Castles in America

Roger Declements likes to build his castles the medieval way.
He starts with stone – up to 1,000 tons of it – and then constructs two parallel walls. After years of work, sometimes an entire decade, these walls add up to what he considers “the most advanced, strongest and most comfortable” abode a person can have.
In the United States, where there are no authentic medieval castles, imitation ones are few and far between. But interest in them has grown, in part because of the popularity of books and shows like “Vikings,” “Downton Abbey,” “Game of Thrones” and the Harry Potter series.

My comment: Very interesting article with good photos plus some info on castles in Europe for comparison. FYI – article is in the New York Times, which only allows a few free articles before requiring a subscription.


Cherry-picking comps & being connected to the neighborhood

By Ryan Lundquist
Excerpts: On paper it looked like value was going to be so much higher. Why? Because comps to the north were easily 10-20% higher, and even Zillow came in $100,000 above the appraisal (ahem). The big cause of such a legitimately lower appraisal boiled down to one thing. Location. Today I want to show a situation where a small section of the neighborhood was blocked off from the rest, and it was a big deal for value. Have a look below and let me know what you think. Anything to add?
Methodology when only 5 sales in 5 years: When appraising something in this section, there were zero sales over the past 2 years and otherwise only 5 sales in the previous 5 years. This means I had to really study older sales to understand how value works…

My comments: Lots of good ideas. Very well written with good analysis and excellent use of graphs and annotated maps. I regularly go back in the past for comps and analysis. Making market conditions adjustments is very easy. I also use percent adjustments, which tend to be stable over time.


Advisory Opinion 37, Computer Assisted Valuation Tools Interpreted

Excerpt: AO-37 cites issues appraisers face when relying on software or online resources to complete their appraisals. The AO addresses two broadly-used technologies – Regression Analysis and Multiple Listing Services – to illustrate the role of software tools in the valuation process. The main message of this AO is that technology can build credibility in appraisals as long as appraisers apply it correctly to support their decisions. Conversely, they can hurt credibility and valuation results if used incorrectly.
Luckily, appraisers don’t need to know the formulas used by their tools or any algorithms and/or proprietary information about, or contained in it. AO-37 states “However, the appraiser should be able to describe the overall process and verify that the computer assisted valuation tool is consistent in producing results that accurately reflect prevailing market behavior for the property that is being analyzed.

My comment: Worth reading this commentary plus AO-37, the original document, on page 51 or 52 of the Third Exposure Draft at . When I wrote about a previous version, I seemed to be the only one concerned about this AO, which appeared to require that appraisers know and understand the regression algorithm, which is proprietary and not available. AO-18 was published in 1987 and did not address current issues in using regression software.


In the paid Appraisal Today Newsletter

Recent Articles on Appraisal Topics

* Supporting Adjustments: Let’s be Reasonable! – are you making too many adjustments?
* Residential Cost Approach Part 1 – Complying with USPAP when lenders require the Cost Approach, Sample Comments
* Residential Cost Approach Part 2 – Reconciliation, obsolescence, Sample Comments
* Residential Highest and Best Use Analysis: more than Just a “Check box”, Sample Comments
* Meet the New Boss – CU – written by a lender reviewer
To read the articles, plus 2+ years of previous issues, subscribe to the paid Appraisal Today.
If one of these articles gives you one good idea for handling underwriter questions, it is worth the subscription price!! 
$8.25 per month, $24.75 per quarter, $89 per year (Best Buy)  
or $99 per year or $169 for two years 
Subscribers get, FREE: past 18+ months of past newsletters 
plus 4 Special Reports, plus 2 Appraiser Marketing Books!!

Zillow’s lawsuit over Zestimate

By Kenneth Harney, long time nationally syndicated real estate writer
In an interview, Andersen (the attorney/plaintiff) told me she is considering bringing the issue to the Illinois attorney general because it affects all property owners in the state. She has also been approached about turning the matter into a class action, which could touch millions of owners across the country.
My comment: Worth reading. This article is important as Harney’s articles are syndicated and published in many newspapers. Also, he understands and writes about appraisals regularly.

