Road Home changing how it sets home values

By Coleman Warner
Staff writer

Scrambling to head off another broad revolt over Road Home grant calculations, state officials said Wednesday they have overhauled methods used in estimating pre-storm values of homes. The new procedures shift emphasis from computer-generated assessments to traditional appraisals by human beings.

The moves came as a smattering of citizens say they believe the Road Homeprogram has low-balled them in estimating pre-storm property value, a figure critical to the ultimate size of grant awards because it sets a ceiling from which deductions for insurance and FEMA real estate grants are made. The problems seem most acute in Orleans Parish, where neighborhoods with checkerboard demographics and home values aren’t well-suited to “average” calculations of value used in the automated assessments.

Rather than the automated appraisal methods, officials now will use a combination of pre-storm appraisal obtained from private assessors or government agencies. For appraisal years before the storm, a formula will be used to calculate appreciation in the home’s value. In another key policy shift, state officials have dropped their opposition to homeowners’ post-storm hiring of certified appraisers to estimate pre-storm values for purposes of assembling evidence for Road Home, which provides rebuilding grants of up to $150,000.

But that tactic should be unnecessary in most cases, because the program will give more consideration to appraisals obtained from alternate sources, said administrators of the $7.5 billion aid program for owners of flooded homes.
In the wake of a tense meeting called by Gov. Kathleen Blanco Tuesday to discuss Road Home procedures, executives in the Office of Community Development, which oversees the program’s privately contracted managers, also said they expect to finalize a process soon that will allow homeowners to receive an approved grant, even as they grind through formal appeals seeking more money.

New scrutiny given to the appraisal issue gives hope to Road Home applicants like Mike Madary, a veteran New Orleans city worker given an estimate of $172,216 for the pre-storm value of his Lakeview home in a Road Home final award letter. Since he went in for his Road Home interview, Madary has retrieved a 2003 appraisal for his property that set its value at $250,000. The higher figure could dramatically increase how much money he qualifies for in rebuilding.

“I don’t know how they arrived at it (pre-storm value),” said the 54-year-old Madary, who recently tore down his old flood-damaged home. “Obviously it’s $77,000 less than it was appraised for almost two and a half years before the storm, and I’m certain that my house didn’t depreciate that much.”

Division of Administration officials said they are discontinuing use of a program called the Automated Valuation Model, which has churned out thousands of estimated pre-storm values in New Orleans by tapping real estate databases. The model, applied to homes for which owners had no qualified pre-storm appraisal, doesn’t always take into account the specific square-footage of a home and did a poor job of pegging values for homes that don’t fit the average for their neighborhood, state officials concede.

Officials also have reduced the role of the Broker Price Opinion, a method widely used in parishes outside Orleans in place of pre-storm appraisals. That technique leaves estimation of values to realtors, who weigh characteristics of the home and surrounding neighborhood, and consider nearby comparable homes. But even that method can produce erroneous findings if pre-storm traits of a home can’t be easily ascertained, Road Home officials have said.

In place of the AVM and BPO — high-volume, low-cost methods employed to get large numbers of applications moving, state officials say — the Road Home program will rely on past files of private assessors and federal housing officials to dig up alternate appraisals for the same addresses, with values adjusted to reflect market-price changes, officials said. The BPOs will still be used as a reference point to check other appraisals in every parish, however.

“We are doing our very best,” Suzie Elkins, director of the Office of Community Development, said of procedural changes. “We feel like this will make it better.”

Elkins said she doesn’t expect the changes to bring new delays in the processing of thousands of grant applications.

After taking part in the opening of a new homeowner assistance center in eastern New Orleans Wednesday, Road Home director Mike Byrne, of ICF International, said the shift in methods reflects feedback received from other state officials Tuesday, as well as a learning curve for the much-maligned contractor.

“At the end of the day, we’ve got a couple of additional tools in our toolbox to do our job, which I think is going to be good for everybody,” he said. “We’ve been changing.”

State officials and ICF International argue that many homeowners are happy with home values already used in their award calculations, and those assessments won’t be changed. But Elkins and a senior housing manager in her office, Mike Spletto, said values will be reconsidered whenever a challenge is made to the Road Home “resolution” desk, or if a formal appeal is filed.

