Understanding the Real Estate Appraisal Process: A Deep Dive with Experts Josh Stephens and Chris Green

Mike Mills (Host) | 00:00:13 to 00:00:25

Hello, everybody. All right. Welcome to the Texas Real Estate and Finance Podcast. My name is Mike Mills with Barry Mortgage. Today's show is going to be a lot of fun because this is a top.

Mike Mills (Host) | 00:00:25 to 00:00:48

I've been kind of digging around to try to find a couple of guys to be on with me to talk about appraisals, because in my world of real estate, appraisals between realtors and lenders and everybody involved in our industry is always a big hot topic, and there's a lot of mysteries around it. There shouldn't be, but there is. So I'm bringing in two guys with me today. Mr. Josh Stevens and Mr.

Mike Mills (Host) | 00:00:48 to 00:00:52

Chris Green. I even got production. Steve. Oh, wow. I know.

Joshua Stephens (Guest) | 00:00:52 to 00:00:59

They're going wild for us, bro. You guys are amazing. So thank you, fellas. I appreciate you all coming in, joining me. I know you took a little trick.

Mike Mills (Host) | 00:00:59 to 00:01:24

You all are actually based in Dallas, is that right? Yeah, we got an office in Frisco over by the Star in Hall Park. And then we've got offices in Austin, in North Austin, kind of by the Lake Line area. Well, I appreciate you coming down into Texas and coming to see me here in Mansfield, so thank you very much for that. Well, first to get started, I wanted to ask you guys just a little bit about kind of tell everybody a little bit about your company, what you guys actually do.

Mike Mills (Host) | 00:01:26 to 00:01:37

I don't think everybody understands there's different structures to how appraisers work. Some of them are individual, some are in groups. So give a little context to how your company is structured and what you guys do. Exactly. Yeah.

Joshua Stephens (Guest) | 00:01:37 to 00:01:52

So most people in the marketplace, if you're an appraiser, you're probably one man shop. Usually maybe there's three at the most. It's usually you and maybe your son or your aunt or someone in your family. There's a lot of nepotism in appraising. That's not our firm.

Joshua Stephens (Guest) | 00:01:52 to 00:02:13

We are actually a medium sized firm. We're a little staff of about 25, a little over that. We do a few hundred appraisals per week all throughout North Texas and Central Texas. There's a lot of different ways that people structure the appraisal business, and what we found for us is none of those ways worked. They did not work for our people.

Joshua Stephens (Guest) | 00:02:13 to 00:02:38

And so the way that we've done it is try to make wildly successful opportunities for people where they're paid very handsomely, a lucrative career with people from diverse backgrounds that don't maybe look just like me or just like Chris, but are maybe different ethnically diverse or gendered diverse or whatnot. And so that has worked really well for us. We actually met in well, where do we meet? Where was that place at? Yeah.

Christopher Green (Guest) | 00:02:38 to 00:02:47

We're on a winning streak. The rooms of recovery. Okay. Actually, the founding folks, we're all church going dudes. We're not batting 100.

Christopher Green (Guest) | 00:02:47 to 00:03:08

And it's very interesting how that's panned out, because we all individually have, like, our own talents. Okay. But then just put together it was neat to see how this thing has taken off. So I always joke, I'm like, if you go into our office to impress somebody, probably not the right spot to do. I'm like, where did I see you at?

Christopher Green (Guest) | 00:03:09 to 00:03:32

Where did I find you? But for our culture, that works out really well. And then as Joshua mentioned, too, when you look at the industry and you look at all the turnover and I get asked this all the time, how do you stop your trainees from leaving? And there's this big fear mentality, and it's always like, well, create something for them that they don't want to leave. Right.

Christopher Green (Guest) | 00:03:33 to 00:03:51

Or how could you afford to pay them that much? In my first mind, I'm thinking like, crap, how do I pay them more? How do you create wild opportunities for families that we can work well Monday through Friday and rest well with our families? So that's really been our mindset. And we've been doing this almost three years.

Christopher Green (Guest) | 00:03:51 to 00:04:15

I mean, I've been appraising for a lot longer than that, but just three years. Oh, yeah. So we're going to continue to grow. I think we're going to try to bring on another ten by the end of the year and launch another office. Well, it sounds like a really unique model just because from my personal experience in dealing with appraisers, I know, like you said, it's either a mom and pop shop where it's an individual and his family or whatever the case, maybe they have one extra appraiser that's in it.

Mike Mills (Host) | 00:04:15 to 00:04:34

Or we get to deal with our favorite three letter word, the AMCs and the AMCs. And you can help me clarify this a little bit. From what I understand, how they're structured is you have, let's call it an overlord. That's very kind of how kind of. You to put it that way.

Christopher Green (Guest) | 00:04:34 to 00:04:43

That's a new one. Very sweet of you. That has individual appraisers that are self employed. Essentially, they're almost like, I would imagine they're maybe 1099 employees in that kind of a situation. Yes.

Joshua Stephens (Guest) | 00:04:43 to 00:05:00

So usually the way that it works is whether it is an AMC or it's a firm model, sometimes it's a network of independently managed appraisers. That's usually what it is. So they are 1099. It's a gig economy. They just sign up the lowest bid or the fastest turnaround time.

Joshua Stephens (Guest) | 00:05:00 to 00:05:17

That's kind of what wins those orders. And whatnot typically it's like an Uber driver for appraisers. Exactly. You're exactly right. It's not necessarily the truth is the really good appraisers, like the really awesome ones, typically, they're not usually working with AMCs.

Mike Mills (Host) | 00:05:17 to 00:05:24

Right. Because they don't have to. They don't have to. And I'm not saying that just because you work with the AMC that you're a lower tier appraiser. That's absolutely new.

Mike Mills (Host) | 00:05:24 to 00:05:36

You could be brand new. It could be the market has shifted. Maybe you got to supplement your income. There's a variety of different type of business you could get into. You could diversify working real estate or estate planning, divorce, all that as well.

Joshua Stephens (Guest) | 00:05:36 to 00:06:01

But generally speaking, in our industry, the AMCs are usually referred to as low cost leaders. Those are the people looking for them to get the most work at the least fee, the fastest, the quickest, cheapest fastest. Well, it's the least fee to the appraiser. But when you look at what a borrower pays down the line, because the AMC's fee, it's usually the same, if not a little bit more expensive in most cases. Correct?

Joshua Stephens (Guest) | 00:06:01 to 00:06:21

Yeah, I mean, it's wild. So we have quite a rolodex of clients, and we've been doing this for quite some time. I know hundreds of fee structures across different AMCs, and I can tell you I've seen anywhere from $150 per appraisal all the way to $600 per appraisal. And that's just to the AMC, not the appraiser. Got you.

Mike Mills (Host) | 00:06:21 to 00:06:32

That's just to the AMC itself. I've never seen $150 appraisers appraisal. So let me know where I'm not. No way I'm going to hide that sucker. Shout out true union.

Mike Mills (Host) | 00:06:32 to 00:06:52

Yeah. There you go. Okay, so tell me then how we talked about this briefly before you guys came or before we started going live here. But I just want to chat about it again. So when the market was running hot and we had interest rates were two and 3%, everybody on the planet was buying homes, refinancing, all that stuff was going down.

Mike Mills (Host) | 00:06:52 to 00:07:22

Well, the pool of appraisers, from the time it went from a normal market until we exploded, stayed relatively the same. Because whether you've got 10,000 loans in a market or 3000 loans in the market, if it changes overnight, the pool of appraisers isn't going to grow with that immediately. So tell everybody a little bit about what it actually takes to become an appraiser, what you have to go through, and what the timeline looks on something like that. Oh, man. Well, first you have to sol yourself to the devil.

Joshua Stephens (Guest) | 00:07:23 to 00:07:39

The first thing you have to do chris, man, dude, you did this over a decade ago. Tell me about your experience. So I'm Iowa guy. I've been doing this for over ten years. Got certified in Iowa, I think at that time.

Christopher Green (Guest) | 00:07:39 to 00:08:28

It was like three years and I don't even know how many thousands of hours. And I remember I was because I joke about this, I was six months into that sucker before somebody even told me, hey man, your time doesn't start until you actually take these classes. And I'm like, this is a different time, a different so there were just hours and hours in classes, and even in that state, you had to go in front of a board and just crazy things now, especially since the last several years when we came up with such a shortage, which in my opinion the alleged shortage. Yeah, I think we came up you had these appraisal numbers that were increasing, and you had appraisers that just couldn't keep up with it. Yeah.

Mike Mills (Host) | 00:08:28 to 00:08:47

I mean, it's hard. And it wasn't like something that happened overnight in our minds as we look at what we're trying to do. It's like creating that next generation of appraisers so we don't have that again and, like, quality. So, like, with our firm model, we're not necessarily just going out and hiring appraisers, we're creating new appraisers. So what does that look like in the state of Texas?

Christopher Green (Guest) | 00:08:47 to 00:09:04

You've got I think it's several thousand hours. We have to log everything. Texas is unique in relation to Iowa. Iowa, you just went from trainee to certified. Texas allows you the ability in six months, no less than six months time, where you can go from trainee to licensed.

Mike Mills (Host) | 00:09:04 to 00:09:14

Okay. And licensed. Then they would roll off the I'm a supervisory appraisal. So you'd have to work under it's like an apprenticeship. License still rolls solo.

