VALUES YOU CAN DEPEND ON REAL PROPERTY VALUATION

About Valucentric is a national Real Estate Valuation Firm employing over 130 Commercial &

About Today’s Speaker Ø Born and raised in Tampa, FL – Plant High School

Housing Crash –Blame Game History proves America tends to reactively over-correct when issues arise,

Collateral Risk Analysis in Today’s Marketplace Under the magnifying glass like never before! Valucentric;

Changes Post HVCC Uniform Appraisal Dataset (UAD) • Understand the Q and C Ratings

Big Data – Predictive Analytics WITH Human Element Valucentric; LLC | 4590 Rd, Hermon

DATA COLLECTION POINTS UCDP – UNIFORM COLLATERAL DATA PORTAL FANNIE AND FREDDIE COLLECT DATA

DATA COLLECTION POINTS Predictive Analysis Looks to see if BETTER COMPS HAVE BEEN PASSED

DATA COLLECTION POINTS Example of Risk Scores and Prior reporting Discrepancies

DATA COLLECTION VALIDATES Predictive Analysis of Value Ø Collection of over 16 million Appraisals

The Future of Appraisal: Bifurcation Machine Learning coupled with Data Collection What is a

AIR – Appraisal Independence Requirements Ø Enacted by HVCC and Dodd Frank Ø Reaction

Unique Challenges ØSolar installations ØGuest Quarters -ADU ØIllegal Uses due to zoning/ lack of

Be Prepared for the Appraiser, Paint the Picture Clear signed copy of the sales

Most Common Lender Requirements 3 or 4 closed sales within 6 months – Adjust

The Comparable Sale Funnel All Sales in Neighborhood/Market Area Verified & Qualified Sales in

Comparable Search Criteria – Inverted View MY COMPARABLE SEARCH CRITERIA CONSISTED OF PROPERTIES THAT

Condition Rating and Definitions C 1 C 2 C 3 C 4 C 5

Quality Rating and Definitions Q 1 Q 2 Q 3 Q 4 Q 5

Adjustments Largest adjustments in most appraisal reports • GLA - Square Footage • Quality

Adjustments –Gross Living Area Appraisers don’t use Price Per Square Foot when comparing properties,

Adjustments –Matched Pair Analysis ü Paired sales analysis is an appraisal technique used to

Condition Adjustments Appraisers must justify the value increase by demonstrating the level of rehab

Comparable Sales For The Appraiser Give as much information you can about closed, pending

Reconciliation of Value Once Comparables are selected and adjustments are made, the appraiser determines

Questions & Answers? Valucentric, LLC | 1003 Mt. Hermon Road, Salisbury MD 21804 |

Contact me for more information or to place an order: John Barcelo (813) 817

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About Valucentric is a national Real Estate Valuation Firm employing over 130 Commercial & Residential Staff Appraisers. The company is a partnership of successful valuation professionals who have united to build a brand signifying excellence. Valucentric is not an Appraisal Management Company. Valucentric services a broad spectrum of clients, including Lenders, Credit Unions, AMCs, Attorneys, and Property Owners. Valucentric is able to centralize many administrative functions, which allows the Managing Directors in our various markets to focus on our Clients and our Valuation Team. Valucentric understands today’s Real Estate environment requires far more than ever before from a technology, validation and vetting standpoint and thus has positioned itself as a market leader in not just Appraisal, but complete Collateral Risk Analysis. Valucentric; LLC | 4590 Rd, Hermon Ste 204 Road, | Clearwater, 33762 | (813) 252 -1140 |(VALU) www. Valucentric. com Valucentric, LLCUlmerton | 1003 Mt. Salisbury. FL MD 21804 | 888. 440. 8258 | www. Valucentric. com

