes a financial nightmare!

First-time fixer-upper? If you’re puzzling over whether to purchase a fixer-upper as your first home, it’s wise to be cautious. Understand the buying process and evaluate whether you have the skills and money to make it worthwhile. Weigh the many factors involved if you’re considering attempting to flip the property. Careful considerations are the key to making a smart decision!

Bret Engle Article

If you need help with design for your project, or with buying/selling your home or knowing the value of your home fill up the form below.

How to Share Posts From the Instagram Feed to Stories

NanaGSmith Leave a comment

What would you say? Have you used this yet? What do you think about Buffer postings?

Instagram has released a new way for users to easily share feed posts to stories.

More than 300 million users now use Instagram stories daily and this update will enable them to share any post from their Instagram feed directly to stories.

In the feature’s launch blog post Instagram explained:

When you come across something in feed that inspires you — like a post from a friend raising money for a cause or a photo of a new design from your favorite brand — you can now quickly share that post as a sticker to your story for your friends and followers to see.

How to share feed posts to Instagram Stories

To share feed posts to stories:

  1.  Tap the paper airplane button below the post (like you would to send a direct message)
  2. You’ll then see an option on the following menu to “Create a story with this post”
  3. Tap it to see the feed post as a sticker with a customized background ready to share to your story. You can move, resize or rotate the photo or video. You can also use drawing tools or add text and stickers.

Any post shared to a story will include a link back to the original post and include the original poster’s username.

Only posts from public Instagram accounts can be shared to stories. If you have a public account and would like to opt-out from letting people share your posts to stories, you can do so within Instagram’s settings.

In a recent episode of The Science of Social Media, hosts, Hailley and Brian discussed this update (around the 4:45 mark in the below audio):

Want to stay up-to-date with the latest social media news and views? Subscribe on iTunes or Google Play.

How brands can use this feature

Many brands and influencers already use stories as a way to drive attention to their latest feed and promote their latest posts. This update will be a welcome improvement to this process by allowing users to directly link to their latest feed posts, rather than taking a screenshot of a post and manually adding it to stories.

As Brian mentions in the podcast, this could enable brands to use stories as a way to cross-promote their feed posts to their audience on stories — people who may have potentially missed the post in the feed.

“One of the reasons we love stories so much is that it can be used as cross-promote content and now users will be able to go from stories directly to your feed,” he explained.

Hailley also drew comparisons between this feature and Twitter’s quote tweet functionality, where users can share content from the feed, but also add their own thoughts and context around it.

This is another exciting update from Instagram — following the share to stories and live video chat announcements at F8 — and it helps to better connect the feed to stories as well as providing a way for users to re-share some of their favorite Instagram content in a more public way than sharing with a couple of friends via a direct message.

What do you think to this release from Instagram? Will it change how you use Instagram stories for your business? Let us know in the comments 💬

Original article is here

 

 

The Ultimate Guide to Instagram Hashtags for 2018

NanaGSmith Leave a comment

This is very informative information.

Did you know an Instagram post with at least one hashtag averages 12.6% more engagement than a post with no hashtags?

Hashtags are powerful. They can help your posts reach a target audience, attract followers in your niche, increase engagement, and develop a more positive and recognizable brand image.

Here’s the thing, though: with great power comes great responsibility (#spiderman).

Click here to learn how to use Instagram Stories, Carousels, Influencers, and more. 

Hashtags can skyrocket your business to new heights, but if used too frequently or without a clear strategy in mind, they become pointless and inefficient, e.g.: #happy #superhappy #ecstatic #jumpingforjoy #whatsanothersynonym.

We want your business’s Instagram posts to receive optimal engagement, so we’ve put together an ultimate guide for using Instagram hashtags in 2018. With this guide, you won’t just attract followers — you’ll attract the right followers.

Why Hashtags Are Important

Hashtags are essentially Instagram’s sorting process. With around 95 million photos posted on Instagram every day, it’s difficult for Instagram to efficiently deliver the right content to the right people. Hashtags help your post get discovered by viewers most interested in seeing it.