Joshua Stephens (Guest) | 00:09:14 to 00:09:32

Dolo you just can't yeah, license. You can only do conventional. You can't do FHA, and then there's certain requirements. But it does allow us as a firm that's 100% dedicated to raising that grooming that next generation of appraisers. It gives us more bandwidth to continue training.

Christopher Green (Guest) | 00:09:32 to 00:09:48

And Joshua can go into a lot of the quality metrics we do because they geek out about this. But the hardest thing, though, is to find a supervisor. Right? That really is there was a time we would get phone calls. I mean, we still get phone calls.

Christopher Green (Guest) | 00:09:48 to 00:10:04

Hey, can you take somebody on? Hey, I've already actually done all my classes. When everything was when the industry was bleeding, we would have trainees that were just like, hey, my supervisor bailed on me. But we actually have a few people right now. A lot of orphans that way.

Christopher Green (Guest) | 00:10:04 to 00:10:24

Yeah, we do. And it's like, literally, they have the time. They have the time as far as, like, when the clock starts, but they did not have enough hours or the ability to get that review work. Even the other thing with that, Chris. That you didn't even mention is that a supervisory appraiser takes on a trainee.

Joshua Stephens (Guest) | 00:10:24 to 00:10:50

Okay, well, theoretically, it's going to slow the supervisory appraiser down so they can't complete as much work. Now they're also doing a fee split with their training as well. So now they're making even less money, doing less volume, taking more time, and then essentially the good old boys, the old approach is that you're training up your competition. And so not only are you going to why would I? But here's the thing.

Christopher Green (Guest) | 00:10:50 to 00:10:59

The machine has worked exactly how you've structured it to work. And we just said screwed the machine. How are we going to structure the. System was broken on how it was set up. It's working just fine.

Christopher Green (Guest) | 00:10:59 to 00:11:08

It's working how you set it up. Right. Tell me a little bit. You'd mentioned in our conversations that you guys have a partnership with Fannie Mae. Oh, yeah, man.

Joshua Stephens (Guest) | 00:11:09 to 00:11:20

That's freaking wild. And super crazy. So Chris mentioned that we've been doing this for three years as an actual firm. When we started Incorporated firm, I was part of the ground team on that one. Sometimes I'm like, thank you.

Joshua Stephens (Guest) | 00:11:20 to 00:11:33

And sometimes I'm like, how dare you put this evil curse on me, Christopher. I thought you were my friend. Why'd you bring you said we would be friends forever. I hate you. So in the last few years, it took about two years, we moved nine trainees through all the way to certified.

Christopher Green (Guest) | 00:11:33 to 00:12:00

Okay. And what's awesome about that isn't just about how quickly we did it. It was because of the online training platform, we were able to build out internally scalable systems processes, creating consistent quality metrics that are applicable to the individual appraiser across every geography and every market. So what I'm trying to say is that a lot of times in a firm is if you engage one appraiser or if you try to engage all of them, you might get one. That's really awesome.

Joshua Stephens (Guest) | 00:12:00 to 00:12:21

Sometimes a lender is like, hey man, we'll take appraiser A, but B and C, they just seem like I don't know, man, they seem like risky, risky guys. Or gals kind of like going to a McDonald's and you're like, hey, if Tim makes my Big Mac, that's good, right? But Sally, Billy, they suck. It doesn't work like that. So creating a scalable process where it's like, no, there's a WP way.

Joshua Stephens (Guest) | 00:12:21 to 00:12:40

So that internal online system training, pairing them with the supervisory appraisers. We have a couple. We've got Christopher, got some other guys that over Sierra trainees. We also have like a pod structure in the way that we're both like I'm sharing all the secret sauce, so if you want to try to replicate it, this is the stuff you need to be listening to. Listen to it's just like anything else.

Joshua Stephens (Guest) | 00:12:40 to 00:12:48

I'll give you the recipe. You might not be able to cook it up like us, but I'll give you the recipe. They're extremely complex. Yeah. So they're in a pod structure.

Joshua Stephens (Guest) | 00:12:48 to 00:13:04

So the trainees get paired with other not necessarily peers, but like licensed and supervisory appraisers. I'm sorry. And certified appraisers and supervisory appraisers. There's also the online training. And then in addition to that, we also have a quality control process that every single report gets submitted through.

Joshua Stephens (Guest) | 00:13:04 to 00:13:29

All that quality control. So what that was able to do. For us and not a program, just so you know, when people say quality control, oh, you're just pushing it through like a system or like no, it's a manual review person that is going through it. Line item team of people who are manually reviewing wild. What we do just to make sure it's like, how can we eliminate any potential hiccups that we would have?

Christopher Green (Guest) | 00:13:29 to 00:13:50

Because nothing is worse than when you go to closing and you're like, hey, I know you're trying to move your family into here, but they actually spelled your last name with an E on the end. Are you freaking kidding me? Come on, guys, be professional. So we try to do anything we can to eliminate those potential hurdles, the. Little hiccups along the way.

Joshua Stephens (Guest) | 00:13:50 to 00:14:10

So that super long answer that I'm giving you, essentially is because of all of those things, fannie Mae recognize us as one of their partners. They wanted to partner with us as part of their Adi initiative. That's their appraisal diversity initiative. I mentioned earlier that a lot of appraisers kind of look like Christopher and I plus 30 years. It's like just old white dudes just hanging out.

Joshua Stephens (Guest) | 00:14:10 to 00:14:15

It's a good old boys club. Especially those VA appraisers. Yeah. And so we're trying to change that. We're trying to change that.

Joshua Stephens (Guest) | 00:14:15 to 00:14:44

We're trying to get some wild opportunities for people. Tell them how we got into that. Speaking of that, though, that's a big I've seen that. I mean, it's been a minute, but over the last month or two, I've seen there's been several lawsuits that have been brought forth about the bias minority neighborhoods and the bias, like, families literally taking down pictures of themselves in their home because they feel like they're getting whitewashed. Yeah, that seems like a big initiative for somebody like Fanny and HUD.

Joshua Stephens (Guest) | 00:14:44 to 00:15:05

So kind of where that comes from is JP Schmorgen Schmace I'm not going to say their name, but they rhymes with that. They're affected by some of that. And they wanted to partner with Fannie Mae to show that hey, they didn't want to be associated with that type of appraisal bias and whatnot. So they donated, like, $3 million, them and some other organizations. They committed that to Fannie Mae.

Joshua Stephens (Guest) | 00:15:05 to 00:15:23

They partnered with them. There's about eight people on the Adi team. Tell them how they found us. Oh, this is terrifying. On my LinkedIn, I absolutely love I like to low key joke that I'm, like, LinkedIn famous, and I'm always like seeing people who are looking at my profile.

Joshua Stephens (Guest) | 00:15:25 to 00:15:43

Fannie Mae kept looking at my profile, and I was like, Guys, promise me we're doing everything above board because I do not want to go to jail. It would be very ominous. It would just say, Fanny, just use your profile looking. But it kept happening, and then so finally they reached out, and they're like, hey, Joshua. Hey.

Joshua Stephens (Guest) | 00:15:43 to 00:15:54

We've noticed we've gotten multiple. Oh, we had an applicant. We were starting to get applicants. I'm like, Applicants were coming through, and they were like, oh, Fanny May referred us to you. We're like, what in the world?

Joshua Stephens (Guest) | 00:15:55 to 00:16:06

No way. And so long story short is if you do good work, you attract good things. And so for us, that's why we have sweating it. I was like, Fannie Mae found us. They saw the amount of trainees we're able to get all the way, because.

Christopher Green (Guest) | 00:16:06 to 00:16:12

It'S one thing to have trainees. That's one thing to have trainees. It's another thing to get them all the way through the finish line to Certify. Right? Okay.

Joshua Stephens (Guest) | 00:16:12 to 00:16:27

They saw they were able to do that, and long story short, they wanted to partner with us. There are only a handful of firms in the nation who are official partners, and we get to be one of those people. It's just a huge honor. I love Sergio. Sergio.

Joshua Stephens (Guest) | 00:16:27 to 00:16:32

What's up, man? Bill Johnson to adi. What's up, guys? Thank you so much for the opportunity to serve you guys. That's awesome.

Mike Mills (Host) | 00:16:32 to 00:16:43

I mean, that's great. That when you do the right things, people see, they recognize, they reach out, and you get a benefit from that. So, I mean, just speaks to that. One of the things I appreciate. And we were just chatting about this before we start.

Christopher Green (Guest) | 00:16:43 to 00:16:54

It's like, hey, who do you hire? Right? Like, what type of person? And when I talk about these are people like I'm doing life with and we're ride or die. I mean, this is still the sunset type thing.

Christopher Green (Guest) | 00:16:54 to 00:17:19

So I want to enjoy and I want to have a professional experience that really brings that bar up. So who do you hire? And it was interesting talking with Sergio and like, hey, what Fannie Mae is trying to do and their initiative in these places. And there was a point and this was the first time we talked to him, I was like, do you know where we were? And he was saying, hey, here are the type of people we're trying to get, or here's the opportunity.

Christopher Green (Guest) | 00:17:19 to 00:17:32

And I literally at the end of it, I was like, hey, I think it's my phone. I put it on like a video. I'm like, let me walk you around the office. And with people from Africa, we've got people from born in Vietnam. We hired one guy one time.

Christopher Green (Guest) | 00:17:32 to 00:17:53

This was the classic bait and switch. And this is why we joke about I don't know if I always want to hire from recovery, but first day we show up. I'm not going to say his name, but we literally get to the house, can hardly speak any English, and I hand him a tape measure, and he goes, what's this? And I was like, no, this is. Going to be difficult.

