Are Granny Flats Undervalued?

by Kathy Price-Robinson, The Appraisers Research Foundation


Whether you call them granny flats, in-law units, or something else, residential accessory dwelling units (ADUs) on residential properties excite municipal planners, homeowners, and others for social and environmental reasons. They are “green” by nature because of their small size and can provide great benefits to the owner.

But they can also perplex appraisers and other real estate professionals because of erroneous perceptions and various institutional policies that complicate lending on properties featuring ADUs.

To help clarify the estimation of value of residential properties with accessory units, researchers Martin J. Brown and Taylor Watkins conducted a study to test an income-based approach to valuation of properties with ADUs.

My comment: I appraise these types of units often in my city. Typically they are not legal. I consider them similar to detached bonus rooms, offices, guest quarters. If legal, the income approach would work to determine the added value of the ADU. Of course, income from airbnb, etc. vs. “regular” rentals is another big issue. The article does not address non-legal ADUs, the vast majority of them. FYI, The Appraisers Research Foundation has been around for a long time and regularly publishes (and gives grants for) research papers. For more info, go to To see their other research, click on Research Results in the top menu bar.


Poll: On average, how long does it take you to complete a 1004 interior inspection appraisal report, including inspection and drive time? survey. This week’s poll is C/R fees in your area. Maybe future polls will ask about time required before HVCC and typical AMC fees in your area.


My comments: For many appraisers, driving time is long. Two years ago I started working almost exclusively in my small town. Driving time is very low. However, I very seldom appraise tract homes. My appraisal reports are very similar to pre-HVCC. I average about 5 hours per appraisal.



8 homes under $100,000/One home for $1

8 homes under $100,000

in FL, OH, WI, NY, TN, etc.

My comment: no Detroit homes under $10,000… Nothing from CA. We do have some mountain/rural areas with low priced homes, but many under $100,000 except bad fixers.


The Odd Tale of the $1 Historic Home That No One Wants


You’ve heard it before, but we’ll say it again: The San Francisco Bay Area is a pricey place to live, where even decrepit shacks command six-figure sales.

But what if we told you there’s a Bay Area house for sale-for a mere $1? And what if we added that no one seems to want it? Not yet, anyhow.

Let’s ponder the price for a moment. A single-family house for a dollar. Less than a bottle of beer. Cheaper than a cup of coffee. A steal compared to bus fare.

My comment: Typical home prices in Hercules are under $500,000. A good price for the Bay Area!! Of course, it is a historic home fixer that has to be moved ;> It was a “company town” for a long time. The Hercules plant opened in 1881 and began producing dynamite. Dynamite manufacturing was ended in 1964.






Funny listing photos

Just For Fun!! As we all know, listing photos are supposed to show what is good about a property (if you want to sell it). If there are no kitchen and bath photos, they have not been updated, etc.


Falling Car of Bordeaux, France

This Bordeaux parking garage has 712 indoor spaces, and one outdoor.


An early 1960s-era Mark 2, in British racing green, hangs precipitously over Cours Victor Hugo in central Bordeaux. Luckily, no Jaguars were harmed in the making of this parking lot.


Vanadu Art House – Hyattsville, MD

An intricately designed junk art house with four extravagant junk art cars hidden in the suburbs.


Ladybug Building in Milwaukee, MN

The bugs crawling down the front of this office building are almost as big as a ’68 VW Beetle.


In the December 2016 issue of the paid Appraisal Today

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 2016 year-end tax planning for appraisers. What you can do now to save money on your 2016 taxes!! One good tax tip more than pays for your subscription!!

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Practical tips for dealing with complex residential appraisals By Joe Lynch. A very good article with case studies and lots of tips. Something useful for all appraisers. I got some good ideas myself. Even after 40 years of appraising there is always something to learn!!


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Modernizing Appraisals Hearing

I watched this live 2-hour: Wednesday, November 16, 2016 (10:00 AM) – Subcommittee on Housing and Insurance (Committee on Financial Services) Hearing.