Krystal Gillespie, HubSpot’s Social Media Community Manager, explains the importance of hashtags this way: “Hashtags are like a funnel. For instance, #marketing is incredibly broad and attracts all types of posts. We’ve found #digitalmarketing or #marketingmotivation gives us a more specific, targeted reach. The audience searching for these hashtags are also trying to narrow their search to what we offer related to Marketing, so we’re actually reaching more of the right people.”

Essentially, hashtags are a better way to categorize your posts. They help you reach a target audience, and more importantly, they help your target audience find you. These users are more likely to engage with your post because your post is exactly what they wanted.

Top Instagram Hashtags

  1. #love
  2. #instagood
  3. #me
  4. #cute
  5. #tbt
  6. #photooftheday
  7. #instamood
  8. #iphonesia
  9. #tweegram
  10. #picoftheday

Adding one of the most popular Instagram hashtags to your post doesn’t necessarily mean you’ll see more interaction. Since the hashtags above are so popular, they are being used by millions of people, so your post will most likely be obscured by the competition. Narrowing your hashtag topic is important, but we’ll get to that next.

How to Use Hashtags for Your Business

1. Keep Your Hashtags Organized

To create an efficient hashtag system, you can use Excel or an Instagram analytics tool. If you choose an excel sheet, you’ll need to manually keep track of which hashtags you use, how often, and which ones correlate to your most popular posts. Over time, you’ll see relationships between certain hashtags and your most popular posts, and this can help you decide which hashtags work best for your brand.

If you have a more advanced social media team, you might want to consider a tool like Iconosquare, which automatically stores top hashtags and provides reports on which hashtags reach the most people.

For smaller businesses with limited budgets, Krystal Gillespie says that, “an excel sheet is the best way to start. Once you get more advanced I would highly recommend using a tool to track the data. A manual system can get overwhelming when you’re posting three times a day and using about 20 hashtags per post.”

2. Figure Out Your Magic Number

Most top brands — 91% of them, to be exact — use seven or fewer hashtags per post, so it’s easy to assume that’s the magic number for everyone … right? Krystal explains that this isn’t always the case: She told me HubSpot has been more successful with hashtags ranging in the low 20s.

The point is, you can’t know how many hashtags work best for you until you test it. For HubSpot, it took the team several months to find a number that worked best, and during our trial period, we ranged from seven to 30. Give yourself the same flexibility for trial and error.

3. Narrow Your Hashtags

There are two big reasons more specific, smaller-volume hashtags are better for your brand: first, you can compete in a smaller pool. HubSpot, for example, doesn’t typically use the hashtag #marketing because it’s too broad. If you search #marketing, you’ll find pictures of restaurants, inspirational quotes, before-and-after hair style pictures, and memes.

The randomness of #marketing leads me to the second reason specific hashtags are a good idea: as a user, I’m more likely to find what I need if I search for something specific, and when your business comes up for my specific search request, I’m more likely to be happy with what I found.

Krystal explains: “Keeping a hashtag close to the interests of your brand really helps. We try to use hashtags tailored for a specific topic and then narrow it down further — for instance, we’d use #SEOTips if our marketing post was mostly about SEO.”

Think of it this way: #dogs is more popular, but it has a wide demographic. If I search #goldenretrieverpuppies and I find your post, I’m more likely to engage with it because it’s exactly what I wanted.

4. Research What Other People are Hashtagging

An easy way to generate hashtag ideas is to make a list of your followers or competitors and research what they’re hashtagging on their own photos. It can also be particularly helpful to research what influencers in your industry are hashtagging — by definition, influencers are people with a large social media following, so they must be doing something right.

5. Test Out Related Hashtags

When you type a hashtag into Instagram’s search bar, Instagram shows you related hashtags in the scroll-down menu. Instagram also delivers related hashtags on the next page after you click on a hashtag. This is a simple way to create a longer list of hashtags to try out.

6. Follow Your Own Hashtag

Another way to use Instagram hashtags for your marketing purposes is to follow your own hashtag. Krystal explains, “On Instagram I actually follow the hashtag #hubspot so I can find anyone who talks about us and connect with them. As long as your account isn’t private, people will be able to find you via the hashtag.”