Christopher Green (Guest) | 00:17:53 to 00:18:05

But the thing is, if you take a chance and I knew he was super smart, super smart. It was just somebody hadn't taken the time to develop those skill sets. One of our best appraisers. Really? Oh, absolutely.

Christopher Green (Guest) | 00:18:05 to 00:18:23

And we just kept going around the room, and I was like, man, what you're trying to do? We're already doing it. It's just we're able to give them to the finish line to get them certified. So for us, it was like a no brainer. Well, there's something to be said because we experience it in our business a lot, and I do myself, too, to some degree, is you deal with when you want to hire people, right?

Mike Mills (Host) | 00:18:23 to 00:18:58

You want to bring in people on board with your team. And when you hire the can't teach an old dog new tricks, right? So when you bring on somebody that has and especially like said, I've been doing this for 20 years, it's like, okay, that's great, but that just means your knowledge is 20 years old. It's not current, especially if you're not open to taking in new information. And so a lot of times I personally prefer hiring people that are brand new to the business because then you can mold them in the culture and the methodology that you believed in that's been successful for you, as opposed to trying to bring somebody in and break them of a bunch of bad habits.

Mike Mills (Host) | 00:18:58 to 00:19:13

And then when you layer on top of that, that you're giving someone an opportunity to better their life. I mean, that makes it tense. Are you kidding me? So whenever we were building our quality control metrics and stuff, we were like, you know what? We're going to hire a Sith Lord from the dark side.

Joshua Stephens (Guest) | 00:19:13 to 00:19:24

So we hired directly from Fannie Mae. We hired one of their senior review appraisers, brought her on staff, called. You shocked. Oh, bro. Dude, for weeks, everybody was terrified.

Christopher Green (Guest) | 00:19:24 to 00:19:33

Oh, man, I've seen grow men cry. It was so awesome. I was like, that's right. It was brutal. But what we learned in that process, man, she was so awesome.

Joshua Stephens (Guest) | 00:19:33 to 00:19:53

Nancy shout out, but we love Nancy. The thing that we learned about is there's just low technology adoption rate amongst senior level appraisers as well. So it's not just like they can't write a quality report. It's the efficiency in keeping up with the demand. When you talk about that shortage earlier of appraisers, it's not necessarily that there's a shortage.

Joshua Stephens (Guest) | 00:19:53 to 00:20:03

It's that there's an astronomical number of transactions in the marketplace that were unprecedented. Right. That was greatest growth we've seen ever in the history of real estate. Ever. And we couldn't keep up.

Joshua Stephens (Guest) | 00:20:03 to 00:20:07

We couldn't keep up. Lenders couldn't. Realtors couldn't. Nobody could. It was insane.

Mike Mills (Host) | 00:20:08 to 00:20:17

It was absolutely nuts. I actually used to have a lot more hair, but I lost most of it during that time. Let's just keep the hair jokes to a minute. I'm sorry, Mike. I wasn't personal.

Christopher Green (Guest) | 00:20:17 to 00:20:19

We got a team at work.

Mike Mills (Host) | 00:20:23 to 00:20:47

I always joke that if there comes a day where I can take one pill one time and my hair will grow back, sure. But anything else beyond that, I don't have enough time for that. No commitment. Okay, so let's dig into some of the nuts and bolts then a little bit too now. Now that we know where you guys are coming from and what you guys have created, I really want to get into kind of dispelling some of the misconceptions when it comes to actually doing appraisals.

Mike Mills (Host) | 00:20:47 to 00:21:35

So let's start with one of the biggest ones that I think are out there, the government versus conventional appraisal. Right now, we know that the difference between a VA appraiser or appraisal, an FHA appraisal and a conventional appraisal. There are differences, of course, but a lot of times, especially in the realtor world, agents are less likely to accept in a multiple offer situation, a VA or FHA appraisal. Now, not just because we all know that the property has to be in certain condition in order to get those accepted, but they actually think that there's an effect of the value of the home right when it comes to if this is FHA or conventional, where I'm worried with FHA that it's going to affect my value. So can you guys speak to a little bit about what are the actual differences between FHA and conventional?

Mike Mills (Host) | 00:21:35 to 00:22:14

Let's just stay there for right now. And then if you were talking to an agent to make them feel better about accepting an FHA offer and not being so concerned about the value piece of it, what would you say to them? Yeah, I'm just reflecting on another talking event that we were at a few weeks ago, and there is a stigma, like, oh, man, one's better than the other. And one of the things you can consider it's like, how do we get this to the finish line? Meaning, like, hey, if this is the person that's going to buy the house, I like their offer and everything.

Christopher Green (Guest) | 00:22:14 to 00:22:35

What does it matter if you say, no, I'm only taking conventional loans, and then they can't buy the house. But they could have done FHA and they could have bought the house. Come on. In our industry right now, I'm not seeing as much stigma around that. And from an appraiser's opinion, at least in our office, I don't care either way how I coach our team.

Christopher Green (Guest) | 00:22:35 to 00:22:48

Yes, there are certain specific differentiations. Like, this is definitely not going to be FHA or it has to be fixed. Yeah, or it has to be fixed and everything. But the amount of data we got to gather is a lot more data. It's a lot more data.

Christopher Green (Guest) | 00:22:49 to 00:23:09

However, a lot of it too, is just common sense, I think. Like, hey, is my kid going to literally, is there a pending health hazard here when I come in here? If my family bought this house, is my kid going to put their head through that railing because it's 2ft wide and the kid's going to fall off? It's just a lot of it's very common sense. Oh, his kids will do that, by the way.

Christopher Green (Guest) | 00:23:09 to 00:23:15

Straight up. Straight up. They cry, shout out greens. Oh, they're nuts. Yeah, they'll give them run for their money.

Christopher Green (Guest) | 00:23:16 to 00:23:44

So those are like big things, like, oh, does it have man, even like a lot back in the day, it was like these electrical panels. And there are certain common sense things that you look for that you don't have to have that stigma. Like, man, it just won't pass this way. If you were talking to a realtor, what would be a I don't want to say a red flag, but what would be an indicator when they're looking at a house to list per se right. And say that, hey, we're going to list this property.

Mike Mills (Host) | 00:23:44 to 00:24:06

And sometimes they'll put in the showings. Only conventional offers accept it. And from a lender's point of view, by the way, there is a difference, obviously, between FHA and conventional because FHA loans always have the exit if the house doesn't appraise. Right. Whereas with that conventional loans, I can put an addendum in there that says regardless of the appraised value, we're going to accept it.

Mike Mills (Host) | 00:24:06 to 00:24:40

So from a listing agent's point of view, I can understand that being a reason why you would select conventional over FHA 100%. But when it comes to the condition and quality of the house, if you were talking to a realtor, what would you say to them to say, okay, if you're going to list this house to understand if it's going to be acceptable for FHA, here's some things that you need to make sure that you check out. Yeah, I would say just super high level when I'm saying what would be posing like a health issue. Are there exposed wiring? Is this guy living here thinking he's an electrician and he's got a box?

Christopher Green (Guest) | 00:24:41 to 00:25:02

Those are things that will jack up. That is like a red flag. Don't Pasco are there fixtures missing? Should there be a sink here and there's just it's like someone trying to be a home repair guy and gets about 60% of the way through and it's like, I'll finish it later. Right.

Christopher Green (Guest) | 00:25:02 to 00:25:27

Those are going to be challenges. I would also say any outright hazard like busted glass and windows, is this something that's atypical? That is not standard for that neighborhood because somebody decided to what about customize it? What about bars on the window? That's a good one.

Joshua Stephens (Guest) | 00:25:27 to 00:25:44

Or what about, man, we ran into this once. Sometimes if there's a window in a bedroom, but that window is not to a certain height and it can't be accessed. So think about, yeah, you can't leave it. It's a fire hazard. Like you could burn alive in there and whatnot or child can't get out.

Joshua Stephens (Guest) | 00:25:44 to 00:26:12

Those are things to look at, especially because a lot of times on these FHA deals, you run into more rural properties. Not always true, but you just do there's just more out there. And so then you just have Uncle Billy who's out there building whatever on his house, and you're looking for water damage. Yeah. A lot of the cookie cutter communities that we would have when I say cookie cutter, like, man, it's like mid, late ninety s and on pretty much.

Christopher Green (Guest) | 00:26:12 to 00:26:24

Unless the house is completely thrashed, right. You'll be just, you'll be fine. It's going to be more of these unique, like, hey, I built this myself. Okay, that brings up a good point. Speaking of unique properties.

Mike Mills (Host) | 00:26:24 to 00:26:43

So again, from a lender's point of view, whenever we get questions all the time, can I finance barndominium? Can I finance a dome house? Can I finance this? Whatever our answer, and you can tell me if this is right, is it depends on the comps? That's always the way that we approach it.

Mike Mills (Host) | 00:26:43 to 00:27:04

Because if the appraiser can find similar properties in the area that have either sold recently or have some sort of history on, then it's possible. But if we can, what is in the area, right? Like, if it's a burn dominion, what is the fine area? Yes, Iowa. And I share that term with some of my appraisers back there.

Christopher Green (Guest) | 00:27:04 to 00:27:14

And they're like, what the hell are you talking about? I was like, no, dude, it's a. Term condominium, but a barn home. I'm like, no, it's a barn dominium. It's a barn with a house inside of it.