Some certified appraisers have blasted the program’s reliance on automated and Realtor-generated values, calling them a poor substitute for a true appraisal.

In one recent letter to a U.S. Department of Housing and Urban Development official, seeking intervention in the matter, local appraiser John W. Murden Jr. said that he “cannot believe that HUD would allow federally funded grants to be based upon ... inferior forms of valuation. The rejection of appraisals performed by licensed Louisiana certified appraisers is a slap in the face to both the certified appraiser and the homeowner.”

In a separate policy shift, Road Home officials expect to quickly finalize details of a new policy that will allow homeowners to accept an approved grant and still retain the right to seek a higher amount on appeal. That change was a key element of a wide-ranging agenda for change in policies sought by the New Orleans-based Citizens’ Road Home Action Team, a loosely-organized lobbying group, and Byrne conceded they were influential in the matter.

Group founder Melanie Ehrlich said she was “very pleased” that the program is making changes in response to complaints.

While there has been widespread criticism of the small number of citizens, out of more than 85,000 applicants, who have gone to a grant closing — fewer than 100 at last report — and of flagrant errors in award letters, Louisiana Recovery Authority member Walter Leger, a Road Home expert, has said the pegging of home values is especially troublesome.

“I just want to make sure the pre-storm values are clear, because that’s the biggest issue that we’ve had contact on,” Leger said recently.

That was before an admission last week by Elkins, during an LRA meeting, of serious problems with use of the Automated Valuation Method. Realizing the pre-storm value figure is critical in determining a rebuilding grant, many without pre-Katrina documents attesting to their homes’ value are unnerved by talk of low-ball estimates, said John Patnett, a Catholic Charities recovery office worker who lives in a FEMA trailer in front of his eastern New Orleans home. The 57-year-old Patnett hopes the calculations reflect a runup in market values in the few years before Katrina hit.

If they don’t, some owners will borrow more than they want in order to rebuild, or they may walk away from their washed-out neighborhoods, he said.

“It seems like the (Road Home) appraisals are lower than what they’re supposed to be,” Patnett said. “I’ve been hearing that from different people. They’re worried about getting enough.”

For Madary, the Road Home program’s $172,216 estimate of his pre-storm property value, once insurance payments of $142,000 were deducted, left him with a rebuilding grant offer of $30,215. If the program now accepts his pre-storm appraisal, he should qualify for roughly another $75,000 to apply toward construction costs.

Madary said the award letter didn’t spell out how the value was determined, and he has gotten nowhere, so far, with calls to Road Home officials for clarification.

“I’m just trying to find out information,” he said. “Most of the people that you talk to are very pleasant, but no one has any answers.”

The city worker hasn’t given up hope.

“We really want to stay here. In fact, when we talk to our kids who live away, for the holidays and so forth, they are eager to come back to New Orleans and spend time,” he said. “There are three legs that the recovery can stand on from my standpoint right now. It’s the LRA rebuilding money, insurance money, and whether levees hold and wetlands are replenished. Right now, we’re willing to take the gamble, but this (Road Home) program and the way it’s being administered so far is making it exceedingly difficult.”

Coleman Warner can be reached at

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or at (504) 826-3311.

The Road Home Program is now accepting Pre-Katrina appraisals from Licensed Certified Appraisers done after the hurricane. But the Road Home Program is still using old outdated appraisals, AVM's, Broker Price Opinions, etc to estimate the value of your properties. They have not changed their methods of valuation. You have to protect yourself from their inferior forms of valuation. They now accept an appraisal from a Licensed Louisiana Certified Appraiser if you give it to them at your LRA meeting or if you challenge their value. Many of my clients homes have been under valued by their methods of valuation. I was informed by 2 of my clients that they were under valued by $50,000 and $60,000 by the Road Home methods of valuation. The small price of an appraisal might save you thousands of dollars. But, there is no guarantee that an appraisal will be higher than the Road Home Programs value.

You have to look out for yourself.

John W. Murden, Jr.
Louisiana Certified Residential
Real Estate Appraiser #R0716
Phone & fax: 504-467-2208
Email:

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