Appraisal News and Business Tips

9-28-17 Newz//Fees up or down?, Credit easing, San Francisco Castle

Albion Castle – A 140 year old castle with underground caves hidden in San Francisco.

Just For Fun!!

Excerpt: When Bill Gilbert was growing up near Candlestick Park, all the kids said that Albion Castle was haunted. Gilbert himself wasn’t sure, but every time his parents took him to eat at the at the old Dago Mary’s restaurant across the street, he would look at the gates that front the 145-year-old stone structure and wonder. Little did he know that as an adult, he would own the keys to the castle (literally).
My comment: It was listed in 2009 for $2,950,000 (a very bad market). The six-story square tower has four bedrooms, two bathrooms and 1,436 sq.ft. It sold for 11/2011 for $890,000 and has been rehabbed. It needed a lot of work!!
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Info on the history and historic photos

My comment: It was listed in 2009 for $2,950,000 (a very bad market). The six-story square tower has four bedrooms, two bathrooms and 1,436 sq.ft. It sold for 11/2011 for $890,000 and has been rehabbed. It needed a lot of work!!

Appraisers affected by recent flooding

Are you prepared?
Excerpt:
BUZZ: What else have you learned during this process?
Eric: Appraisers may not be prepared for what follows a natural disaster. Companies need to plan for contingencies and redundancies in case of disruptions to business. If you work on a PC, then get a laptop as a backup with a spare battery. Make sure your cell phone works as a WIFI hotspot in case your office internet is down. Also, make sure your clients have multiple methods of communication with you.
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An appraiser’s new outlook in the wake of Harvey
Excerpts: When Jesse Garza purchased a storage unit for some of his family’s belongings, he never thought it would become a temporary office for his appraisal business.
“We watched from our neighbor’s second-story deck as our home was engulfed by water,” said Garza. “Nothing can prepare you for the emotion you feel as you watch something like that happen.”
In just hours, the Garza family lost their home and the place that Jesse had run his appraisal business, Texas Valuations, for the past 12 years. “All that matters is that my family and I are alive,” said Jesse.  “Others, including my friends, lost their lives.  We lost possessions.  You can’t be mad at that.”
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My comments: Both of these stories are worth reading. Although you may not be close to the ocean, there are significant risks from reservoir dams. Most were built in the past and were not constructed today’s increased rainfall. Some have deferred maintenance also. In California, Lake Oroville dam filled this year. The 1950s/60s spillway was not built to modern standards and started failing. Thousands of down stream residents were told to get ready to flee to higher ground. In San Jose, CA recently a small dam filled and had to release water, flooding a few small neighborhoods. The warning system had failed and they got no notices.

The Federal Emergency Management Agency (FEMA) reports that each year approximately 90 percent of all disaster-related property damage results from flooding. I live in Earthquake country and grew up in Tornado Alley in Oklahoma but damage as  not as widespread as floods.

ASC Releases Final Rule for AMC Fees ; Appraisal Institute Reiterates Concerns

Excerpts: The Appraisal Subcommittee on Sept. 25 published the final rule on the Collection and Transmission of Annual Appraisal Management Company Registry Fees, which establishes the formula for transmitting registry fees to the ASC by states that elect to register and supervise AMCs.

The ASC responded to the concerns, stating that it was constrained by the Dodd-Frank Act to assess AMCs based on a $25 per-appraiser formula, and that it had no authority to prohibit an AMC from passing the registry fee to the appraiser.

This link has the link to the final rule plus more info

http://www.appraisalinstitute.org/ano/asc-releases-final-rule-for-amc-fees-ai-reiterates-concerns/

I wrote about this (and other regulatory topics) in last month’s issue of the paid Appraisal Today newsletter, in the article ” What’s happening in state and federal appraisal regulations? Statute of limitations, Evaluations, AVM QC, Appraisal Waivers, Etc.

Fannie Survey – As Market Pressures Mount, Lenders Continue to Ease Mortgage Credit Standards. September 25, 2017

 Excerpts:
Facing constrained mortgage demand and a negative profit margin outlook, more lenders say they have eased rather than tightened home mortgage credit standards, according to Fannie Mae’s third quarter 2017 Mortgage Lender Sentiment Survey®. Across all loan types – GSE Eligible, Non-GSE Eligible, and Government – the net share of lenders who reported easing credit standards over the prior three months reached a new high since the survey’s inception in March 2014, after climbing each quarter since Q4 2016.

The net share of lenders reporting purchase mortgage demand growth over the prior three months has fallen for all loan types when compared with Q3 2016 and Q3 2015, reaching the lowest reading for any third quarter over the past two years.
Overall, the refinance market remains a stark contrast from a year ago, when the net share reporting rising demand over the prior three months hit a survey high.

http://www.fanniemae.com/portal/media/corporate-news/2017/mortgage-lender-sentiment-survey-q3-2017-6606.html 

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An Appraiser Gets Audited by the IRS! My Story…

 

In the October issue of the paid Appraisal Today
Excerpts:
I never expected to be selected for an audit because my tax return changes very little from year to year and I don’t have much to target. I have been in business for 30 years.
     However, anyone can be selected for a random small business audit, which I had never heard of. On June 13, 2017 I received a 10 page letter stating that I had a random audit for my entire tax return: appraisal business, publishing business, rental real estate, and personal for 2015. 

     73% of small business audits found poor record keeping – a big problem. At least 83% of small business audits paid extra taxes. I did.

     I fit right in – poor record keeping and lack of receipts, especially for credit card payments. Plus poor mileage log.