Mike Mills (Host) | 00:27:14 to 00:27:34

Yes. How do you do that? If that's the question, you're getting one thing I would challenge your listeners or whoever's watching this, the two things that come to my head are when you say lender and comps, I think lender, are they in the area? Do they know what they're doing? Do they know?

Christopher Green (Guest) | 00:27:34 to 00:27:49

Because if it's like, hey, I got a 1800 call and they're offering me this rate and you're buying some kind of unique property, no freaking way, right? And you saved a quarter percent, man. You can say 1%. It doesn't mean anything if you can't get to the finish line. So are the lenders competent in the area?

Christopher Green (Guest) | 00:27:49 to 00:28:23

And even more importantly, comps are as good as the appraisers that you have pulling those comps? Yes, absolutely. And my point in saying that is like, we have lender partners that know their appraiser panel so well that they know in many cases we are the last piece of the puzzle, right? We are that last part to come in. And if you don't know who your appraiser is or if you don't have faith in that product that that team is producing, that's consistent because you have unique properties like that, you will have questions, right?

Christopher Green (Guest) | 00:28:23 to 00:28:43

So that also depends on how well that appraiser narrates that to the underwriter who's looking at it. So I would say the lender being competent in the area. And two, I would ask that lender, hey, what does your appraisal panel look like? Now, here's the thing. AMCs, I will tell you, AMCs are a great solution when you have outskirt areas.

Christopher Green (Guest) | 00:28:43 to 00:29:05

And if you're like this, we have to use them sometimes 100% do that. But you can really learn a lot from a lender if you ask them, hey, what's your appraisal panel look like. When you were talking about earlier about defining an area. So if an appraiser is running some comps and we're looking at a particular, what is the standard kind of timeline from which it had to be sold? Distance from even just a standard property.

Mike Mills (Host) | 00:29:05 to 00:29:18

What are most appraisers looking at when it comes to actually picking comps? Yourself. Now, I know you guys had mentioned we talked earlier about it, about you do like interactions with agents, say, hey, what comps were you pulling? Let me know. We'll consider it to some extent.

Christopher Green (Guest) | 00:29:18 to 00:29:35

Absolutely. Hey, realtor shout out. I mean, if you got comps, man, it is advantageous to work hand in hand with your appraiser. Now, I know not every appraiser is that way. At our firm at WP Appraisers, we're like, no, let's get in the trenches together because the truth is, oftentimes we found they have information that we don't.

Mike Mills (Host) | 00:29:36 to 00:29:58

Right. There have been times where more often than not where we have been able to a deal has gone to the finish line because we've been able to identify whether comparables have sold off market or there was like as long as we have that documentation, some of the best information we get is from realtors. You just need the data. Exactly. That's all I'm doing.

Christopher Green (Guest) | 00:29:58 to 00:30:08

I'm playing Sherlock Homes. But for you, I'm not trying to fight you. Let's say you go in 90 days, you go in 180 days, you go in 5 miles. Neighborhood boundaries. What are we talking here?

Christopher Green (Guest) | 00:30:08 to 00:30:32

So let's do a barnuminium, for example. I'll go out as far as I need to go to find comparable sales that produce a credible defendable report, right? That doesn't mean I'm overlooking Barn dominiums to hit a price. That doesn't mean that, oh, he's just going out like a barn Dominium is a unique product, semi unique. How many acres is it?

Christopher Green (Guest) | 00:30:32 to 00:30:55

Like if I were in the market with my wife and my four little kids and my mini golden doodle and I want to do the Green family dream or Barndo dream. Living the American dream. There's going to be a big difference if I want to do a Barndo on one acre or a Barndo on 20 acres. Right? And can I articulate that difference in what the acreage amenity actually costs?

Christopher Green (Guest) | 00:30:55 to 00:31:12

So I can use that. So to answer your question on Barndo, I'll go out as far as I need to to create those two things a credible defendable report, cookie cutter neighborhood, for example, proximity and time. And I know that's very like, which. One'S more important, distance or time? So here's the thing.

Christopher Green (Guest) | 00:31:13 to 00:31:55

It depends the neighborhood and it depends how much information I have. What I mean by that is if I'm in a well, we're up based in Frisco, there's some really ritzy communities that just have low turnover and you're like, man, I can't necessarily use time because I have such limited comps in there. And those comps, since it's such a unique neighborhood, those are probably going to be what I favor right now. On the flip side, you might have a more neighborhood where there's lots of transactions, say some of these pop up neighborhoods and there's tons of new construction sales and all that. I am looking for homes that have sold recently.

Christopher Green (Guest) | 00:31:56 to 00:32:21

Okay, that's what I'm looking for. Would you say because this question came up a lot too, especially when we were going through all the chaos. Agents would say, well, the market's changing and it's rapidly changing. So how much does an appraiser consider? Or do you guys ever think to yourself because I know the circumstances don't come up often, but do you ever think to yourself, okay, this market is really shifting in a certain direction, up or down?

Mike Mills (Host) | 00:32:21 to 00:32:50

So I am having to consider the newness or the recency a little bit heavier because we are in a dramatic shift because in some cases, prior to COVID and all that kind of stuff, it was pretty I mean, prices were going up for sure, but the rates were same. It wasn't like a crazy influx of properties. It was just kind of consistent. So I could see how distance would be more important just because we got to get more of a neighborhood set up. But then you move into, say, 2021 right after COVID hits and the market explodes.

Mike Mills (Host) | 00:32:50 to 00:33:20

And now that property that sold 60, 9120 days ago, the market was completely different than it is that it's selling today. So how much thought goes into that when you guys look at those things? So I'll say in that, and I can give a specific example, a ton. And the appraiser and this goes back to whoever is listening, make sure your lenders aren't familiar with the area, no underwriting, know just what it's going to take. And then know your appraiser panel and being able to articulate that.

Christopher Green (Guest) | 00:33:20 to 00:33:31

So, for example, we had one, and this was when it was like wild. And I joked about this. A $500,000 Manny? No, that's something.

Joshua Stephens (Guest) | 00:33:34 to 00:33:39

It was incredible. That's beautiful. Lakeside waterfront views. Wonderful. That's a hell of a man home.

Christopher Green (Guest) | 00:33:40 to 00:34:00

It was something. But in this situation, it was rapidly increasing. Like, could not keep up, could not keep up. And again, everything that we do so making a time adjustment has to be data driven. It drives me freaking nuts because we do a lot of review work and it's like the appraiser put a 5%, appraiser put 10%.

Joshua Stephens (Guest) | 00:34:00 to 00:34:13

Where'd that come from? What based on what? It just gives you so much exposure. But in this situation, we could rapidly increasing. And I had it down to a specific, I mean, data jam packed.

Christopher Green (Guest) | 00:34:13 to 00:34:24

This is where it's going. We even had it was the money comp, as I call it, the pending sale. That's like, this is where it's going. That sucker hasn't closed yet. And we noticed this during that time.

Christopher Green (Guest) | 00:34:24 to 00:34:36

You'd have like three it happened to me. Let's wait them out. Let's wait them out. And I'm just kind of a pushover, so I'm like, screw it, I'll take one for the team. So then it's like that first one sells and now everybody else sells, right.

Christopher Green (Guest) | 00:34:36 to 00:34:52

But in that case, you need to be partnered with folks that know what they're doing. We were able to go to that realtor and say, hey, lovely house, all this, we're here too. What is that thing closing for? And they wouldn't disclose that. I tried.

Christopher Green (Guest) | 00:34:52 to 00:35:19

Why not? Yeah, and then also too, when do you anticipate that closing? And what we were able to do is I knew once that sucker closed, I could get ours there and we gave the lending and it was only like a week later, but that would make the report and it would support everything going to it. We ended up appraising the property the lender allowed us to go back out to and do a reinspection so we could change the effective date after this other one sold and we got to the finish line. Oh wow, that's awesome.

Mike Mills (Host) | 00:35:19 to 00:35:39

So you were able to actually go adjust it because that new comp in that appreciating market. But the thing is that's great. Most folks and not a jab at appraisers do that. Most people just don't have time to do that. But that's what it takes, a good appraiser and having good appraiser partners because that's where the market was going and.

Joshua Stephens (Guest) | 00:35:39 to 00:35:57

That'S exactly where we ended up doing that on quite a few during that time. We did that quite a bit. We had those conversations with the lender like, hey, listen man, we believe that we can get this across the finish line in a credible and defendable way. If we can get like three more days out, give us a little more. Time, I'll even give you the report right now.

Joshua Stephens (Guest) | 00:35:58 to 00:36:14

We do a reinspection fee so I. Can change the effective date and stay kosher. Flip side on that. One of the things we're noticing now, it's like, oh yeah, the market's declining because again, we do a lot of review work and you're like declining. Why the heck did you mark this declining?

Christopher Green (Guest) | 00:36:15 to 00:36:39

And you look at the MC sheet and a there's maybe like six comps on an MC sheet. So you're basing all of your data and where that market is going on six comps? Yeah, I don't think so. And then you're also seeing things that'd be like 400, 399, nine and 398 declining market over the last twelve months. You're like so by marking that declining throws a whole wrench into this process.

Joshua Stephens (Guest) | 00:36:39 to 00:36:49

Yeah. Even if hit value, all of a sudden now that borrower's got to put more money down on the loan because it's more risky. Right? And so you completely just threw a whole wrench when maybe you actually didn't. Need to market the clients.

