Hello everyone and welcome to another episode of Selling Greenville your favorite real estate podcast here in Greenville South Carolina I'm your host as always Stan McCune Realtor right here in Greenville and you can find all of my contact information in the show notes if you need to reach out to me for any of your real estate needs and just a reminder please like the show review the show rate it hit the little subscribe button if you're on YouTube all of those good things make sure you don't miss future episodes and just to support what I'm doing been providing you guys weekly content for six and a half years appreciate a little bit of support that would be that would be great it would go a long way and we've got a great episode here coming up here I've got a special guest actually a repeat guest which I have not had very many of but I'm gonna before I jump to introducing the guest I want to paint a little picture for you guys of some things that are going on in the world of appraisals and this is not just going to affect realtors this is going to affect the general populace and of course appraisers themselves are going to be greatly affected as well this is going to have a ripple effect in the entire market and I think I'm very curious specifically the effects that it will have in Greenville which will be I'm sure quite a few now here's kind of where I'm going with all of this for a while we've been hearing and I've been hearing and a lot of people have been hearing rumblings that there's major changes coming to appraisals but for the most part it's really flown under the radar in fact I heard someone on the South Carolina Real Estate Commission recently say that he just recently heard about this just a few weeks ago and if you don't know much about the South Carolina Real Estate Commission their whole job is to protect the general public in real estate transactions so if it's flying under their radar it's flying under a lot of people's radar and it's and it's something that it is definitely worth discussing and it really wasn't until I sat in a session on UAD 3.6 which is what this next iteration of appraisal standards is being called that we're gonna be talking about today I sat in a on a session about this a few weeks ago and realized okay this isn't just a small thing for the industry this is actually a big thing that needs to be discussed and there's a whole lot more information it just needs to get out there so a couple weeks ago I reached out to my appraiser friend Chris White who has been on the show a few times well not a few times after today it will have been a few times but Chris has been on the show before he's a he's a heck of an appraiser he's a good friend of mine in fact my I told my mom that I was gonna be interviewing an appraiser for the show and she said don't you dislike appraisers and I was like well Chris is an exception Chris is a good guy so Chris thank you once again for coming back on the show thank you so much for having me man I listen to all your pretty much all your shows so I'm not only my repeat guest I'm a fan well I appreciate that that you have a unique perspective on the data part of it and you have to have a special talent and nerdiness to really dig into that stuff and you do a really good job with it so my level of nerdiness knows no bounds if you my either you need to see me in front of one of my complicated board games and then you'll fully appreciate the level to which to which I can nerd out yeah I'm a I'm a I spread my wife always jokes me I spread sheet out vacations you know whatever it is I have it in a spreadsheet you know we we've been we discussed in it in really a Dub Tales about 3.6 the whole point of what's going on in the appraisal industry is really being dictated by Fanny Mae and as you know if you're aware of this and I know we have some consumers as well some customers of real estate that listen to you so not to dumb it down but you know if you're getting a loan on your on your home you're getting a mortgage on it more than likely it's gonna be sold to Fanny Mae or Freddie Mac or something like that I don't know what the percentage is but it's well over 90 if I remember correctly so they pretty much dictate how evaluation is done and what kind of terms it's done under yup and that hence the new version of this and it's all really gonna be really focused on data mining for the sole purpose of using AI to make some decisions and to have a better perspective on valuation of houses in terms of lending money on them you know to further strengthen their position to make sure that they're making good financial decisions on their mortgages and there's a lot of factors that go into that but at the end of the day no matter how good a borrower you are if your house is worth less than what you're paying for it it's never a good position for the bank to be in and for the purpose of this conversation and appraisals this is what we're gonna talk about is bank appraisals you know and how it affects the bank the other side of the other understand this that U a d 2.6 which is commonly you know known as the 10:04 form and there's several different other forms that Fanny Mae has for different products such as you know duplexes or income producing or mobile homes or condos or whatever they be all that's going away and it's all gonna be done to this new form 3.6 but the thing is evaluation is not changing at all how we are how we are essentially gonna look at a property and do it for risk management for the banks is not changing at all really that's changing is the form and it like I said it's all dictated by the fact that we've make you know quantum jumps in data and how we look at data and how we analyze data within the last five years you know when I first started doing this we used to have to you know take a take a photo of it and then go have it developed and then put in a reappraisal report and deliver to the client and then then they came out with the polaroids and we're like oh hot diggity dog this job's easy now you know now we're in a point now where you can pretty much do the whole thing from your iPad so you know that's where the focus of this comes in so the No. 1 bullet point to tell everybody is it's not changing valuation at all it's just changing the way date the data is gonna be delivered to the client which is an end client being Fanny May or whatever bank happens to be there if it's not Fanny May so what do you what do you say to the person that they just heard you say that they're like okay so my house is worth is gonna be worth after this form comes out which you told me pre show that the mandatory implementation date is what November 2nd I think correct that's Monday November 2nd there there's actually you may they may do it now it's usually right now they're sending out in bigger markets and there's haha in typical fashion this is something that has been punted down the road for a few years and this is like where the last time it's you know Fanny Mae's kind of drawn a line in the sand and said everyone get out but this is it and there the soft and this is a colossal change in in terms of the world of appraisal software how things are done and delivery of it so it it's been a very stiff form and now it's gonna be very fluid and as a result of that it's a it's not just a change it's a complete revolution and as a result a lot of these software companies and a lot of the lender side of it they're frankly not ready yet and there's gonna be a distinct in my opinion a distinct slowdown when it becomes mandatory in November about you know getting your appraisal reports back and that's a bullet point you wanna from an a real estate agent standpoint from a consumer standpoint it's one of the things you wanna kind of keep it in back of your mind if you're if you're under contract on November 2nd and you send that thing over to the to the closing attorney and then you call the mortgage guy up and say hey we're gonna order the appraisal and they ordered it on November 2nd it's gonna be done on a 3.6 which means if you're trying to close in 30 days it might cause some issues because I I don't know how this is gonna go there's several different industry you know scuttlebutt that like if you look around a if you look around an appraisal conference or