About Today’s Speaker Ø Born and raised in Tampa, FL – Plant High School Class of ‘ 86! Ø Lived in Clearwater for the past 25 years Ø Started my RE career MCS, Default Servicing at 18 years old Ø Obtained my RE Agent License in 1996 - as my “night job” Ø Spent nearly 20 years in 3 rd Party Logistics Ø COO of Source Appraisal Management after HVCC Ø Regional Managing Member for Valucentric Appraisal; LLC Ø PRO Affiliate Director since 2013, Chairman since 2018 Valucentric; LLC | 4590 Ulmerton Rd, Ste 204 | Clearwater, FL 33762 | (813) 252 -1140 | www. Valucentric. com

Housing Crash –Blame Game History proves America tends to reactively over-correct when issues arise, rather than pro-actively address what even the blind can see a mile away!! Valucentric; LLC | 4590 Ulmerton Rd, Ste 204 | Clearwater, FL 33762 | (813) 252 -1140 | www. Valucentric. com

Changes Post HVCC Uniform Appraisal Dataset (UAD) • Understand the Q and C Ratings • efanniemae. com Uniform Loan Delivery Dataset (ULDD) QM Qualified Mortgage Dodd-Frank Bill • Reasonable & Customary Fees • Defining Appraisal Company & AMC Additional regulation for AMC’s • 3 rd Party Oversight • Consumer Finance Protection Bureau (CFPB) • Appraisal Independence • Reasonable & Customary Fees Collateral Underwriter (CU) Additional Education for Appraisers • Four year college degree required • Additional classes to get certified

Industry Changes On-Going

DATA COLLECTION POINTS UCDP – UNIFORM COLLATERAL DATA PORTAL FANNIE AND FREDDIE COLLECT DATA ON ALL APPRAISALS THE LENDER AGENT UPLOADS REPORT TO WWW. UNIFORMDATAPORTAL. COM CU WILL SCORE OUR APPRAISAL 1 -5 CU WILL RANK THE APPRAISALS COMPARABLES VS THE COMPARABLES THEY BELIEVE OUR BEST CU WILL PROVIDE ADJUSTMENTS BASED ON FANNIE MAE ALGORITHM

DATA COLLECTION POINTS Predictive Analysis Looks to see if BETTER COMPS HAVE BEEN PASSED OVER in EVERY report submitted

DATA COLLECTION POINTS Example of Risk Scores and Prior reporting Discrepancies

DATA COLLECTION VALIDATES Predictive Analysis of Value Ø Collection of over 16 million Appraisals in the prior 8 years by FNMAE/Freddie. Mac allows for a solid data set Ø GSE’s, Lenders use Predictive Analysis on every new loan and grade against it upon new report being submitted Ø Appraiser Scorecard kept on every report and cross validation of reports are conducted routinely TO IDENTIFY FRAUD Ø Average variance in Appraised Value is 3% Ø Some Lenders use multiple sources of Value Validation Ø Property Waivers are being relied on at an accelerated rate, if accurate data exists, a new Appraisal can be waived. Ø The future is not eliminating appraisals, but making them more simple and fast

The Future of Appraisal: Bifurcation Machine Learning coupled with Data Collection What is a Bifurcated Appraisal? It is a “desktop” appraisal product with a hands-on third party inspection that can be used for numerous lending and servicing scenarios including portfolio lending, home equity, default, securitizations, and servicing QC. Third Party Property Inspection Completed Data Collected from Prior Reports, MLS, Public Records compiled into an AVM type analysis Both are provided to Appraiser and at their “desk” they review and analyze all data to come up with a “Reconciled Value” Pull Through Rate is 7% Nationally (convert to full appraisal) Less than 5 years away from this being the New Standard

AIR – Appraisal Independence Requirements Ø Enacted by HVCC and Dodd Frank Ø Reaction to improper relationships and practices between Appraisers and Production Loan Officers Ø Loan officers who are compensated based on closing loans cannot select appraisers or influence the process Ø Realtors are NOT covered by AIR regulations Ø It is important for Realtors and Appraisers to have regular and productive interaction Ø Realtors often have information and perspectives that Appraisers do not Ø Realtors have better insight into real time market dynamics Ø Realtors may know more about a Sale or Listing that can be gleaned from MLS Ø Realtors may be aware of non MLS data Valucentric; 4590 Ulmerton Rd, Ste. Road, 204 | Clearwater, 33762 | (813) 252 -1140 | www. Valucentric. com Valucentric, LLCLLC| |1003 Mt. Hermon Salisbury. FLMD 21804 | 888. 440. 8258 (VALU) | www. Valucentric. com