Mike Mills (Host) | 00:36:51 to 00:37:34

I think there's an extra layer to it too, because right now at least, and I think maybe it's gotten a little bit better, but there was a period of time for a couple of months when everything was not declining. But certainly the market, I don't think the vast population or the majority of the population understands that when all of this chaos was going down, that there were very large entities purchasing up a lot of homes the open doors, the Zillows, the hedge funds of the world. Right. And then when they overpaid for a lot of those properties because they were throwing cash at everything they could get their hands on, then they were like, okay, well, now the market is stabilizing, so we need to unload some of these. Well, then, you see, I remember I did a search in Mansfield.

Mike Mills (Host) | 00:37:34 to 00:37:52

My wife's a realtor, and I did a search in Mansfield, where we're at right now, for all the homes that have been on the market for more than 60 days. I just wanted to see what had been sitting. I wonder who owned them. Exactly right. I picked a purchase price between like 350 and 450 or something like that.

Mike Mills (Host) | 00:37:52 to 00:38:13

I kind of narrowed the range a little bit, but I think at the time, there were 15 listings. 13 of them were either owned by Redfin or the one that I just said a minute ago opendoor. And when you look at the pictures, when you look at the property, there's holes in the wall paint. It's rated for maintenance. Terrible.

Mike Mills (Host) | 00:38:14 to 00:38:37

And so there's this thing where we would tell people that were selling their homes, like, if you make the house because at that point, it was like, buyers now have a choice. They don't have to throw 50 offers out there and hope one of them gets accepted. Now, they can be a little bit more discernible on what they want to put an offer in on. So as a seller, you need to make sure that your house is presentable when you come, hey, we're back to regular market. You can't sell crap anymore.

Mike Mills (Host) | 00:38:38 to 00:38:56

Correct. So there had to be a certain level of I wonder from an appraiser's point of view, when you're saying, okay, well, there's still these homes at this price that have been on the market, but let me look at these houses. These are all open door dumps that nobody wants to touch. These homes that were individually owned, that were actually presentable, sold just as fast. As any other, you should be an appraiser.

Christopher Green (Guest) | 00:38:56 to 00:39:15

So it's like, how do you articulate that in the report? Because guess what? That's going to come up in the report. So before the underwriter even asks you that, tell them, hey, all of these properties, we looked at it. These ones are all open by or these ones were all owned by this entity.

Christopher Green (Guest) | 00:39:18 to 00:39:38

Ultimately, it comes back. Does the underwriter, does the lender, are they going to be able to are they able to sell this or B, is this something that they're comfortable keeping it in house? But if the appraiser doesn't take that time to explain that, that's why you have appraisers, like, man, I hate these revisions. I'm like, look what you sent them, dude. Come on.

Joshua Stephens (Guest) | 00:39:38 to 00:39:51

The other thing about those types of homes, they're not selling on the secondary market. Usually they're selling to other investment firms, but they're not going to Fannie Mae. They're not GSEs aren't touching those things. Right. And we've seen an uptick in absolutely.

Joshua Stephens (Guest) | 00:39:51 to 00:40:16

I read a statistic and I might butcher it, so I'm going to throw the word allegedly so I can't be held responsible. I heard that's what you do, but allegedly, in 2022, one in four transactions in Collin County were institutional buyers in. Tarrant County, dallas Morning News or, excuse me, the Fort Worth Star Telegram reported that 50% of the homes in 2022 were purchased by 2021, were purchased by institutions. And you know what? That wild.

Joshua Stephens (Guest) | 00:40:19 to 00:40:27

There's an organization that we work with, too. I won't call them a loan shark. They're a hard money lender, though. People call them loan sharks sometimes, but. They'Re hard money lenders, have a place in the market.

Joshua Stephens (Guest) | 00:40:27 to 00:40:48

This is a great one, especially for maybe Credit Challenge people. They're amazing. Okay? We work with them occasionally here and there. We were having a conversation with Caleb shout out, and Caleb was telling us, man, that he believed that the next big thing in the institutional buying is for it to be regulated, for it to be like agents, for it to be like Fanny Freddie Mac.

Joshua Stephens (Guest) | 00:40:48 to 00:41:30

We really were getting into the nitty gritty details, and it just makes sense that things are going to head that way with warm institutional buying. I mean, without it, it's going to have to be regulated in order for the everyday buyer to own a home. Well, the problem, and I agree with you, the issue, though, is that it goes back to incentives again, right? So the legislation bodies, whether it be state or federal, they have to have incentive in order to pass laws like that. And if the money that's coming in to determine those laws is not coming from the average homebuyer and it's coming from opendoor zillow BlackRock blackstone, then it's going to be tough for those types of laws to be passed.

Mike Mills (Host) | 00:41:30 to 00:41:56

Everybody that looks at the market that exists in our world absolutely knows that in order for it to ever get back to a stable housing market, to where the average American can purchase a house, they're going to have to do some sort of legislation to minimize the amount of institutional buyers that can buy homes. But in order for that to happen, there has to be incentive for legislation to pass. And unless people get up in arms, which maybe they will, maybe they won't. You'Re the guy, Mike. I vote Mike Mills, 2024.

Joshua Stephens (Guest) | 00:41:56 to 00:42:11

You all heard it here first on this podcast. He's going, I'm voting Mike. Yes. I don't think so, but it's a sad state of affairs, and I do actually talk about this a lot when I do different podcasts with people on this topic because it's frustrating. I made a joke.

Mike Mills (Host) | 00:42:11 to 00:42:44

The other day when I made a different video that this isn't 1955, where one income can buy a car, support a family, purchase a nice home, and pay for college. In 1955, if you worked at Lockheed Martin or General Motors or whatever you want to call it, one individual, mom, dad, whoever could support the entire household, buy cars, buy homes, and be able to pay for college for their kids. Today you can barely do it with two incomes. And if you have more than one kid, good luck, right? Because if you have car payments, yes, it's insane.

Mike Mills (Host) | 00:42:44 to 00:43:06

And the cost of housing has gone up so incredibly much that the next generation I don't even want to say the millennials, but the Gen Z's, like my kids, the only reason that my kids would be able to purchase a house in ten years is because I help them. That's going to be the only reason. They get some money. That's it. Because otherwise there's no way to do it.

Mike Mills (Host) | 00:43:06 to 00:43:49

And it's almost a little disheartening sometimes right now, because when I talk to someone in their, say, late 20s, early thirty, s, more often than not, I'm talking to their parents quite a bit. Whatever the reason is, whether we want to raise them a certain way or whatever, it's just through a place where they're afraid to make decisions or make the wrong decisions. Interesting. I don't know if it's because too many options maybe it's too many options, maybe it goes back to parents and we want to do the best for our kids, and so we tend to make decisions for them instead of letting them figure things out. There could be a million reasons, I don't know exactly, but it's just a trend that I'm starting to see.

Mike Mills (Host) | 00:43:49 to 00:44:04

And then the next generation I hear this all the time, too. It's funny because they'll say, well, you'll see Forbes, right? They'll publish an article, they'll say, well, millennials don't really want to be homeowners. They want to travel, and they want to spend time being free and having flexibility. They prefer to rent.

Mike Mills (Host) | 00:44:04 to 00:44:12

And you know what? That is true. That's true. Until they have kids. I'm going to tell you right now, one of our best guys, he was just promoted.

Joshua Stephens (Guest) | 00:44:12 to 00:44:22

He used to report to me, but he got kicked off my team because he did such an amazing job. Shout out Vaughn. Vaughn, you're the real MVP. He's one of our trainees now. He's moved over into that area.

Joshua Stephens (Guest) | 00:44:22 to 00:44:43

Vaughn is 24, straight out of college, been in the appraisal life now for a little over a couple of years, I guess. He has moved to Grayson County up in the Sherman. He's got chickens and he's married. So I think it's a lie. Also, I'm just saying, what are you in the media and what they want to sell well, because they're trying to.

Mike Mills (Host) | 00:44:43 to 00:45:00

Push an idea that they're trying to share. Because again, when you don't want to buy homes. Well, when your biggest investor at Forbes is Zillow, when they're paying absolutely dollars in advertising I hear you. Then you're going to push the idea that people don't want to own homes, they want to rent. No, they don't.

Mike Mills (Host) | 00:45:00 to 00:45:12

Nobody wants to rent. It does make it Mike Mills 2024. You're good. It does make it tough for someone like a bond, though. It's like this uphill struggle because it's like, man, no, I still want that.

Christopher Green (Guest) | 00:45:12 to 00:45:17

It just means I'm going to have to come up with more money. But for the folks that want to do it, they'll figure out a way.

Christopher Green (Guest) | 00:45:19 to 00:45:32

Interesting. So right now we have people that are sitting with two and 3% interest rates, and they don't want to sell their home. That's me. I completely understand. If you don't have to sell, you're not going to sell.

Mike Mills (Host) | 00:45:32 to 00:45:58

So then the next thing that's going to happen is people are going, but they're also sitting on I read the other day, the average American sitting on $185,000 worth of equity in their house right now. Right. So if you're sitting on that much equity and you have this interest rate that you don't want to sell your home, then the next landlord well, no, the next logical step would be I want to improve my home. I want to upgrade because I'm not going to move. So I want to add a pool or I want to put in a new addition, or I want to change my bathroom or my kitchen or whatever.