our peer group like I'm one of the younger dudes I don't know about that not young okay I'll be 56 this year so the as a result there's a lot of guys that are just like it's not worth it for me the portion of lender work they do to get compliant with this and we're already kind of you know the good appraisers are kind of already at capacity as far as volume is concerned so now you're talking about doing a turnaround of seven days to maybe 14 days from for just an appraisal and then you talk about now it has to go through the underwriters now it's gotta go through the AI underwriting now it's gotta go through all that other stuff and they're training a whole new generation of underwriters on this as well so you know there's just gonna be a gigantic lag at the beginning part of it that's gonna really affect people as far as the closing dates are concerned I think you know I that's my suspicions is that I mean honestly personally I am probably gonna be one of the guys now Fannie Mae has told us we're doing this but as of right now FHA rule housing and you know um VA are not making it mandatory so for me I probably will step back in November and see how I can get good at what I need to get good at and not maybe just say well I won't take any conventional loans right now and just do the government stuff or do pre listings or whatever other non lending work I can find and then in in the meantime train myself so maybe at the turn of the year that I could be good I personally don't want to walk into this and spend six hours on my first one when it's the time crunches on an actual consumer for sure it's not it I don't think it's gonna be fair to do that and I wanna make sure if I sign my name to it that you know I'm 100% I know what I'm doing with it and it's not a fly by the seat of your pants kind of thing so well do you think a lot of appraisers in our area are gonna do that because if that happens then conventional loans are kind of yeah that's kind of my issues it's kind of been my banter I've been carrying around doing these things is yeah I mean I don't know what they're gonna do I can't speak for him but we've got a in in my experience we have a a high percentage of good appraisers in the upstate of South Carolina there's a lot of guys and gals out here that really are good at their job and they're on the proactive side of it and a lot of it has to do with their coalition and stuff like that we would try to keep abreast of all these things I mean to my knowledge I'm one of the only guys out there you know kicking MLS's and going hey you guys need to be aware of this and not just you know I want to be proactive with it so we can sure we can be on the same page because if you stop selling houses and I don't have the information that I need to do my job then it's gonna slow down the whole process and if you stop selling houses then I have to go work somewhere else and I'm too old and stupid to do anything else so this is what I wanna do until I until I don't wanna do it anymore and that's not anytime soon so we have to come up with a solution for that so being on top of this now when you're listening to this podcast it what you have to also understand is this is it's a colossal 100% we need to be on board with this but it's not gonna affect your daily life other than the bullet points we're gonna go over today but you need to be aware of them because if you're on the front end of it you could gain business by this because you say hey all this stuff's going on you know there's people that are proactive and there are people are reactionary and reactionary people are always left out of the loop and you can lose customers if you're reactionary absolutely so if you're listening to the podcast you know you listen to this podcast don't the sky is not falling there's things you're gonna need to adapt to life changes this is a change and if you're on top of it a year from now I think this is gonna be one of the easiest best things we could have done for the industry because it's gonna take a lot of subjectivity out of the appraisal report it's gonna take a lot of you know confusion out of it it's gonna be easier to read on a consumer standpoint I mean let's be let's be honest man when you get an appraisal report in here's what you do with it crap or yeah right yeah there's 57 pages of data in there that's right there's analysis all day long I have had I had I had one client one time that got angry about a high appraisal why because he was like I paid for this and this is garbage this is the market would not pay that price well then he got it yeah that that he should be not that is high but it's crappy appraisal yeah it just happened to be high yeah yeah I get it crappy appraisal in his opinion I don't know if it was or not but yeah but that but that's what most people do with them you know especially on the even from a consumer's perspective you get the report and you're like sometimes they don't even look at them they're just like the lender will go okay you appraised and like what did I praise for a contract alright cool next step you know it's like that's right that's all there is to it and it's there's so much more that goes into it you know and at the end of the day we're here to protect our client and the consumer in the industry as well if we weren't here you know it could have potential disaster you know economically speaking for sure it's a safeguard for sure so you know to start from the top you absolutely we have to absolutely know that the valuation side is not changing what will change is how long it's gonna take to get back to you okay and as that as we get good at this listen I've been doing this is my 23rd year I think and this is the first time they changed in the 20 in the two decades the form it changed right before I started and then it's changing now so 25 years basically two and a half decades we've been doing the same thing so this is needed have you ever looked at a reappraisal report and you can't find something or for instance you're like oh the it says my house is 2,000 square foot but it's 3,000 square foot that's cause you have 1,000 square foot basement and it's on a line below it and it doesn't look anything like the line above it so it's just confusing to everybody the only people that really know how to read it are the people that read them every day like underwriters and stuff like that it is confusing this one's gonna be a lot less confusing you know you'll see you'll see something like a you know say living room and then it'll say condition good and it'll say updates and then it'll have pictures right there so you can kind of get a good picture of whatever is right there you don't have to go hunting through the report to figure out what he said here all the subjective language is gonna be gone the commentary is gonna be very minimal and it's gonna be very data driven so can you give can you give some examples of some of these things you're that you're describing yeah like for instance like we're gonna have to know like for instance mitigation features you know you know what kind of hazards that you know if you are you in does it have flood vents does it have storm shutters does it have you know all that kind of stuff now will it make any impact on value no but these are things that are gonna be in the report renewable energy components you know solar and MLS doesn't do a good job with this right now anyway you know one of the one of the number one my one number one pet peeve with real estate agents right now and if you're listening to this please change how you do things is how what we do is we misuse the members remark section so what we do is we say remarks syndicate remarks and member remarks those are the three things we have to fill out and 99% of the time they're just copied and pasted from one of the other there's no additional information on any of them what the member remarks is supposed to be is that a non published non idx feed remarks that are made that are not public to everyone else but are integral to the property for instance if you walk into a house and it smells like pet odor and you know that has an effect on the on the marketing of the property but it's not something you really wanna advertise you know you could put it in the member remarks and it says hey this