As part of our contributor series, Julie Molendorp Floyd gives tips on how to use more objective language in your appraisal reports ahead of the new Loan Collateral Advisor (LCA) alert messages that will take effect June 29, 2023.
Did you know that the giraffe was called a “camelopard” until the late 19th century? Originally, people heard ideas of a beast which looked to be part camel and part leopard. Since they had never actually seen the animal, they created an image based on their imagination. Once more people had seen the animal and documented its actual appearance, thought processes were revised accordingly.
“Nice to meet you, let me add your information to my Rolodex.” I doubt this sentence has been spoken with any regularity in the past 5 years. I am sure there are some active Rolodexes out there, but most of us now save contact information on our computers or smartphones.
Bottom line: Times change, so does our language and word choice.
Evolving the language in our appraisal reports
Following that thought process, our appraisal language has simply got to change to reflect current times. In addition, our lenders and GSE’s are implementing tools and programs to identify when “Certain prohibited, subjective or potentially biased words or phrases are included in appraisal reports.” (Freddie Mac Announcement: “Loan Collateral Advisor: Starting June 29 New Messages Alert Users to Certain Unacceptable Appraisal Practices,” April 28, 2023)
So, if we have the technology and tools to present our conclusions in clearer, fact-based ways, let’s get ahead of the program and make the changes proactively.
Our fellow appraisers get so upset when they are asked to change or remove a certain word or phrase from their report. What is the basis for this angst? As appraisers, we take a certain personal pride in our appraisal reports, and it is never a good feeling to be questioned. It is simply human nature to be bothered when your thought processes are questioned or are labeled in a problematic way, such as “potentially biased,” and we react in an emotional manner.
None of us enjoy completing revision requests. They take time, effort, and ultimately do not contribute to our bottom line. However, revision requests are part of an appraiser’s life. How can you go about crafting your appraisal report to avoid a revision request for “problematic language” or “unsupported conclusions”? Let’s dive into some words or phrases that should not be included in your appraisal reports and uncover ways to convey your meaning in a compliant, credible way.
Moving toward fact-based language
I am sure you are familiar with some of the basics that have been lingering in our reports for quite some time. When we choose comparable sales, we are fundamentally looking for properties with similar appeal to the market. If one area has a lesser appeal than another, how can you say that accurately and based in fact as opposed to opinion?
For years, we called one neighborhood more desirable or sought after than the other. But how accurate was that description? What metric did we use to calculate “desirability”? Let’s focus on using provable, supportable facts. Does one neighborhood experience a mean of 3-5 days on market as opposed to the general area’s 20-30 days? Use language which is fact-based to support your opinions and conclusions. Visual tools often can tell the story better than anything, and there are numerous resources out there at your fingertips to illustrate your points.
Words and phrases to replace in your reports
While we know that any words related to protected classes must not be used in appraisal reports under any circumstances, there are also some other words/phrases that could be updated to make your appraisal reports fact-based and avoid those nagging revision requests. Let’s look at a few examples of how we can “Say This, Not That.”
Say This:
Not That:
Homes in the XXX neighborhood experience an average of XXX, DOM, while the overall average DOM for the market is XXX.
Desirable/undesirable neighborhood, prestigious
Accessory Dwelling Unit
Granny Flat, Mother-In-Law Quarters
Within 10 blocks of shopping areas
Convenient to shopping areas
Conforms to current market trends
Traditional
Primary bedroom, ensuite
Master Bedroom
Renovated homes are present nearby
Gentrified
External obsolescence
Nuisance
Show actual decreasing or increasing sales prices, DOM, etc. (Graphs/visuals help!)
Strong market, weak market
Public transportation is XXX (yards, miles) away
Walking distance
Schools, parks, etc. are within XXX miles/blocks
Family-friendly
Colleges/Universities are present
Students
Discuss conformity/variance of neighborhood from overall market averages
Pride of ownership, Well-kept
Final thoughts
If this discussion pops up amongst appraisers, emotions tend to run hot. We have been taking a lot of heat lately, appraisers feel challenged and persecuted when their age-old go-to phrases are called into question. If you view these types of suggestions as ways to evolve your appraisal reports to make them more current and relevant, it is easier to make the changes. To quote a Chief Appraiser I was talking with, “If I can avoid making someone feel uncomfortable or having a question raised about my report by updating a word or phrase, why wouldn’t I?”
No one wants you to water down your conclusions, they just need you to state them in a fact-based, supportable way. Do not let the use of a particular word or phrase get in the way of your message.
Want to learn more? Enroll in California Elimination of Bias and Cultural Competency for Appraisers (mandatory CE for California appraisers only) or Fair Housing, Bias and Discrimination (elective CE for appraisers in other states).
Written by Julie Molendorp Floyd. Julie Molendorp Floyd has been a real estate appraiser since 1999 and currently holds a Certified General Credential in both Missouri and Kansas. A former teacher and mother of five, Julie is now a Course and Curriculum Developer for McKissock, as well as an instructor. She teaches USPAP and many other continuing education courses, including Mortgage Lending Appraisal Requirements: Fannie Mae and Freddie Mac. Previously, Julie managed a team of appraisers at a mid-sized regional bank. She is an active voice for the appraisal community and currently serves as the Vice-Chair of the Missouri Real Estate Appraisers Commission.