Following your own hashtag is an effective way to engage with other people talking about your brand and develop better relationships with them.

7. Create a Brand Campaign Hashtag

This is the trickiest item on the list, but if done successfully, it can pay off big time. Some businesses have successfully attracted followers by creating their own campaign hashtag. A campaign hashtag needs to be funny, clever, or at least memorable in order to work.

Campaign hashtags are particularly useful for promoting a new product or upcoming event, or even just inspiring people. Red Bull, for example, encouraged followers to post Red Bull pictures with a #putacanonit hashtag (see what I mean about clever?). LuLuLemon, rather than running a more traditional ad campaign, developed a positive connotation for their brand by asking followers to post real, active pictures of themselves with a #sweatlife hashtag.

How to Use Instagram Search Within the App

Now that we’ve covered the importance of using Instagram hashtags for your business, you might be wondering how to search for Instagram hashtags within the app, or how to use the search function to find related ideas. If you’re unsure of the technical process for hashtag searching, here’s how:

How to Search Instagram Hashtags:

  1. Tap and enter a general search term
  2. Scroll through related terms
  3. Choose hashtag that has decent search size and relates to your post
  4. Look at related hashtags that Instagram serves you on the hashtag’s page
  5. Click on a top trending photo for that hashtag
  6. Check out related hashtags on that post for more inspiration

Original full article is here

Appraisal Firms and “Hybrid” AMCs: Beware of the Dynamex Decision and Its Impact on Classifying Appraisers as Independent Contractors in California

NanaGSmith Leave a comment

Classifying “staff appraisers” as independent contractors, rather than as employees, is a very common business practice among real estate appraisal firms. It also has become fairly common for appraisal management companies (AMCs) not only to manage the delivery of appraisals that are performed by independent contractor appraiser panel members but also to now employ staff appraisers, as employees, who perform some of the appraisals managed by the AMC — these AMCs are what I would call “hybrid” AMCs because they are functioning both as AMCs and appraisal firms.

Today, on April 30, 2018, the California Supreme Court issued a landmark decision in Dynamex Operations West, Inc. v. Superior Court. The decision could have a big legal impact on both true appraisal firms with “1099” staff appraisers and on hybrid AMCs. In its opinion, the Court held that for purposes of California’s Industrial Wage Orders, which specify overtime requirements among other things, a firm classifying a worker as an independent contractor bears the burden of establishing that such a classification is proper under the so-called “A-B-C test” used in a few other states. To meet this burden, the firm must establish all three of the following factors to justify treating workers as independent contractors:

(A) that the worker is free from the control and direction of the hiring firm in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
(B) that the worker performs work that is outside the usual course of the firm’s business; and
(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

This is a significantly different and tougher test than has been applied under prior California precedent.

The underlying case in Dynamex involved a delivery driver named Charles Lee, who claimed that he and his fellow workers were misclassified as independent contractors. The California Supreme Court determined that the appropriate legal test to be used in California courts is the straightforward, simplistic A-B-C test, rather than more complicated tests considering and weighing a long list of factors. As such, the Supreme Court upheld the trial court’s certification of a class action against the defendant company. A copy of the opinion is available here (on my website).

While the full effect of the decision may take some time to settle in, and while the decision also doesn’t resolve employee/contractor determination for every purpose (such as reimbursement of expenses), I expect that we will soon see something of a wave of litigation against appraisal firms that treat staff appraisers as independent contractors in California. Firms should carefully look at their current practices and risk. Meeting any of the three parts of the test may be a challenge for many firms, but among the three factors, the hardest one that firms will have to grapple with may be part (B) relating to whether a staff appraiser’s work falls outside the regular course of business of the firm. When an appraisal firm’s business is providing appraisals under its own name, rather than acting as a true AMC that solely manages appraisals performed by third party vendor appraisers, it will be difficult for the firm to argue that the work of the appraiser wasn’t the regular business of the firm. Making it even harder, the Court clarified that unlike in some other states, part (B) of the A-B-C test can’t be satisfied by showing that the worker performs his or her work outside the firm’s regular place of business — that won’t fly in California.