closed 10% less than the rest of the houses in the market because there was a huge pet odor or hey you know this you know whatever that it could be good things too you know it could be the list of upgrades and stuff that the guy had that could be in member remarks I mean that stuff usually likes to be you know you like to market that thing that portion that's right you know the member of marks would be very helpful for us as appraisers if you could kind of just mention things that might be integral to us in evaluation like hey this was a nasty divorce or they wanted to really you know anything that would be pertinent to why something is or isn't you know better or worse than it should be so other areas that you wanna be you wanna be noted of hood certifications where they are a lot of times you're I this is I'm not throwing shade anybody but real estate agents will market mobile homes and not know anything about mobile homes yeah of course they won't know where the hood certify certifications are they don't know the data plate is those are all things we're gonna need to know on the front end accessory dwelling units is another one that's gonna and why because they're being they're more popular now and if you don't know what an ADU is an ADU is an accessory dwelling unit which is like a sub servant living space to the property it's not a whole another house it could be that's smaller but it's an area that could be used as secondary living quarters that has all the you know like a has a bedroom a living room heat and cooling and a kitchen and all that stuff those are gonna that that's a if anyone wants to know about all that stuff and that's good because right now we don't know we don't know what has we call things different things in the MLS we don't know what they really are they're entered in different ways and we have to guess at the at the overall the overall you know if it's a ADU or whatever we have to guess at it and once we guess at it we gotta figure out what the contributory value is have you mentioned or said something it sounded like maybe you had spoken to some of the MLS's have you have you like had meetings with MLS committees locally here yeah actually we all senior leadership from GGR and the two the two 2 at that was Spartanburg Association of Realtors as well and by the way when I was there I happen to mention that we have too many MLS's you know that's one of the things that makes things hard now yeah it is there's you know you have people listing things in Spartanburg that's not gonna happen unless one of them goes bankrupt that's the only well that's the only way to do it it's my goal to at least have them combine information post closing sure it I understand it's a business I understand it's you know it's a revenue source but from your perspective looking up comps and doing research my perspective is an appraiser if we could automatically shoot each other back to the closed sales so that you don't have to go back and forth that it would be monumentally more I have to do double work now and if I'm working in an area like Piedmont or you know where they have western which is a completely different MLS it's just problematic but to answer your question yes just a couple weeks ago me and another appraiser Erica Ward had a sit down with the leadership of GDR and we went through a presentation that this is the stuff that's gonna need to change and they are actively gonna be changing the MLS in Greenville to accommodate 3.6 now I don't know how that's gonna transpire because I understand coating side of that is a pretty big task yeah to change boxes and do you're like just add a box it's not that simple no when you're talking about an animal like MLS but for starters I suggested No. 1 we use the members remark section more efficiently and No. 2 how about we add all the stuff that appraisers are gonna need in this form of a checkbox list or something like that to the associated DOC section so that we can go through all this thing like what one of the one of the other things we're gonna need to know um for instance is the distance the height of the front door from the ground now why do I need to know that I don't have the answer that to that Stan I don't know what why they think that's important I think it has to do with flood plains or something yeah I would imagine I don't know but we that's one thing we're gonna have to look at in every appraisal report and report and all that stuff so there's just little nuances and there's a so what's gonna what's gonna happen if you pull up cops or yeah are you gonna have to have that for all the cops that you're pulling up yeah and so what happens if you don't have that then you check unknown and then they get slowed up okay anytime there's unknowns so I don't remember the exact how I took a couple classes and but there's roughly 10 times more data points on this form than there are than there is currently and I think there was something like 200 on this this form so we're talking about 10,000 or 2,000 new data points to this things I got to check what kind of this what kind of that what kind of Windows what kind of that and all that takes time and if there's unknowns then we have to then we have to well does that impact value or you know it just gonna slow the whole process down if we can have a little form that has everything on it then it'll be easy we just check it off move on to the next one and it'll be like it is today but it's there's a ton I mean there's really a ton of stuff that's gonna be out there and I have a list somewhere I'll be happy to share with you at some point but it just it's gonna be a lot of minutia but the big ones the big ones are gonna be stuff like I need I'm now gonna need to know the like I can't say a house is a average quality house in average condition I have to break down is the kitchen new is the kitchen average is it good is it C1 is it C5 all that stuff and I'm gonna need to know the year and dates and the extent of the remodel in the kitchen was it countertops see what happens in the terms of in the disconnect between what you do which is to get as much money for a house as you can and what I do is tell you what most people would pay for a house is that your job is to market the house that's right and when you market the house there's certain things that you say about it like for instance totally remodeled but totally remodeled to a real estate agent is not totally remodeled to Fanny Mae you know 2 dollar square foot LVP and laminate countertops in the kitchen is not a total renovation you know how old is the HVAC how old is the roof how old are the mechanical systems does it still have old piping in it you know all those other things to the components of the house we use the term effective age you know that that actually equals the effective age of the house or our opinion the effective age of the house you know so all the little nuances of that quote unquote totally updated need to be a little bit picked apart so that I so that I can but here's the good thing about that is now I can make an adjustment for condition based on only the kitchen rather than an aggregate house were what we were pretty much have to do now or the fact that one house has crown molding in a trim package and another doesn't or something like that whereas in the past we'd have to do it in in a macro environment we'd have to say okay the quality is 2% better of this house cause it has this whereas in this we can break it down and say well the kitchen's better therefore the contributory value of the kitchen is $10,000 more than that house sure something to that so those are things that are gonna be really pertinent at the front is it is it been encapsulated is there you know all the all those other just everything you can ever imagine about anything that would mean anything to the effective age of the house so you had said that that these things aren't going to change the values but are there not going to be adjustments on the basis of all these different things so yeah but and just so the well and if I could back up for a second because I don't want to get too inside baseball on here for those that might not know but you know when because people don't typically read those appraisal reports right so on appraisal report let's say that a