Mike Mills (Host) | 00:45:58 to 00:46:21

So from an appraiser's point of view, what do you guys think the type of upgrades that an individual could add to their house is going to have the biggest bang for their buck when it comes to the actual market value? Okay, man, that's like a million dollar question I'll throw. Well, it depends on the neighborhood, too. Yeah, right, absolutely. I would look at bedroom bath count.

Christopher Green (Guest) | 00:46:21 to 00:46:33

Those are like the really big ones. Okay. If you've got a two bath home and primarily all the comps in your neighborhood are three or four bathroom. Okay, yeah. You should add a bathroom if you can.

Christopher Green (Guest) | 00:46:33 to 00:46:48

That would be smart. But any type of bathroom, remodel, kitchen remodel. And I'm not talking about like, paint, like, hey, we did a full remodel. No, like remodel remodel. The one that's interesting, though, and this is one that has changed.

Christopher Green (Guest) | 00:46:48 to 00:47:00

And we've been talking this has come up garage. We go in garage here. No, I'm not the pool back in. The day, pools would be like, again, with our firm and what we do, it has to be data driven. Sure.

Christopher Green (Guest) | 00:47:01 to 00:47:16

So, like, if comp A sells for this, it's identical to comp B. There's no difference other than one has a pool, but they still sold for the same price. Guess what the pools were, because that's a data driven decision. Sorry about that. No, but it gets better.

Christopher Green (Guest) | 00:47:18 to 00:47:42

What we found with pools and COVID is like, we started seeing comps that were like, oh, Dang, you're getting, like, 50% of your you're not getting dollar for dollar. But then it kept creeping up, and then there were sometimes we would see, good Lord, you're getting, like, dollar for dollar of what the pool would have cost back then. Now, pools tend to cost astronomical now. I mean, they have gone through the roof. So I don't know if you're still.

Mike Mills (Host) | 00:47:42 to 00:47:53

Getting dollars for dollar just to put a hole in the ground. Yeah. My very close friend, one of my close friends, he just got a quote. I think it was like, close to $200,000. He might be in the room right now.

Christopher Green (Guest) | 00:47:54 to 00:48:07

I thought, Sorry, kids, you're doing the kitty pool. Daddy loves you, just not that much. They have gotten incredibly well, but they've. Gone up in price substantially. So there was a time where I said, yeah, pool.

Christopher Green (Guest) | 00:48:07 to 00:48:25

Maybe if it cost you 50 grand, you might get 20,000 out of it, something like that. And then there was a time where it swung the complete other way, where I'm like, Dang, you have a pool and it's COVID you're going to sell that house. Yeah. Now it started to I don't know. Again, not dollar for dollar, just because the price of pools, at least ones that I've quoted, have been way high.

Mike Mills (Host) | 00:48:25 to 00:48:54

Well, we always I mean, my my wife and I, when we talk to people that ever buy or sell, we're like, listen, if you want a pool and put it in, you have to make that decision based on the fact that that's what you want. Exactly right. You want and you're going to get value out of that, then great, you do what you got to do. But if you're doing it because you're deciding on whether or not you're going to sell your house for more or less, don't do it. Don't do it because there's no there's just as I could go into a home and I want three bedrooms or I want two and a half baths or this is my preferred desire.

Mike Mills (Host) | 00:48:54 to 00:49:22

Well, there's people that don't want a pool, and there are people that do want a pool, and you can't control who's coming and seeing the home. So whether or not that individual places value on that pool, you can't control. So there's no reason to put in that's something of that significant unless you find value in it. My wife and I, we bought a house in I want to say it was 2010, maybe. And here in Manson, that's like, perfect timing.

Mike Mills (Host) | 00:49:22 to 00:49:39

Yeah. We paid 190 and ended up selling it for 320. Not too much longer. I bought a house in Saginaw once, and it was like, around 2010. I've been down to Texas here a couple of times, but previous job, and it was like 212 or something.

Christopher Green (Guest) | 00:49:39 to 00:49:50

That same thing is like half a million dollars. Yeah. It's insane. The prices have gone ridiculous. But we put in the pool and then we moved twelve months later.

Mike Mills (Host) | 00:49:51 to 00:50:02

Because my wife's a realtor, so she likes looking at houses all the time and she's like, what about this? I'm like, we just don't show me another in a house. We just put in a pool. Like a micro. Yeah, but she got me what about this, Chris?

Joshua Stephens (Guest) | 00:50:02 to 00:50:21

What about, like, a sunroom? Let's say someone wants to close it in, finish it out. What would cause that thing not to be included in Chile? Well, again, you're going to have to have HVAC and not just like, oh, I threw in an AC unit. The other thing we see, too, and this is really important for realtors, when you're listing yes.

Christopher Green (Guest) | 00:50:22 to 00:51:02

Is the fit and finish of that room for a sunroom, for example, similar or the same as the rest of the house? Because if I'm giving X amount dollar price per square foot for the home, and you want me to add an additional shack that you screened in and put a window unit in, I'm saying I can't it feels nice out here on the shack. I bet it's got a breeze, the wind is nice. Can you speak to the same topic about the permits and what you can include and what you can't when it's not permitted? Because when Uncle Bob decides he's going to convert his garage and now it's his man cave, but nobody else knows about it other than Uncle Bob.

Christopher Green (Guest) | 00:51:04 to 00:51:15

Okay. So that's interesting. You can grip and see what the county shows. And again, this goes back to the lenders. You better know your stuff, because sometimes lenders will be like, is the fit and finish the same?

Christopher Green (Guest) | 00:51:16 to 00:51:22

Are there other homes in the area that have your garage is converted? Yeah. Okay. You're fine. Yeah.

Christopher Green (Guest) | 00:51:22 to 00:51:56

If permits the Kosher thing, though, for example, if we're doing an appraisal and by the way, we know, just like, you know, the folks that you work with, we know our clients, we know the lender is going to we go through to a point where our appraisers freaking hate me. We go through the engagement letter and I'm like, hey, did you check this? Because Chase, for example, I just know this. Is this legally permitted permissible? And if you don't have that on there, then no, you cannot know it's not.

Christopher Green (Guest) | 00:51:56 to 00:52:23

So I will note it. I'll even take a picture of it for you and I'll put it in there, but I won't give it value. Yeah, well, the agents have to know that too, going into it and say, hey, look because they have to set expectations with their sellers to say, hey, look, this house is I know you put this work into it and you put ten grand or 15 grand into this converted garage or sunroom or whatever the case it may be. But because it doesn't either match the neighborhood or because it doesn't, I just got a new. Roof, man.

Joshua Stephens (Guest) | 00:52:23 to 00:52:34

What the heck? What do you mean? You're like well, listen, I mean, everybody's got to have a roof, right? It's called the bare minimum. But we run into that new roof.

Christopher Green (Guest) | 00:52:34 to 00:52:45

I got HVAC, tell you what, how many light bulbs? Oh, you put new trusses in. I'll write them all down because it's like, it's their home and these are families. These are people and they're proud of it. Everybody thinks their house is worth more than it is.

Christopher Green (Guest) | 00:52:45 to 00:53:17

But here's the thing. What I know is true is at the end of the day, whether there is a discrepancy or not between contract price and appraised value, I can sleep well at night knowing that I did all my due diligence and I asked all the right questions. That way, if they don't because we know this, if they don't like the value, that's not my role in this. But you can't come back and say it's not because I didn't ask you and because I didn't do my due diligence. Well, as long as you give them the information and there's a reason for everything, then you can justify it.

Mike Mills (Host) | 00:53:17 to 00:53:37

So one other thing I want to ask too, that we get a lot is the price per square foot, right? Every agent or not every agent, I want to put a broad blanket on everybody. But a lot of agents, that's the only thing that they use, the price per square foot. This is what the house is comped at. But there's a lot of other factors that go into it.

Mike Mills (Host) | 00:53:37 to 00:53:50

So can you elaborate on that a little bit? Yeah, for sure. And that's, again, not jab at an appraiser or at Realtors or anything like that, because I've heard it the other way, too. Appraisers like, oh, they're just going off of price per square foot. Well, did you ask them?

Christopher Green (Guest) | 00:53:51 to 00:54:14

Yeah. One of the challenges is like a 2000 square foot house is not going to have or potentially more than likely not have the same price per square foot as a 4000 square foot house, right? So there's brackets. But again, you go back to that GLA, you go back to the data. So, like, hey, homes that are say you're trying to list a house and the house is 2000 square foot.

Christopher Green (Guest) | 00:54:14 to 00:54:37

Okay, what are homes 1800 to 2200 going for? Roughly have that data. Note that this is what it looks like and we're dorks at work. We spend thousands of dollars on Titan analytics and all this technology where you can quantify and you can see on a graph and you can see these outliers. So you can say, even though it's within the range, why is this one so high?

Christopher Green (Guest) | 00:54:37 to 00:54:57

Right? Maybe because and then you look at the pictures, you're like, what's a full blown remodel? So you can better gauge as you're pricing your home, that you want to list. This is more in line with this comparable sale or this is more in line with this comparable sale versus just taking a blanket and saying, well, price per square foot is X amount. Right.

Joshua Stephens (Guest) | 00:54:57 to 00:55:20

Quality and condition on that also, it's like quality and condition are huge indicators of the price. How do you all base that? Because I do see that on the appraisal reports often the C Two, C three. Can you explain that a little bit? Because to me, as a lender, when I look at that and I see a big adjustment for a C Two to C three, and then I'm looking again, I'm ignorant to this, and I'm looking at both, I'm like, I don't understand why there's such a big difference.