FYI, some appraisers are including the Zillow zestimate on the subject in their appraisals and explaining why it is not the same as their value to eliminate hassles.


AVMs to Finally Replace Appraisers?

Appraisers have responded to Fannie and Freddie’s new changes with a mix of shock, outrage, indifference, and a few “I told you so’s.” Richard Hagar, SRA argues that while change is coming to the industry, appraisers are and will remain an integral part of the valuation industry. “AVMs are not going to take over the job of an appraiser any time soon. Houses change: some get larger, some remodeled, some add an accessory dwelling unit (ADU), some have massive interior damage, while others burn down. County records rarely or very slowly reflect those changes,” Hagar says.
While AVMs won’t replace appraisers, Hagar notes they are by no means “useless” (as some appraisers argue) and their use can be expected to continue in the future. “AVMs have a place in a valid business model when it comes to providing yearly updates on the value of a block of loans held by banks, Fannie Mae and most private lenders.
My comment: The article is a discussion of what Fannie and Freddie are doing with using AVMs for valuation plus other issues. AVMs have been in use for decades by assessor’s offices. They started being used by lenders in the 1980s. In the mid-1970s, I worked for two California assessor’s offices that were converting to AVMs. Of course, the purpose was property tax equalization, not the value of a specific property by itself, which is what you do for other uses such as a mortgage loan.

SEC Probes Rental Home Values Using BPOs in Private-Equity Bond Deals

U.S. securities regulators are investigating whether bonds backed by single-family rental homes and sold by Wall Street’s biggest residential landlords used overvalued property assessments.
The agency has been looking at whether BPOs were wrongly inflated, and similar letters were sent to other companies, potentially serving as a starting point for an industrywide probe, said a person with knowledge of the matter. The SEC is scrutinizing how BPO providers compete for business and whether their customers shop for providers willing to put the highest value on their properties, said the person, who asked not to be identified discussing private matters.
My comment: Worth reading for lots more info. They are finally figuring out that real estate agents are sales people and want to give their clients what they want to get the listing. I saw that a lot when doing REO appraisals. Hassles from real estate agents who wanted low values so they could make the listings easier to sell. Or hassles from clients who wanted to be able to sell the homes for higher prices.
Appraisers are objective and can be deal killers. We are owed our fees, whether or not the deal goes through. Quite a different orientation from real estate agents. Maybe someday we can get acceptable alternate valuation products to compete with BPOs.
I have never read an article about a real estate agent going to jail or losing their license because of “bad” BPOs.
In upcoming issues of the paid Appraisal Today, Barry Bates, curmudgeon (and long time lender appraiser and manager) will discuss what is happening with alternate valuation products.
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 paid monthly 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 4.1 percent from one week earlier
WASHINGTON, D.C. (May 17, 2017) – Mortgage applications decreased 4.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 12, 2017.

The Market Composite Index, a measure of mortgage loan application volume, decreased 4.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 4 percent compared with the previous week. The Refinance Index decreased 6 percent from the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 9 percent higher than the same week one year ago. 

The refinance share of mortgage activity decreased to 41.1 percent of total applications, the lowest level since September 2008, from 41.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 8.1 percent of total applications. The average loan size for purchase applications reached a survey high at $322,300.

The FHA share of total applications increased to 10.6 percent from 10.5 percent the week prior. The VA share of total applications decreased to 10.7 percent from 10.8 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 ($424,100 or less) remained unchanged at 4.23 percent, with points increasing to 0.37 from 0.31 (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 $424,100) increased to 4.23 percent from 4.22 percent, with points increasing to 0.30 from 0.28 (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 4.11 percent from 4.09 percent, with points increasing to 0.37 from 0.28 (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 3.51 percent from 3.50 percent, with points decreasing to 0.33 from 0.40 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs decreased to 3.30 percent from 3.36 percent, with points increasing to 0.21 from 0.15 (including the origination fee) for 80 percent LTV loans. The effective rate decreased 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.

We want to know what you think!! Please leave a comment.