house has been updated whatever that means let's say it's been updated top to bottom everything's been updated in some way shape or form and there's no cops that compare that that have been fully updated in that same way you're gonna make adjustments you're gonna say well on the basis of that we're going to add value to these comps in order to basically account for that they haven't been updated and then eventually all the cops have a higher value which then you know you use to determine the valuation for the subject property so what I'm wondering is an encapsulation now is that something that you're gonna be have to look at every single other one of these comps to see if they have an encapsulation and then make an adjustment based on that absolutely but I what's gonna happen it's gonna be more nuance so in the past you let's say you have first of all let me let me correct you a little bit or not correct you but make it more precise for the move your eyes away from the conception is that there's never not a comp so just because you say there's no comps that aren't updated you have to have a basis for sure for making adjustment so you have to find one that has similar updating even if it's further away or in a slightly different market or something like that but each thing that adds value contributory value to a house has to have some kind of data supportable data to make an adjustment on that's why for instance I don't make adjustments for like things like fences a lot because of a 500,000 dollar transaction how you know if it adds 2,000 dollars of value to the property is that even can you even be that good at your job to say that's true so what what's gonna happen in in what you're talking about is in the past I had three cops and they were 400 4:10 and 4:15 okay and the 4:15 was totally updated the 4:10 was a little bit updated or the 400 was a little bit updated and the 4:10 was in the middle and you can say okay well mine's kind of more like 4:10 it's not totally updated so I'm gonna make a 10 thousand dollar adjustment for condition now I'll be able to further pinpoint that and say well everything was the same except this one did have encapsulation and the kitchen was a little better so now I can pick a point those dot those dot the individual items a little bit better because now I have individual data on all those items to find exactly what the contributory factor is rather than just saying I don't know that one was nicer all over and that's what the adjustment is now I can say well maybe it was as good but the kitchen wasn't as good and the kitchen is the one that's gonna is the condition of the property that's gonna be adjusted for but in the end you have to have data and the truth is about things like let's say encapsulated area or whatever you the my big example always is plantation shutters like yeah they cost a lot of money but you can't tell me that a buyer is ever gonna walk into a house that doesn't have them and then walk into a house next door that has them and say I'll pay an extra $15,000 for that house because it has plantation shutters and that in essence is how we is that's how we figure out what things are worth is what the what a the what the difference that the market bears on how much more somebody would pay for something that's right and if it's not provable guess what I can't make an adjustment you don't get value for it yeah you don't you it's not that you don't get value because there's this thing there's this term that we use value does it do we get value for it well there's there value means money and when we talk about you don't necessarily increase the sales price but you increase the marketability sometimes and when you increase the marketability it might sell faster it might get picked over another one I can't say for instance that it gives you an extra five grand right but I'll say if you have really nice landscaping or if you have plantation shutters most people would pick it first mm hmm or most people would pick it above another one but I can't tell you it's worth any more dollars because there's no data it you know real estate in any given situation it's a fluid living being and in in reality what happens is it's this perfect marriage of two people at this particular point in time and that's what happens with you have a guy looking for that house at that time for that much money and if you wait a week that might change and if you wait three weeks it might change you might find somebody else that's willing to pay more for that house so to try to figure it out is unless you're the most you know great and powerful odds and have all the answers to everything it's too fluid there's too much subjectivity to real estate that that's why like my job is like 90% math 10% like subjectivity you can't pinpoint it you can't you can't figure there's so many that you know you have what do you have in the house like floor plan I even told about how does this house smell like what kind of paint did they choose what kind of I mean there's so many things that go into it yep you know how you get a really crappy appraisal is if that value is 421,650 bucks nobody's that good show me the math show me the proof nobody's that good yeah I usually round to $5,000 because that's as good as that's as good as you can possibly be in this business sure I mean that's pretty good by the way 1% is pretty good you know what I'm saying 1% error is pretty good yeah for sure so anyway I took a left turn there add hit me no no you're fine so well to answer your question all that stuff is gonna be further analyzed and when we do regression on individual things we'll be able to pinpoint exactly well not exactly but pinpoint further how much the contributory value of things are it sounds like you're it sounds like it's gonna take time for all of that data to be out there like you're like an encapsulation you know not very many homes in Greenville are encapsulated for instance in the crawl space and then we've got all these slab homes being built that where that doesn't even apply yep and so I would imagine it might be years before you can even find a trend related to that and if you do find a trend it might be zero sure I mean well a lot of people don't even look in the crawl space until inspections yeah exactly but like I have arguments with builders all the time they're like you know cost doesn't equal value in my world it does so it just because it cost you an extra $20,000 to build a slab or a cross base home doesn't mean that's what it's worth in the open market it's just built in the overall sales price of the house right so if it's not the fact that it cost more is not why the house is worth more the house is worth more because people's perceived value that house might be higher and they're gonna pay that for it it's not and if it doesn't then if it costs 20 grand more and there's a slab house next to it guess what they it's if that slab house is $20,000 less I guarantee and it's identical in every other way I guarantee they'll pick the slab house 99% of the time because it's the same house that's $20,000 less yep so it's just oh yeah absolutely yeah so that part of it you know that part of it's never gonna change but that's the valuation side you know the main focus on this like I said the timing you know what's gonna require real estate agents to do is gather more information for us another thing we're gonna need more on is HOA information how much is HOA dues what does it encompass is it exterior maintenance is it lawn maintenance what kind of amenities do the HOA have that will just help the process move faster cause if it's not in the listing I'll have to go look for it and that takes time the report's gonna look totally different I don't know how many pages but they're well first of all there's not even gonna be in a report anymore the pdfs are gonna be generated by Fanny Mae so when I get done with a with a report it'll be in a in a in a online cloud situation and then I get done I hit submit it goes to Fannie Mae I don't even have a I don't even have a printed version of it I can't afford a printed version to anybody I can't afford a version to anybody other than other than the lender and then they do what they're gonna do with it and they send it out to whoever needs it how long is that