Unique Challenges ØSolar installations ØGuest Quarters -ADU ØIllegal Uses due to zoning/ lack of permits ØLegal Non-Conforming ØNo good comps BE INFORMED!!!!! Valucentric; LLC | 4590 Rd, Hermon Ste 204 Road, | Clearwater, 33762 | (813) 252 -1140 |(VALU) www. Valucentric. com Valucentric, LLCUlmerton | 1003 Mt. Salisbury. FL MD 21804 | 888. 440. 8258 | www. Valucentric. com

Be Prepared for the Appraiser, Paint the Picture Clear signed copy of the sales contract Copy of the disclosure Plat of survey / Elev. Cert in Flood Zone List of recent improvements to the home Closed sales, pending sales, active listings Neighborhood or Project Information PUD Amenities / Special Amenities

Most Common Lender Requirements 3 or 4 closed sales within 6 months – Adjust &Unadjusted Value must BRACKET – as many as it takes to create a credible opinion of value 2 of those preferably be closed within 90 days, all of them actually 2 pending sales or active listings in the market area similar to subject For Condo’s, all comparable closed, pending or active listings located in the subject building must be included or addressed in the report. Many Guidelines were eliminated years ago, most Appraisers still use them • Remember to BRACKET AMENITIES • Be sure your comps are selected within GUIDELINES Net adjustments 15% max, Gross adjustments 25% max, 10% Line Item Max

The Comparable Sale Funnel All Sales in Neighborhood/Market Area Verified & Qualified Sales in Neighborhood : How Far, How Recent, How Similar? True Comparables

Comparable Search Criteria – Inverted View MY COMPARABLE SEARCH CRITERIA CONSISTED OF PROPERTIES THAT ARE BETWEEN XXX AND XXX SQUARE FEET, WITH XX-XX BEDS & BATHS, WITH LOT SIZE BETWEEN XXXXX, WHICH SOLD WITHIN THE PAST XXX Days, AND ARE LOCATED WITHIN XXX RADIUS OF THE SUBJECT PROPERTY. MY COMPARABLE SEARCH DID NOT INCLUDE ANY SALES PRICE OR VALUE PARAMETERS Step 1 Step 2 Step 3 • Comparable Sold within. 25 mile of subject • Comparable Sold within prior 90 Days • Comparable Sold within. 5 mile of subject • Comparable Sold within prior 6 months • Comparable Sold within. 5 - 1 mile of subject • Comparable Sold within prior 6 mos - 1 year If nothing exists, we expand Area and/or Time, based on the specific characteristics of the subject.

Comparable Amenities

Condition Rating and Definitions C 1 C 2 C 3 C 4 C 5 C 6 New 100% New Foundation Not Previously Occupied No Deferred Maintenance No Repairs Recently Rehabbed Well Maintained Limited Physical Depreciation Some Minor Deferred Maintenance Obvious Deferred Maintenance Substantial Damage Defects That Affect Safety & Soundness

Quality Rating and Definitions Q 1 Q 2 Q 3 Q 4 Q 5 Q 6 Exceptional Quality, Custom High Quality, Semi. Custom Above Standard Quality Adequate Quality Economy, minimal, inexpensive Quality Basic, Lower Cost, Simple Quality

Adjustments Largest adjustments in most appraisal reports • GLA - Square Footage • Quality and/or Condition Market derived using paired sales analysis Can be greater or less than the cost of the improvement Can be subjective, Experience based, must be supported Agents have all the tools to help appraisers with adjustments