The monetary risk, however, may be much bigger for “hybrid” AMCs. Some of them may be targets for potential class actions. Such firms need to look closely at their litigation risk when they are delivering appraisals that are performed both by independent contractor panelists and staff appraisers. These firms tend to be larger and most often actually do treat their true “staff appraisers” as employees, but they still have potential risk. Since they are now combining staff employee appraisal services with offering appraisals managed from third party vendor appraisers, their risk is that the independent contractors on their panels could be reclassified as employees — since those independent contractors are now performing work that is within the regular course of the hybrid AMC’s business.

The risk to hybrid AMCs is not far fetched. In a case that went to trial in California last summer, a “field services” vendor management firm (which happened to be affiliated with an AMC under ownership of Assurant) was found liable to field service workers it had classified as independent contractors. The case is Bowerman v. Field Asset Services. The federal district court found that Field Asset Services should have treated these workers as employees and that it was now liable to them for unpaid overtime and unpaid business expenses. The decision is available here.

I recapped the Bowerman case in a longer article entitled “Independent Minded” in the 4th Quarter edition of the Appraisal Institute’s Valuation magazine, covering the appraiser/contractor issue on the broader national level. The following summary paraphrases that recap:

To prove the key point that the company’s vendor panelists should be classified as employees, rather than contractors, plaintiff’s counsel offered evidence that the company “tells vendors where to go, when to go, what to do, when to get it done and how much and when they will be paid for their efforts.” The evidence included:

  • As part of being approved for Field Asset Service’ panel, vendors signed an agreement which, although referring to vendors as independent contractors, set forth detailed requirements for accepting assignments, scheduling property access, timely performance, photo requirements, status updating and quality control.
  • Panelists were not given a meaningful opportunity to negotiate the agreement.
  • Panelists authorized Field Asset Services to perform background checks.
  • Field Asset Services offered assignments to panelists through its proprietary software platform and panelists were required to use this platform to upload their status reports, photos and invoices.
  • Panelists were required to respond to assignment requests within 24 hours and complete assignments within a stated time period, sometimes just three days.
  • Declining too many assignments or cherry picking the best could result in fewer assignments being offered.
  • Field Asset Services “score carded” panelists on their acceptance/declination of assignments, status communications, timeliness of completion and quality. A low rating could result in a warning, reduction of work or ineligibility.
  • Field Asset Services tracked its panelists’ performance and recorded warnings, counseling and eligibility suspensions in “vendor profiles.”
  • At trial, Field Asset Services’ panelists testified that they worked long hours, often 10 hours per day six days a week. And, of course, since the panelists were classified as independent contractors, they did not receive overtime. Nor did Field Asset Services reimburse them for expenses such as mileage, insurance, equipment, cell phones, internet use or computers.

What happened? After four years of litigation, the court ruled on summary judgment that any vendor who derived more than 70% of his or her income from Field Asset Services should be classified as an employee and was thus entitled to overtime and payment of expenses. The essential reasoning was that Field Asset Services had the right to so closely control the work of its contractors (and also exercised that right) and the contractors were so dependent on Field Asset Services that the contractors were employees under California law.

With liability established, the issue was then how much did Field Asset Services owe its reclassified contractors? Last summer, the damages claimed by the named plaintiff and 10 class members went to trial. The jury awarded a total of $2,060,237 to those 11 individuals for unpaid overtime, unpaid expenses, penalties and interest. The award to the named plaintiff was a striking example: the jury determined that he worked 4,845 hours of overtime from 2010 through 2016 for which he should recover $98,615 in overtime payments (on top of the payments he actually received for doing the work) and that he should be awarded $168,746 for his unpaid expenses ($95,247 for mileage alone). It’s estimated that there are 100+ remaining class members potentially entitled to the same types of damages.

Because of the high stakes, the potential risk for hybrid AMCs needs to be considered very carefully by such companies.

Written by Peter Christensen