process gonna take who knows okay they so they haven't I mean I know that what they say doesn't necessarily matter but I didn't know if they had issued any guidance on that or anything well unfortunately they they've adopted the theory that this is what you're doing figure it out and the ripple effect has not been analyzed by many people at this yeah like you said there's people in high positions of power authority and knowledge that have no idea this is even happening and they're gonna be completely in the front yard with their pants hanging well I'm at least grateful that they're doing this in November and not in like April or March or you know I think that was blind luck to be honest with you oh I'm sure it was yeah but yeah I mean it is what it is the other thing you have to understand too if you you're like hey Chris I'm having a hard time with this house I need you to help me price it or if I have a client that has a probate issue it's still gonna be on the old forms so those aren't going away either but for any lending purposes this is this is gonna be the way it's gonna look you know so just understand you might get some orders in from now they are out there but November is the hard date on it do you do you think that lenders that do just shelf type loans that are you know not gonna be conventional FHA whatever that they're gonna that they're gonna keep within their bank do you think that they're gonna require 3.6 or do you think they're gonna stick with the old one I think they'll stick with the old ones unless the a significant portion of their business is also Fannie Mae work and they have to integrate all the all their other stuff into it as well cause you might as well do everything one way you know what I mean if they're doing all in house stuff then they probably won't change if they're doing 90% Fanny Mae and then they keep some stuff they probably will change I don't think their I think their in house stuff will still stay on an old form though that's my initial thought you know just for ease of translation yeah the people you know in the lack of technology so I hear I don't know if it's true or not but I think I heard from a lender friend of mine that said like Fannie Mae's goal on this is that the reports turned in and the first thing it does is go to their AI underwriting like literally within seconds and then it gets under underwritten right there then and there and then it goes to an actual underwriter so they're nitpicking all the minutia the data right off the right off the top just to see if it's consistent you know the other thing that's gonna suck is that like if I call something one thing and another appraiser calls it something else there's gonna there's gonna be a flag in the system and then we're gonna have to kind of rectify that so if you had 10 people call it C3 and I call it C4 it's gonna cause a lag cause I have to explain why I think it's C4 and that's a part of the subject activity of it too yeah still gonna be a lot of that that's not changing for what it is right now right still the same way right now it's gonna it's supposedly gonna make it better and I agree is anything changing with regard to cause I've talked about this a good bit on the show in fact I think I talked about this with you last time you were on here but with regard to basements and how basement square footage is handled and all of that I know that you know what one thing a lot of realtors and the general public doesn't realize is the definition of below grade is like insanely strict I guess I'll tell it to you here's the here's the yeah so in 2,022 we finally Fanny Mae said that we're gonna have one way of measuring houses and they instituted the Ancie way of measuring houses and that's what we're supposed to adhere to and Ancie's definition of a basement is this if 1 inch of one wall is below grade you have yourself a basement well what the whole thing not a portion of it if 1 inch of one wall of the four walls or more than four walls in some cases if any of those is below grade 1 inch you have the whole place has to be valued as basement now here's the here's the misconception with that is that basement space is valued any differently than above grade space because there's some instances that's true and there's some instances it's not true right somewhere in the Greenville market and maybe nationwide I don't know somebody told you Stan that basements are valued at 50% of the above grade square footage it's not true multiple appraisers have told me that it's not true tell me their names I'll wrestle them I'll fight them now if you did a bar I'm not gonna I'm not gonna put them on blast on this show but I could if you if you did a bar graph on it and you did the data from the last 10 years of the appraisals I did maybe it's is around 50% of above grade square footage maybe it is by pure happenstance but you go up to the cliffs of glassy and you have houses that are 2,000 square feet above grade per ANSI standards and 5,000 square foot below grade per they're built in a mountain yup you can't tell me that basement space is worth 50% of the above grade square footage you go to Augusta Road and you go to a basement down there and there's dead bodies running water Freddy Krueger and you can't tell me that those basements are worth 50% of the of the above grade square footage they're not they're borderline hazard so you just have to do the work on it and here's the other thing to remember about that my issue my issue with that with the blanket with the times I've had appraisers just use a blanket rule and tell me that that they have reasons for just using a blanket rule for basements is that what you just described at least to me to my realtor ears is you just described condition like if that were the second floor and there's a dead body and mold and water coming in on the second floor of the home that affects the value of the home just as much as if it's below grade you know and so that that's my take on that no well you're 100% right I mean just because it's a basement doesn't mean it's worthless you have to me it's lazy yeah that's it to say it's 50% is lazy cause you have to do the work on it well I was also told that it's cheaper to build a basement home that is to build a second story to a house and I have asked a lot of contractors that question and every one of them has been like no way yeah I don't think so no way yeah I don't think so but look that shouldn't matter though either way to me value is value the what we do is analyze trends analyze market and that's what you should do as an appraiser that's how it should be done what is the market doing what does the market tell you about what that particular feature does whether it's a basement a pool or ADU or whatever but have you ever worked in Westwood yeah mm hmm okay so Westwood's a community for you that you people that don't know that's in Simpsonville was built in the mid 1970s started it was one of the best places to live in Simpsonville at the time it wasn't really interesting yeah and it was like the first up and coming Simpsonville back then it was Cowland and then they built a subdivision down there so when Westwood was first constructed it was in the mid 1970s and one of the big ways to build houses that were effectively and cheaply is do split level homes down there because of topography and stuff like that and virtually I would say 50% of the houses in Westwood are split level houses I know streets you can go down in Westwood right now and side by side there's Model Match Model Match Model Match okay they flipped them or whatever but house a we'll have zero square footage above grade or below grade all of it is on a raised slab just because of the topo the next house might have one inch of one wall the next house all same models might have 50% of the basements underground you can't look at me as an appraiser and look me in the eye and say that the last one is 50% of the square footage because if you do I'm calling bull crap on you it's not true you have to do the work on it yeah those are in the perception of the market in the perception of a buyer those are the same houses that's right that's how it should be valued I don't I don't mean to get on a high horse but when I hear things like that it really irks me because it means