Adjustments –Gross Living Area Appraisers don’t use Price Per Square Foot when comparing properties, they select comparable sales based on similarities and adjust for the difference in amenities to reach a reconciled value of the subject. “The comparable sales were sold from $82. 02 to $120. 06 per square foot. This includes the site, site improvements, bathrooms, kitchen, garage, etc. The living area adjustment reflects only living area size differences. It would be reasonable for the living area adjustment to be less than the price per square foot paid for the entire comparable. A living area adjustment of $30 was made to reflect differences in the living area size. The comparable sales were adjusted $0. 50 on the $1. 00 for seller concessions. The room count adjustment is a net adjustment based on $1, 000 for bedrooms, $3, 000 for bathrooms, and $1, 500 for half baths. Comparable 2 was adjusted due to its view and proximity to a power line. In the final reconciliation of the Sales Comparison Approach, all of the comparable sales were given equal weight. ” Valucentric; LLC | 4590 Ste 204 Road, | Clearwater, 33762 | (813) 252 -1140 | www. Valucentric. com Valucentric, LLCUlmerton | 1003 Mt. Rd, Hermon Salisbury. FL MD 21804 | 888. 440. 8258 (VALU) | www. Valucentric. com

Adjustments –Matched Pair Analysis ü Paired sales analysis is an appraisal technique used to determine a feature's value within a property, such as a pool or an outdoor kitchen. These pairings are called paired sales. ü As with any statistical equation, the more data analyzed, the more reliable the results ü Isolate individual amenities and compare the sales price of those with the amenity and those without the amenity –the difference in price equated to a percentage justifies the adjustment amount ü Realtors have the same access to data to make Matched Pair Comparisons ü Always be sure you are comparing Apples to Apples, the same guidelines apply Valucentric; LLC | 4590 Rd, Hermon Ste 204 Road, | Clearwater, 33762 | (813) 252 -1140 |(VALU) www. Valucentric. com Valucentric, LLCUlmerton | 1003 Mt. Salisbury. FL MD 21804 | 888. 440. 8258 | www. Valucentric. com

Condition Adjustments Appraisers must justify the value increase by demonstrating the level of rehab performed on a property in addition to the market reaction to similar transactions. The level of “Finishes” must coincide with other similar transactions C 2 vs. C 3 condition – Must have been completely rehabbed for C 2, all major components, free of repairs The cost of rehab doesn’t always equate to market value Agents have all the tools to help investors with adjustments and selecting proper comparables.

Comparable Sales For The Appraiser Give as much information you can about closed, pending and active comparable property. Take the time to go over it with the appraiser *Verify the square footage and lot size of comparable property. These are often your largest adjustments in an appraisal report. Most times this can move a comparable up or down. It can also be helpful when making an offer for your client Reporting function in MFR. Get familiar with running data, review every picture! Realist. Make sure the data in Realist is correct, identify and clarify discrepancies in MLS/PR data Best practice would be to email your documents to the appraiser prior to the appointment, or leave in an envelope on kitchen counter, if home is vacant

Reconciliation of Value Once Comparables are selected and adjustments are made, the appraiser determines a Median Range of Value The Median Range of Value puts a high and low value mark based on the market area statistics and applicable adjustments to balance dissimilarities The subject property value is then “reconciled” to where in that range it belongs Compared to the other sales is it Inferior/Superior/About the Middle? The subjects current condition/size/amenities as compared to all the other sales in the analysis determines where in the value range the subject belongs.

Questions & Answers? Valucentric, LLC | 1003 Mt. Hermon Road, Salisbury MD 21804 | 888. 440. 8258 (VALU) | www. Valucentric. com

Contact me for more information or to place an order: John Barcelo (813) 817 – 6382 Mobile (813) 252 – 1140 Office Direct JBarcelo@Valucentric. com www. Valucentric. com “The best investment on earth, is earth. ” Louis Glickman, Real Estate Investor & Philanthropist Valucentric; LLC | 4590 Ulmerton Rd, Ste 204 | Clearwater, FL 33762 | (813) 252 -1140 | www. Valucentric. com