Mike Mills (Host) | 00:55:20 to 00:55:35

And it's a $50,000 adjustment or something like that. Well, C Six is like a meth lab exploded. People died in there. You can put some pain on that. But it's a C Six, and people aren't lending on that.

Joshua Stephens (Guest) | 00:55:35 to 00:55:43

The condition is just outright atrocious. Yeah, absolutely. C One would be new construction. Right. So two differences.

Christopher Green (Guest) | 00:55:44 to 00:56:05

Condition, quality. It's actually if you ever want to fall asleep, you can go through the 1004 form that we use, and there's several addendum pages in there that actually go. So there was a time, like, when I started, when I started, everything is Q three, C three, Q three, C three, Q three, C three. That's not correct. Right.

Christopher Green (Guest) | 00:56:05 to 00:56:25

So look and see what the quality looks like, and you'll be able to differentiate between this type of builder and this type of builder. So it's supposed to be the reason that you need to have some of those standards in there is because the adjustments you make. Right. One of the things that we find, like our firm, we embrace technology. We just do.

Christopher Green (Guest) | 00:56:26 to 00:56:47

So you can see what your peers have up as your comparable sales, and you'll still see some that you're like, q four, Q four, Q four. And then you have a Q three, C three. And it's like, dude So you're kind of gauging. So quality would be the quality of material utilized. Condition would be like, you could have a manufactured home that's a C One because it's brand new.

Mike Mills (Host) | 00:56:47 to 00:57:00

Right. The quality would do the age of. It, basically, a lot of the times. Yeah. And condition like a C Two would be like, just barely lived in, or there has been substantial remodeling done to get to a C Two.

Mike Mills (Host) | 00:57:00 to 00:57:07

Right. Most of the time, a home is a C Four, C Three because it's. Been lived in for a little while. Yeah. Here's the thing, and there's nothing wrong with that.

Christopher Green (Guest) | 00:57:07 to 00:57:23

It's just we're trying to get more consistency. And then again, it goes back to the adjustments you make. Now, I've seen it where they're like, yeah, 50,000, or it's a $500,000 house. They do a 10% swing. You really should go back to the data and see what is the marketable difference.

Christopher Green (Guest) | 00:57:24 to 00:57:41

So a home that hasn't had carpet the typical items that you know are going to wear out. You have that home compared with one that has been replaced, those items. What's that difference if you can quantify it? That's the adjustment between a C four and a C three. That's how it should be.

Mike Mills (Host) | 00:57:41 to 00:57:50

Do you guys see? I'm sure you do, but maybe it's gotten better, the quality of builders that we have out there these days, because.

Joshua Stephens (Guest) | 00:57:57 to 00:58:13

On top of me and put me in the hospital by an organization rhyme with schmacht and SHMA. Okay, all right. So when we talk about the quality, I haven't heard that builders. Has the quality of builders increased in general? Has it gone down in general?

Mike Mills (Host) | 00:58:13 to 00:58:23

Is there a big dichotomy between builders these days? What do you think, man? So that's a great question. Loaded question. No day on the firing line.

Joshua Stephens (Guest) | 00:58:23 to 00:58:42

Here's the deal. So DFW and Austin, although they're separate markets, they're very similar also, and a lot of great builders. We have a ton of just incredible builders. There's big name people everywhere, everyone from Dr. Horton all the way up to more custom boutique like Jim Scott and Sons.

Joshua Stephens (Guest) | 00:58:42 to 00:59:07

There's a wide gambit. And the more custom, the more boutique, the less product that is in the market, the more time, probably the higher quality material. Whereas you get like the cheesecake factory of home builders who are just pumping out all day every time get them. Out the same 50 item, see a straight line. But you're like, man, they put like an inch of caulk here to do the gap between the base.

Christopher Green (Guest) | 00:59:08 to 00:59:20

But you're just like there's absolutely a. Difference between the entry level home than those custom builders. Absolutely. And so I didn't know when I got into the business. I had no idea.

Joshua Stephens (Guest) | 00:59:20 to 00:59:38

I remember shopping for homes and I started seeing patterns across different ones. And so when you're shopping, just don't buy the first thing you see. If you really want to understand quality, man, go into some of these subdivisions also when they're being built and just walk the properties.

Mike Mills (Host) | 00:59:41 to 01:00:03

Well, I've always told buyers that I'm talking to when they go to new builds because like, oh, what's a new build? I don't need an inspection. I'm like, no, you absolutely do, because, yes, you might be buying from XYZ Builder. Not to put a name on anybody, but you might be buying from this builder, but that builder is not there. That person that runs that company is not there building your home.

Mike Mills (Host) | 01:00:03 to 01:00:14

ODS, are there is some kind of subcontractor who subcontracted somebody else who's there? That's not his house. He doesn't give a damn about what it looks like. Sober. Yes, hopefully sober.

Mike Mills (Host) | 01:00:14 to 01:00:32

He's just trying to get through the job. Right. So to think that, oh, well, it's a brand new build, it should be in great shape. It's like no, I mean, we've all seen the videos now, especially on social media where I think there's storm comes through where the guy's, like, pushing on the fascia on the front of the garage, and it's just like, wiggling. That's not safe.

Mike Mills (Host) | 01:00:32 to 01:00:45

So just because it's new doesn't mean the quality is great. You got to get that stuff checked out. Absolutely. And honestly, there's one builder, and I love their homes are beautiful from the outside. The inside oh, man.

Joshua Stephens (Guest) | 01:00:45 to 01:00:58

The quality is a little different. Yeah. It's kind of like getting married and finding out something on the back end where you're like, oh, you tricked me. We didn't live together first. We should have figured that out for a long time.

Mike Mills (Host) | 01:01:00 to 01:01:15

One last thing before we wrap up, too, because we're already in over an hour here. But taxes, everybody loves taxes. So obviously when we talk about property taxes, property taxes are based off the value of the home. Okay. Allegedly.

Mike Mills (Host) | 01:01:15 to 01:01:51

Allegedly. So there is a difference in most cases between the market value for which you can sell your home versus what the county is going to tax you on the assessed value. So from an appraiser's point of view, a, do you know much about how they assess the properties? I'm curious myself, if they have their own internal appraisals from the county, do they just go through the MLS and look and see what house is sold for, or is there a process to it? And then B, do they ever get outside appraisers involved in that process to try to assess at whatever level they think is necessary for that area?

Joshua Stephens (Guest) | 01:01:52 to 01:02:03

I can really speak in our area. Okay. I know. Let's say most counties do not have a robust tax assessor team. Okay.

Mike Mills (Host) | 01:02:03 to 01:02:07

Right. These are government funded. Correct. They're using technology. Okay.

Joshua Stephens (Guest) | 01:02:07 to 01:02:27

So most of these things are all run through algorithms, program software that they have to calculate, and then they have reviewers on the back end. Okay. They do put build in percentages of failure rates of knowing that there will be disputes. That is very wildly known. And so it's kind of one of those things where effort reward.

Joshua Stephens (Guest) | 01:02:27 to 01:02:39

And so they're going to push those out knowing that some people are going to fight for them. Right. Now, you can hire an appraiser to help you get a value on your home. I'll be honest. Unless they specifically work in helping people.

Mike Mills (Host) | 01:02:39 to 01:02:51

Reduce their value. There are actual organizations out there who partner with you and help you dispute the charges formally. Yes. Okay. I get their main and appraisers.

Joshua Stephens (Guest) | 01:02:51 to 01:03:06

Are not those people appraisers those people? No. They're usually people that used to work in the office, that worked with all those people. I tell buyers all time, it's a good old boy network. The guy that you're paying the $500 to to argue your appraisal is going to be way more successful than you spending six and a half hours absolutely.

Mike Mills (Host) | 01:03:06 to 01:03:12

And filling out a form and going to stand in the courthouse. It's not going to work. Okay. It's not going to work. You pay the guy 500.

Mike Mills (Host) | 01:03:12 to 01:03:24

He goes and talks to his best friend that he's known for 20 years that's in the office and says, hey, I need you to get this one fixed for me. They take care of it and boom, your value is less. Congratulations. Yeah, I mean this year already I've had a couple of budies hit me up there. Hey Josh, man, will you pull some comps for me?

Joshua Stephens (Guest) | 01:03:24 to 01:03:40

And I'm like, momma con guy, so you owe me some nice cigars, but for sure. And then I have a cremudgeon. Not Chris, but one of our other guys pulled the numbers for me and needless to say, it's always yeah. I'm like, you don't want us putting the value on it, bro. Yeah, especially right now.

Christopher Green (Guest) | 01:03:41 to 01:03:42

Now here's the thing too.

Christopher Green (Guest) | 01:03:44 to 01:04:05

If you get your assessed value and it is astronomical, well, first off, they're going to take, hey, what did you pay for the home? Now here's the thing. Say that's not the case and say there was like when you bought the home, one of our appraisers that we have, when they bought their home, they were like over tax. I think it was like 100 and 5200 thousand dollars. And their house when they bought it.

Christopher Green (Guest) | 01:04:05 to 01:04:15

Allen really beautiful area. Like zip code. I mean everything was in line. Their house was trashed. I remember walking through it, there was like a blue light.

Joshua Stephens (Guest) | 01:04:15 to 01:04:24

I mean I was like a lot of deferred maintenance. Oh my gosh. Just because you have money didn't mean you have class. Exactly. You preach in Mike Mills.