you're not doing your job properly if you say if you make if you make statements to the public to say well it's generally 50% it maybe not but that leads to a misconception and it leads to people believing that's truth because people just hear what you say what you say is how they think they wanna hear it and when you tell a real estate agent what's this worth you say 50% of the bottom top that's what they're gonna forever and here and out that's what they're gonna remember so I'm here to tell you that's not true so yeah well and I think I it's not the first time that that you've come on here and said I believe your last time you said that too and yeah I but I was just curious if u a d 3.6 change anything with regard to that sounds like really really not a whole lot no that's part of the valuation process what will change a little bit is the way the reports gonna look on it and it should be a little clear on what's above grade and below grade that's like the number when I do like private work with a basement that's the number one thing the first phone call as soon as I send it over to the client the first phone call it says hey you said I had four bed or you said I had three bedrooms and I have four bedrooms I have one in the basement I'm like I know look at the line below it says below grade square footage and it says how many rooms are down there and I know it looks nothing like the rest of the report but that's where it says and you add those two together it's the same you know but people don't I mean how many times do people buy and sell a house if they do it a lot three in their life four you know not a lot my parents did it twice in in their lifetime so they don't look at most of the time when I do that kind of work too I mean I don't talk to anybody or I don't meet anybody so they don't even know who an appraiser is they just say oh it's a piece of paper some guy signed and he says it's worth this cool I mean we don't get interactions we don't get to learn about it we just whatever we learn on TV or the internet is what we know about it and you know god if you think it's like I people say Zillow the first thing they say out of their word Zillow when I'm talking to them about valuation I'm like that's like going to web MD and saying I got a headache you can have cancer or you can have a you can have a migraine I don't know what it is but it's taking you're just dehydrated you just need a little more water or you have cancer it's one or the other yeah exactly but it's the same thing with Zillow it's like it just it's an algorithm and what Zillow is it what is Zillow is it a real estate valuation site Zillow is not what it is a marketing site yeah yes they sell ads they sell ads and the vehicle to those ads is real estate mmm hmm evaluation but it's wrong it's not right sometimes they're right but so is a blind squirrel once in a while so is a broken clock twice a day right I get yeah yeah I yeah we have that at the office I see that every now and then the every now and then I'm there when it's right the yeah I get clients sometimes that will ask me they'll be like as soon as I list their home all of a sudden their Zestimate changes based on the price we listed it for and they're like wait a minute how did that happen and I was like now you now you know the dirty secret behind the Zestimate well the dirty secret is they don't want to get sued anymore for having it wrong is what the dirty the dirty yeah yeah no doubt a lot of politics when it comes to that what about and this is I don't know how many anyone listening up to this point is invested whatever we're talking about so this this one's more for me ads yeah so currently in Greenville and Spartanburg MLS I can't remember about Western Upstate we don't have a great way of incorporating ads into a listing for instance there there's not clearly like you basically have to include them into the total square footage of the actual home yep talk about that is that gonna be a problem is that something MLS are gonna have to change yeah that was like a discussion one with the MLS board so yeah we're right now it's handled the same way as a porches you know what I mean it's like a check box somewhere and there's no additional information and that's right some cases you could have ADU's worth hundreds of thousands of dollars I know there's a builder in Greenville who's building a million dollar houses and he's building a two car garage next to them with about 400 square foot of living space and then I had a I had I did a review on one that had a the ADU as a contributory value of $40,000 and I'm like that that that that I mean that doesn't make any sense whatsoever no you know so yeah it's something that we address with them and it's something that they're supposed to be handling on a it's gonna be hopefully it's gonna be a whole another section on both of them and it's gonna have it'll be just a whole another section under that it's gonna have areas that we can put in information I know it's more work on the entry level but we're gonna have you know what kind of flooring does it have what kind of heating system does it have well there's not that you know there's not that many homes in Greenville with ADUs there's starting to be a lot more because people are built you know because of the affordability people are starting to build them and then you know like I you if it's legally permissible right now and by the way that's a whole another remind me what I just said if we get off topic about okay permissible but like if they're legally permissible people are starting to do them to have their parents live with them to have their kids live with them my daughter just bought her first house she's 20 right the right before we found her this house the conversation before that was I was gonna build a two car garage with living space on it in my property because I could do that for $100,000 sure rather than find her a house for $300,000 yep you know so that's a something that moving forward you might not see a bunch of them right now but I think you it's gonna increase as not only that where is the available property right now to build in Greenville or Spartanburg it's not in the cities it's in the more rural areas which has no zoning restrictions so the family compound thing is a real thing and it's happening more frequently than yeah well they I will say Greenville County has not been super favorable towards ADUs not in town yeah or not in you know no I'm saying the county not the city the county specific the I you know the county currently requires a breezeway attached between a true ADU now there are workarounds for it which I won't get into if you want to know the workaround reach out to me after whoever's listening there are workarounds but yeah I mean the it is an affordability issue they're taking off in California and New York and these affordable states so I do think it's a matter of time here only a matter of time before they become super popular yep for multi generational purposes and what not but well income producing also yeah absolutely and oh and I was gonna ask you about that is there anything changing on this form with regard to how that's calculated in in not in not to my knowledge not to my knowledge it's so how this form is gonna work is like as you as you if anyone's ever done Turbotax it's gonna be kind of like that so like you'll say okay this is my property and then the next question is a single family is it a has a ADU and as you check these things it opens up certain other questions to the to the thing so when you get to the end it's all kind of self populated so there's no you know there's no skipping anything or whatever it just is kind of self guided as far as like is that so my understanding is when you get to the point where it says is there an ADU and then is it rentable or does it share this and you hit it and then is this an income producing property whatever then there just different check boxes that are gonna bring you down that path so I don't think it's gonna in my I think it's gonna get a lot better actually I think overall it's gonna be a lot better for everybody including appraisers we're gonna need a little bit of time you know for sure to kind of take sort through the mess you know it it's the whole 10,000 hour rule you