     The standard advice is: if you can’t prove the deduction, don’t take it. Fortunately, I was able to get receipts or other good documentation, for all my expenses. I spent 2 months collecting and organizing all the information plus doing a mileage log for 2015.
To read the full article, plus 2+ years of previous issues, subscribe to the paid Appraisal Today.
 
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Property Inspection Waivers for Purchase Transactions

Announcement SEL-2017-08: Selling Guide updates
In December 2016, we began offering property inspection waivers (PIWs) for refinance transactions to all lenders due to the dominant refinance market at that time. Since then, the market has shifted from a refinance to a purchase market. In response to this shift, we now also offer PIWs on certain purchase transactions, which will help increase efficiency and lower costs in the origination of more loans. Exercising a PIW offer gives a lender Day 1 Certainty™ with relief from enforcement of representations and warranties on the value, condition, and marketability of the property.
In addition, we updated the transactions that are ineligible for a PIW to include gifts of equity and the use of rental income from a subject investment property to qualify the borrower. When these apply to the loan, the lender may not exercise a PIW and must obtain an appraisal.
Link to Fannie announcement

https://www.fanniemae.com/content/announcement/sel1708.pdf 

My comment: This probably is a factor in the recent appraisal slowdown, but it is mostly due to the decline in refis, which affects appraisers in areas with few purchases.

Purchase lending hits 10-year high as refis sink to 16-year low

Originations jump 20% in second quarter

Excerpt: During the second quarter of 2017, purchase originations jumped significantly even as refinances shrank, according to Black Knight Financial Services’ latest Mortgage Monitor report.
First lien mortgages jumped 20% from the first quarter and 16% from last year to $467 billion in the second quarter. During the second quarter, refis fell 20%, or $37 billion, from the second quarter to 31% of the market share of originations, the lowest level in 16 years.

2017 Fee Survey: Analyzing the Data

By Isaac Peck and David Brauner, Working RE Magaizne
Excerpts:
For the last few years the appraisal industry has been abuzz with talk of rising appraisal fees and longer turn times. AMCs complain of a shortage of appraisers and “price gouging” in certain markets (Colorado and Oregon, for instance); appraisers report modest success at raising their fees after years of frustration (See Fees Rising).

The new fee data offers an interesting comparison with the results of the first Customary and Reasonable Fee Survey, which was conducted in 2010 in the wake of the Home Valuation Code of Conduct (HVCC) and the ascendance of AMCs. The first survey results measure non-AMC appraisal fees only-where appraisers and clients negotiated fees directly without a middleman. The new survey makes no distinction. So today, more than seven years later, the comparison of fees and turn times between then and now- before AMCs and after-offers Working RE readers a unique perspective.

My comments:  For my area, San Francisco-Oakland-Fremont, most 2017 survey fees were from $350 to $550, centered on $451-$500. In the Los Angeles area, where fees tend to be lower, they were centered on $401 to $450. Turn times were typically 3 days to 1 week.

There is lots of fee data for many geographic areas and types of appraisals. See what fees were in your area!!

Also, see the comparison of 2010 vs. 2017. In Los Angeles, the “most popular” URAR fee went up $50, similar to most areas. Fees in OR and WA went up $350 to $450. In my area, they went up about $100 (results were not included in the 2010 survey). Turn times also went up in 2017 in most areas.
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However, this survey is the past for my area. Work started slowing down in early 2017. In the past month or two, volume and appraisal fees have significantly declined due to low demand.

I have a friend who is a mobile notary specializing in mortgages. We started car pooling to pickleball classes(similar to tennis but on a smaller court) in January 2017. It was hard to chat during the driving as she was continuously being called by mortgage mobile notary services wanting to place orders. But, her business has been gradually declining since January. This month, there are calls and texts, but she has only accepted one order. Fees have significantly declined. She used to do a lot of HELOC loans for credit unions. Her work volume parallels appraisals, so it is an excellent way for me to know what is happening in the mortgage market. She started doing mobile notary services 5 years ago. This is her first downturn.

How is it going in your market? My market, the San Francisco Bay Area has a severe shortage of listings and purchases and a median price of around $950,000 which significantly affects the purchase volume. (lending has been shifting nationally from refis to purchases for awhile. See the MBA stats below and Fannie lender survey above). Median price in my small city is $860,000.

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 www.mbaa.org 
 
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 https://www.appraisaltoday.com/products.htm or send an email to info@appraisaltoday.com . Or call 800-839-0227, MTW 8AM to noon, Pacific time.

Mortgage applications decreased 0.5 percent from one week earlier

WASHINGTON, D.C. (September 27, 2017) – Mortgage applications decreased 0.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 22, 2017.

The Market Composite Index, a measure of mortgage loan application volume, decreased 0.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The Refinance Index decreased 4 percent from the previous week. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 4 percent higher than the same week one year ago.

The refinance share of mortgage activity decreased to 50.8 percent of total applications from 52.1 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.5 percent of total applications.

The FHA share of total applications decreased to 9.6 percent from 9.9 percent the week prior. The VA share of total applications decreased to 10.0 percent from 10.1 percent the week prior. The USDA share of total applications remained unchanged from the week prior at 0.7 percent.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) increased to 4.11 percent from 4.04 percent, with points remaining constant at 0.40 (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 4.06 percent from 3.99 percent, with points increasing to 0.26 from 0.23 (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 3.98 percent from 3.97 percent, with points increasing to 0.50 from 0.34 (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 3.38 percent from 3.35 percent, with points decreasing to 0.40 from 0.44 (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 increased to 3.38 percent from 3.30 percent, with points increasing to 0.45 from 0.34 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

If you would like to purchase a subscription of MBA’s Weekly Applications Survey, please visitmba.org/WeeklyApps, contact mbaresearch@mba.org or click here.

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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