I had planned on writing an article for my paid newsletter about it. But, I could not think of anything much to say, even after reading the prepared testimonies and watching it again. The people testifying said nothing new. The legislators did not have much to say either. When I write an article I need a “hook” or something that makes it relevant to appraisers. Unfortunately, I could not find a good hook. Maybe you can. There were lots of suggestions, but no conclusions.

It is interesting to watch, to see what those giving testimony said and comments from the legislators. Watch it here:

Links to the prepared testimonies and lots of appraiser comments:

Several of those who posted comments mentioned that it is worth watching. I recommend watching it also as it goes over many appraisal issues and listen to comments from the committee members.

As of early 11/22/16 there were 3,162 views. Lots more than most of the other House Subcommittee meetings, probably mostly appraisers.


Fannie’s Property Inspection Waiver starts 12-10-16

No one really knows how many loans will be affected. Below are some links. The latest news is that as of January 1 2017, Fannie will not be requiring a fee for the PIWs. Underwriters are looking forward to having fewer appraisals to review.


Trump Treasury pick: Fannie Mae and Freddie Mac will be privatized – Steve Mnuchin tells Fox Business: “We’ll get it done reasonably fast”

Excerpts: Rather than be wound down, as some including another rumored choice to lead the Treasury, Rep. Jeb Hensarling, advocate for, Mnuchin said the government-sponsored enterprises will be taken out of “government ownership,” restructured, and privatized.

If the government were to release the GSEs back into private hands, it would be an absolute boon for the hedge funds that bought Fannie and Freddie stock when it was trading at pennies, betting that privatization may happen again in the future.

As it stands now, the government holds all of the senior stock in the GSEs, but the other GSE stockholders, many of whom sued the government for sweeping all the GSEs’ profits into the Treasury Department’s coffers, could stand to make a fortune as well.

As Timiraos notes in his tweet, Fannie and Freddie’s stock shot up on the news of the day, both up more than 30% as of 12:30 pm Eastern

My comment: I have no idea what this means for appraisals. But, I shoulda bought some F&F stock ;>

More commentary on the anticipated GOP battle at:


HOW TO USE THE NUMBERS BELOW. Appraisals are ordered after the loan application. These numbers tell you the future for the next few weeks. For more information on how they are compiled, go to

Note: I publish a graph of this data every month in my printed newsletter, Appraisal Today. For more information or get a FREE sample issue go to or send an email to . Or call 800-839-0227, MTW 8AM to noon, Pacific time.

Mortgage applications decreased 9.4 percent from one week earlier

WASHINGTON, D.C. (November 30, 2016) – , according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 25, 2016. This week’s results included an adjustment for the Thanksgiving holiday.


The Market Composite Index, a measure of mortgage loan application volume, decreased 9.4 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 38 percent compared with the previous week. The Refinance Index decreased 16 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.2 percent from one week earlier. The unadjusted Purchase Index decreased 34 percent compared with the previous week and was 3 percent higher than the same week one year ago.

The refinance share of mortgage activity decreased to 55.1 percent of total applications, the lowest level since June 2016, from 58.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.7 percent of total applications, its highest level since June 2016. The average loan size for purchase applications reached a survey high at $312,400.

The FHA share of total applications decreased to 10.4 percent from 11.7 percent the week prior. The VA share of total applications decreased to 11.7 percent from 12.5 percent the week prior. The USDA share of total applications remained unchanged at 0.8 percent from the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to its highest level since July 2015, 4.23 percent, from 4.16 percent, with points increasing to 0.41 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) increased to its highest level since July 2015, 4.18 percent, from 4.04 percent, with points decreasing to 0.29 from 0.37 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.


The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to its highest level since July 2015, 4.00 percent, from 3.90 percent, with points increasing to 0.44 from 0.36 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to its highest level since October 2014, 3.48 percent, from 3.35 percent, with points increasing to 0.33 from 0.32 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 5/1 ARMs decreased to 3.23 percent from 3.24 percent, with points increasing to 0.44 from 0.28 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.

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