know you need you can't you know as much knowledge as you have on a subject you don't become an expert in it until you acquire a certain amount of experience and when you the only there's no there's no way to train for experience and that's gonna be this you know we're gonna make mistakes it's gonna be confusing and it's gonna be confusing for underwriters it's gonna be confusing for lenders it's gonna be confusing for agents it's gonna be confusing for customers but this is this is something we're gonna have to do and it's gonna in the end of the at the end of the day it's gonna be good are you are you expecting that people are gonna automatically jump to you asking for value reconsiderations do you think that there's gonna be an uptick in that I've thought about that maybe possibly like me I I could I could see that happening particularly as people get adjusted to how it looks trying to read it yep yeah the other thing is just to prepare I don't know about the rest of the world but I'm not doing these for the same amount of money as I'm doing the old ones you know the industry standard right now is not that there's a standard but the industry thought is it's gonna be 50% more than what we're charging for wow so interesting yeah and the reason is just a business decision it's like I can do two of those it's like when people say hey can I can you do the strange property for me and I'm like what's strange about it what's on a lake it's in built in 1800s and I'm like sure but it's gonna take me twice the amount of time to do a regular appraisal so it's twice as expensive yeah it's just it's just a business decision I could do two new constructions for 500 bucks or do yours and it's gonna take me twice as long so it's gonna be a thousand bucks so I mean it's just a business decision it's kind of the same thing with these you're gonna go through your thing and say I can take one U a d 3.6 or two of these it's gonna be the same thing right now a good appraiser and a 25 square foot two story house I'll spend 15 to 25 minutes in that house that's inspection wise that has nothing to do with evaluation right just talking about inspection and then report writing maybe another hour they're saying that most people are doing this now are spending between an hour and a half and two hours in the property and another hour and an hour and a half to do the report so you're talking about doubling the time to do it now and here's the other thing the software sucks right now we can there's shortcuts there's common responses there's cloning there's drop down menus each one of these if they're gonna continue to do it the way they're doing it like I told you is gonna be independent and have its own life which means there's gonna be none of that so you gotta start from scratch in every single one of them so the time and I'm sure as the software gets better it'll be easier to do this but when we're starting out right now there's none of that so there's it's gonna be it's gonna be a very very time consuming on an appraiser standpoint no doubt alright couple more things so you had mentioned right at the beginning and this was something that I hadn't heard up to this point is that it's not gonna be required for FHA and VA's is that gonna be do you think some specific lenders will require it well if they're doing if they're doing an FHA product they probably won't accept it to start with okay so right now they're just not accepting it they're yeah well I don't know if any been ordered that way so if you're doing an FHA and I'm not a lender so I don't know exactly how that whole process works sure but what I think happens is you're like I'm gonna order an appraisal well is it conventional or is it FHA and if it's FHA it's ordered as a 2.6 I think that's how it's gonna happen okay to the appraisal side so but if you know anything that's happened that Fannie Mae's done FHA is done too it just usually it's six months later okay or whatever it is yeah so this is we've got a little bit of a honeymoon here yeah and that's typical of any changes that ever come down the pipe honestly it's like Fannie Mae decides to do something they tell FHA and then FHA is yeah sure that sounds good they all want to be on the same page inevitably too right yeah for sure for sure yeah so you told me to write down legally permissible and I don't know why but I wrote it down awesome thank you so one of the big things that we've been told is that the one of the big changes is gonna be a super hyper focus on if things have been done right permitted right and our directive so far is that if you have an unpermitted addition that can't be verified that it's not gonna be able to be included at all oh yeah OK and how you gonna verify that I don't know so specifically in addition well anything let's like for instance take a two car garage that you put out there or something anything that has contributory value if it's if it if it has contributory value to say first of all in order to have contributory value it has to be real property so if you're talking about something that's not real property it's irrelevant anyway and typically you don't need a permit for that anyway but you know my takeaway is like if you're talking about maybe you enclose the porch or something mm hmm I don't know if that has a bearing on the contributory value of a property or not now if you converted it into living space and it was unpermitted like you did foundation work put a H back in and it's not permitted then Fannie Mae's directive is you cannot include it in the overall GLA of the house okay but you know again I don't know how I mean some in Spartanburg County they don't there's they don't really require permits sometimes for certain things and I don't know how you're gonna track it I mean there's a website you can go to but what if what if the last time the house went was what if it was done in 2,004 yeah that's what I was gonna ask you is I mean it's gonna be really it's gonna be really hard it's gonna be interesting on my perspective to see how that part of it shakes out but moving forward if you've got I mean we've got some of these mill homes and you know Denine and what not that have been added on to five different times like yeah sometimes on the top haha yeah the top the back I mean a lot of them didn't have bathrooms yeah you know they don't have bathrooms when they are built yeah they added on those bathrooms so what are we gonna go back and look 50 years ago if they pulled a permit to add a bath you like so where does that end there's no way to verify that I think it's specifically for stuff that's been done in recent years or in the so the takeaway I think on that is like if you have a client that had bought a property in 2,026 and then in 2,027 he added 400 square feet make sure that it's permitted and make sure when you take the listing that you're looking for that permit make sure that you're you just for valuation side cause if it's not there you might run into some problems on the appraisal side if it's a house in in Judson that had a bathroom built in 1962 I don't think it's that's what we're looking for that's what they're looking for right now that there so you would you would need to actually have a copy of the permits yeah well I don't need to copy the permits but I need some verification that a permit was pulled there's websites that do it like part of our appraisal software now has a button that you click and it shows you the permits that are pulled for that property gotcha so it's not that hard to check for newer stuff and the stuff that's older is almost impossible so I don't know how you would do that too unless you have specific knowledge that it was not permit permitted and then it's a material fact at that point you know you sure you walk into a listing and you're just like well my Uncle Fred built this shut up shut up shut up don't need to hear it yeah oh gosh I you know I sold a house a few years ago to a client that my by our client that I when I looked up in public records I actually knew the builder and did not have a lot of respect for this guy and I let him know that right away this is like a mom and pop builder yeah who hasn't built for probably 30 years but he had built this home you know way back in the day and I was like oh my gosh I know that