Christopher Green (Guest) | 01:04:27 to 01:04:45

So anyways, in that case that would make sense. Like an appraiser could step in because it's like, yeah, I could help you get comps, but everything else not right now. Yeah. Could say we could send out we joked about that. Yeah, we could send out all these mailers and just appraise all these houses.

Christopher Green (Guest) | 01:04:45 to 01:04:57

You're not going to get what you're looking for. Ultimately you're looking to get a lower tax, right. If it seals the nail in the coffin. So I got my assessment and it came in and I left on the counter. My wife saw it, she was like, baby, baby, what do we do?

Joshua Stephens (Guest) | 01:04:57 to 01:05:06

What do we do? And I said, we don't do nothing because that thing says it's lower than what we really at. So we're just going to take the L, we're good. Make them think we took the L on this. We're good to go, baby.

Mike Mills (Host) | 01:05:06 to 01:05:29

Yeah. Well, hopefully there is I haven't updated myself recently on how it went through, but in the Texas legislature there is some stuff being put through. I believe it got through the Senate. But it's going to be a little different getting through the House because they have different ideals on how they should affect this stuff. But they are trying to reduce the amount that they can raise the appraised value when it's your home per year.

Mike Mills (Host) | 01:05:29 to 01:05:51

Because right now I think the cap is 10%, that they can't raise the assessed value when you live in your home because you won't be priced out homestead exempt, right? Well, that's not the homestead exemption, necessarily. What it is, is if you own so this happens all the time to people. They buy their home, and the person that they're buying it from has owned it for 15 years. And the assessed value, I know was, whatever, 200 grand, and they bought it for four.

Mike Mills (Host) | 01:05:51 to 01:06:02

Right? Well, that first year, they carry that 200,000. Right. But then within, usually because it's the government, twelve to 18 months, they're going to come in and reassess it. And now their property taxes shut up because they can raise it.

Mike Mills (Host) | 01:06:02 to 01:06:13

The county can raise it to whatever level they want once. Then after that, then they're capped. If you live there. If you don't live there and it's an investment, they can raise it however much they want. But if you live there, they're capped at 10%.

Mike Mills (Host) | 01:06:13 to 01:06:34

Well, the state legislature is trying to bring that down, I believe, to 5%. So they can or maybe be three and a half. They can't raise it be on that. The other thing that they are doing is they are increasing the homestead exemption amount, and some of the other, like, the disability over 65. So they're trying to help a little bit with those exemptions as well, to try to mitigate some of the higher.

Mike Mills (Host) | 01:06:34 to 01:06:49

Because our market's just gone ridiculous, you know, since 2020. And we've seen firsthand I mean, that it's stressful families. Yes. You're like, hey, like my Escrow, like, when someone's having, like, their payment and it goes up, like, 100, $200. Are you kidding me?

Mike Mills (Host) | 01:06:49 to 01:06:51

Oh, they go up five, six.

Joshua Stephens (Guest) | 01:06:54 to 01:07:07

I live in a mud, okay? And when they did my loan, that did not get factored in, okay? So I was a new construction house. So the first year, I already knew that one of my taxes came. Next year, I was already going to have to owe a significant so then I got that.

Joshua Stephens (Guest) | 01:07:08 to 01:07:23

Then the next year, then they hit me with the mud, and I was like, what? Are you freaking, dude? I almost had a heart attacked in the office. I loved it. Well, what really sucks, because a lot of the servicing banks don't do a very good job of and the builders and everybody it's just the explanations of stuff.

Mike Mills (Host) | 01:07:23 to 01:07:39

They don't educate people on how it works. Again, plug for local lenders know what they're doing. But what happens is, let's say your taxes go up $1,200 for the year, right? Well, if that's it, then you're really lucky. But it went up 100, right?

Mike Mills (Host) | 01:07:39 to 01:08:00

So your Escrow was short $100 for every month. But not only do you have to make up for the shortage, now you have to collect for what's going forward. So not only did your payment go up $100 because your taxes went up, but it went $200 because you had to make up for what was there before. So people, I get calls all the time, friends, family, whatever. My payment just went up $800.

Mike Mills (Host) | 01:08:00 to 01:08:10

And I'm like, well, the good news is it's only going to go up $400 after next year. But right now, yes, that sucks. Unless you catch up for what the arrears are. Unless you got the cash. Unless you got the cash.

Mike Mills (Host) | 01:08:10 to 01:08:20

But the servicing banks don't even tell. They just send them the bill. Like, here's your new payment. You know what, I take that back. They do send out stuff, but unfortunately people don't read their mail very often.

Mike Mills (Host) | 01:08:20 to 01:08:38

They're like, oh, I just want to throw it away. But you do see that stuff come across. But when someone buys their house and they've owned it for twelve months and their payment especially, it happens with builders all the time. All the time. Especially when they use the builders lender, when they get that payment, that's $1,900.

Mike Mills (Host) | 01:08:38 to 01:08:51

And then within twelve months, all of a sudden it's $2,600 or 20. And they're like, what happened? It's like, well, your taxes before, did you see where you said your escrow taxes were $100 a month, you bought a $600,000 house. That's not what it was going to be. But it happens.

Mike Mills (Host) | 01:08:51 to 01:09:13

It happens all the time. And it's a shame, but people get mired in that stuff and their mortgage payments because that is the biggest for most people, that's the biggest monthly expense that you put out on a monthly basis. And when you have a fixed salary that you make and I'm fortunate I have commissions, I just go work a little harder. But most people can't do that. Think about that.

Christopher Green (Guest) | 01:09:13 to 01:09:25

Yeah, like salary, like it's like, man, I got 2% increase. Does what? Inflation. You haven't even kept up with inflation. Livelihood.

Joshua Stephens (Guest) | 01:09:25 to 01:09:33

At the end of the day, we're just dealing with everybody's families. Yes. Everybody has a family member. And behind every transaction is a person. That person has family.

Joshua Stephens (Guest) | 01:09:33 to 01:09:49

Right? And so we really work hard at trying to remember that because so much of what we do is just numbers and data and analytics and it's real easy to just start looking at every assignment as math. Right. 100 appraisals went out. These three are something like that's.

Christopher Green (Guest) | 01:09:49 to 01:10:07

Still three families. Yes. And I'm just saying we exhaust every resource. And if three didn't get to the finish line, I can sleep well at night knowing like it was either price not aligned with what Comps would support, or like there's something else going on here. But that's not on me.

Mike Mills (Host) | 01:10:07 to 01:10:26

Yeah, well, I appreciate you guys. I love the culture that you all have built within your company because it sounds like you carry a lot of the core values that a lot of the companies that we work with do as well, where we're all working together. The goal is, like you said, to get it across the finish line. We're just trying to get to the end. Nobody's trying to throw wrenches and deals.

Mike Mills (Host) | 01:10:27 to 01:10:51

Nobody's trying to get people to not get their homes. Nobody's trying to get agents to not get paid. We're all trying to get across the finish line. And if the more people that just work together and you align yourself with partners that have of the same mindset and you're not dealing with somebody that is obstinate and doesn't want to help and just what I got, you got to deal with it, then you're always going to get a better result. Not every single time, because there's always outliers.

Mike Mills (Host) | 01:10:51 to 01:10:58

Problems come up, things get messed up. It's what happens. And I don't mean by the people that you work with. I just mean the nature of the transaction. Absolutely.

Mike Mills (Host) | 01:10:58 to 01:11:04

That's just what happens. Our people will make mistakes. Oh, yeah, sure. That's the thing. It's like, no, I expect there to be mistakes.

Christopher Green (Guest) | 01:11:04 to 01:11:20

How do you react to that and how do you learn? And I think you guys have built a great culture, and I really appreciate you all coming and trekking all the way out here to come see me and talk through all this stuff. Anybody that's not in real estate appraisal stuff is boring. Lending stuff. I tell people all the time.

Mike Mills (Host) | 01:11:20 to 01:11:37

I talk about mortgages often, but I don't talk about mortgages all the time because nothing's more boring than numbers and metrics and data. Like you said, it's like if you want to go to sleep, you can read the bottom of those. The addendums. Yeah, nobody's interested in that. But I appreciate you guys.

Mike Mills (Host) | 01:11:37 to 01:11:46

This has been great. I definitely will have you back sometime. Because every quarter or so, the more questions on Appraisals come up. More questions on appraisal. We deal with them all the time.

Mike Mills (Host) | 01:11:46 to 01:11:55

So anything I want to say before. You go, man, just shameless plug. If you ever got questions about appraisals, sometimes maybe you got an appraisal and you just have a question on it. And we didn't even do it. It's not one of ours.

Joshua Stephens (Guest) | 01:11:55 to 01:12:09

Orders@wpappraisers.com hit us up. Wpappraisers.com. Love that even here. Joshua@wpappraisers.com, you can email me directly and flood my inbox Russian bots. You're probably going to do that now, so thanks a lot.

Mike Mills (Host) | 01:12:09 to 01:12:25

And you do a ton on LinkedIn. So if you guys ever want to find Josh, he's there all the time because that's how I found you myself. Yes. So you do a great job getting information out there, and I appreciate you guys so much. So that's it for today and we will be back next week.

Joshua Stephens (Guest) | 01:12:25 to 01:12:31

My bill is 2024. Yeah, right. Appreciate it. All right, see y'all. See ya.