name and I don't know that you want to buy this house but my client was also a builder and he felt comfortable with it but yeah I can assure you there were some permits that were not pulled when that house was done in some way originally by that builder alright I we need to wrap this up but I want to make sure Chris was there anything that you wanted to hit on or that popped into your head that we didn't touch on well just a just a couple just like bullet points about what this means you know you know business wise just you know for you guys just know that you know appraisals are gonna look different they're gonna take more time at first and it's gonna be more expensive it's gonna be more expensive you know and when you're taking listings if you can get more information about permits and HOA's and stuff on the front end that's gonna be really really helpful you know for appraisers this is gonna be a learning curve so bear with us for a little bit it's gonna be you know it's gonna end up looking like a better report it's gonna be easier to read you know for consumers you know the big takeaway is it's gonna be a pretty standardized form no matter what kind of loan you get whether it's a condo or whatever or income producing you know they can review the goal is to review more efficiently you know so they can get faster turn times when we get good at it so they can make lending decisions easier you know the delays I thought won't be long term but they will be there at the front the report should be easy to read and it's gonna be more accurate because you're gonna have better information in it and you're gonna know the things that really contribute to the value of the property we're gonna be able to pinpoint better but it's not gonna affect anybody to the point where it's you know gonna change the way you do business it's gonna be a little bit more work and we'll be in tune to it may hold up some closings but it's not gonna be deal busting things unless you have issues like permits I don't know about you but if you're a pro if you're listen probably listen to this podcast you're probably not in the class that isn't on the top end of your industry you know what I mean there's there but there's people out there that take listings that really shouldn't be selling real estate I mean just didn't know the basic the basic and then you know I had no comment on that one yeah I mean it's like any industry at all but sure people that are proactive this will be a bump in the road people that don't know about it you can lose a deal so know about it be on the front end of it you won't have anything to worry about yeah and it sounds like it's something that for the general public that when they're interviewing realtors they might want to ask them are you familiar on some level with the appraisal changes that are happening are you making any changes I have already started well so I just had a listing that that went live this past weekend that was renovated and you know I often times do this but some sometimes it's hard to get from clients for one reason or another and this one wasn't the easiest to get but I was like I want a detailed list of everything was done and you know now what I Learned from this conversation is that there also needs to be a years on there as well for things that were done maybe a couple of years ago which oftentimes people will include that into their when they're saying that they remodeled their home right exactly the AC they replaced two years ago is part of that remodel hey Stan I had one I this is a this is a God's honest truth two weeks ago they said totally remodeled this is an advertising house totally remodeled in 2,012 hahaha whoa I didn't realize that zoom would like move the camera like that that was weird that's hilarious though two I mean yeah I 14 years ago surely nothing changes in 14 years right that's funny the question was it a what kind of roof did they put on it's the roof that is 15 to 20 years rated or 25 to 30 years well that's actually it's one of the things we have to put on there is it composite shingles three tab it's one of the things we'll have to look at for sure yeah it's a lot of a lot of minutia but I mean we'll get good at that part it's not that hard you know for sure but the more information we have on the front end is gonna be better off we are in moving quickly you know this this is a fast paced you know fast paced real estate environment you got to get stuff done we're gonna we're gonna have to figure this out very fast because yeah people are still gonna be buying and selling homes they're not gonna be waiting for three months for us all to figure this out it's 100% not only that it will cost the money if it does that's right cost everybody money no nobody's happy when that happens no absolutely I don't know if people are aware but most real estate agents don't get paid until it closes that's right hahaha so it's integral that you get closed yep yeah and maybe that's enough motivation for Realtors to do what they need to do and you know to get that information yeah my hunch is not because I see emails all the time going out from the assistants at my office saying telling people to submit their closing paperwork so they can get paid I'm just like I don't understand why you would have you would have gone through that entire process and get a client closed and then not submit the final paperwork which isn't that much it's just a hood and maybe a scan of a check that you got like it takes two seconds but hey I ran a brokerage and I had agents and I quit because I couldn't figure that out so yeah I had enough of it myself but yeah it was a it was a the cream always rises though I mean the people that are gonna be there it's it no matter what happens I mean people are buying houses in 2008 too you know there was agents in 2008 there's gonna be agents from here on out and people like you said are gonna be buying and selling real estate and I look at this as an opportunity as an appraiser as a real estate agent as a lender to be on a front end of stuff so you can be a guru on it so you can educate people on it and for sure the thing that happens when you do these kind of things you get out in front of things is people notice you and when people notice that you're proactive on things that mean something they're more likely to sit trust you with you mean that it's the biggest financial decision that most people will ever make in their life and it and it the fiduciary duty there is great absolutely and I think we miss that sometimes even from my angle you know you miss that they're real people involved in these transactions and it's important it's an important decision for them absolutely do your best job you know yep and I don't think we could end on a better note than that so yeah Chris thank you so much for your time and for all those details and all that if anyone needs you obviously lenders are the ones reaching out to you for bank appraisals but if anyone needs you for home measurements or for pre listing appraisals or anything like that where should they find you WWW dot SC appraisers.com and my name of my company is Carolina Appraisal Partners and I am the only person there so I am the partner alright there we go one partner to rule them all one partner that's right that's our pill battle right there but yeah and I'll put Chris's information in the in the show notes as well along with my own so I enjoyed it my friend and me I wanna be the first 3 time guest though oh well we'll have to we'll have to we'll have to let this one breathe and we'll see how we'll see what changes maybe we'll review U a d 3.6 once you've got you know a little bit more experience football or something I just want to be haha you just want to come on the show to just talk about whatever exactly yeah that I hey I'm not opposed to it I've had some people on here before for I've had someone on here for a roast one time where we roasted someone on Facebook I had another guy we just talked about just random stuff so yeah we'll have to do that alright sounds good alright well that was Chris White everyone thank you so much for watching and listening again his contact information as well as mine will be in the show notes please like rate review subscribe and I'll talk to you guys again next time!