Appraisal News and Business Tips

11-30-17 Newz// My Client the FBI, 50 Lane Traffic Jam,Third Party Inspections

China’s 50-Lane Traffic Jam Is Every Commuter’s Worst Nightmare

What happens when a checkpoint merges 50 lanes down to 20.

Excerpts: Thousands of motorists found themselves stranded on Tuesday in what looks from above like a 50-lane parking lot on the G4 Beijing-Hong Kong-Macau Expressway, one of the country’s busiest roads. Some are dubbing the traffic jam a “carpocalypse,” while others are calling it “carmageddon.”:

China is no stranger to these ridiculous traffic jams, especially on national highways. In 2010, gridlock spanning more than 74 miles on the stretch between the Inner Mongolia Autonomous Region and Beijing left drivers with nowhere to go for a staggering 12 days. That time blame fell on everything from road construction to broken down cars and fender-benders.

My comment: Check out the photos. Wow! One of my nightmares is getting stuck in a big traffic jam, but I never thought about one as bad as this…

https://www.citylab.com/transportation/2015/10/chinas-50-lane-traffic-jam-is-every-commuters-worst-nightmare/409639

A Mysterious Device Revealed

Excerpt: On Monday, I distributed a photo (see below), which was taken by a western US appraiser at the subject property, and asked if anyone could accurately describe what this device is:

The property owner was not at the property when the appraiser was there, and the appraiser was frankly stumped as to what this ‘thing’ is.

By late afternoon Monday, the appraiser was able to talk with the property owner, and was told about this contraption. Meanwhile, dozens of appraisers wrote back with suggestions or positive “it’s a” statements.

My comment: There was a fun email thread on this topic. To sign up for Dave Towne’s emails, send an email to dtowne@fidalgo.net He has been writing a lot recently about hybrid appraisals (non-appraiser does the site inspection). Very controversial. I am working on an article for this topic in the paid Appraisal Today newsletter.

Appraisers, Scope of Work and the “Alternatives.”

By Ernie Durbin

Excerpts: Today, appraisers are presented with many opportunities to produce “alternative” valuation reports. For appraisers, a positive shift has occurred in the valuation marketplace. Valuation consumers in capital markets, loan servicing, and home equity are migrating away from the wholesale use of broker price opinions (BPOs) and evaluations to valuations produced by appraisers. This new appreciation for professional appraisers has given rise to a fresh generation of appraisal reports with a different Scope of Work than traditional GSE appraisal products (1004 etc.).

Most alternative valuation products do not involve a full site inspection by the appraiser. Some involve a drive-by inspection, but many are based on an analysis by the appraiser without viewing the property. In these assignments, the appraiser provides a desktop appraisal relying on an inspection provided by a real estate agent or professional property inspector. The appraiser utilizes Extraordinary Assumptions when using the content provided by the third-party inspector. These are similar to the Extraordinary Assumptions that would be applied to a drive-by assignment performed by the appraiser (for instance assumptions about the interior of the property).

My comment: Appraisers are getting more requests to do these types of appraisals. Controversial topic. Check out the comments. What’s the biggest issue? Very low fees, of course!!

USPAP on Significant Appraisal Assistance from FAQ #248 (2016-17 edition)

Question:  In preparing an appraisal assignment, I talk with many different people. I know the report certification must identify individuals who provide significant real property appraisal assistance. What is significant appraisal assistance?

Response:  USPAP does not include a definition of significant appraisal assistance. However, aspects of this phrase can be explored to clarify its meaning.

First, the adjective significant means that the contribution must be of substance to the development of the assignment results. In other words, the individual must contribute to the valuation analysis in a noteworthy way. An individual who merely collects or provides data for use in the analysis does not provide significant appraisal assistance.

Secondly, the reference to the term appraisal assistance means that the contribution is related to the appraisal process or requires appraiser competency. One misconception is that non-appraisers who provide assistance should be identified in the certification. This is incorrect because the certification requirements in USPAP apply only to appraisers. Thus, only appraisers sign the certification or are identified as providing significant appraisal assistance. For example, the use of an environmental expert to determine wetland boundaries would not be considered significant real property appraisal assistance.

Examples of contributions made by appraisers that constitute significant real property appraisal assistance include the identification of comparable properties and data, inspection of the subject property and comparables, estimating accrued depreciation, or forecasting income and expenses.

My comment: The ASB is aware of the confusion on this issue and plans on addressing it in an FAQ and/or the 2020-2022 edition of USPAP.

Who actually fills in the subject info in ‘hybrid reports… results of a recent survey

By Dave Towne
Excerpts:

Last Wednesday, (yah, bad on me!), I sent out a message asking appraisers who have done, or are doing, the new ‘hybrid’, ‘alternative’, ‘bifurcated’ or “easy squeezie” desktop reports promoted by some AMC’s and others, what the actual process is concerning WHO actually fills in the subject info in ‘hybrid reports’.
A number of appraisers took time to answer via email that afternoon. Among the responses, I actually CALLED and talked to 4 appraisers who are from different areas in the US, and who had different experiences with these reports. I really appreciate the time they took to explain the process they have witnessed.
What I learned, and I think I’m the only one who has done this on a national scale and reported findings, is that there is massive confusion about the Scope of Work actually performed by two separate individuals (and perhaps other unknown contributors) in these reports. I have learned that some of these new-fangled reports actually do allow an appraiser to be in compliance with USPAP, while others can be considered serious contenders for non-compliance if an appraiser completes them.
Worth reading this post, plus the comments.
My comment: I was never able to do “comp checks” or other desktop appraisals. Too many years working in the field, I guess ;> Of course, the main issue is low fees.  Personally, I think that driveby appraisals with the appraiser driving by the subject is best. I might trust a trainee that I have trained and supervised to drive by the subject. For me, it is a business decision.

Do Third Party Inspectors Violate USPAP

By Dustin Harris
Excerpts: If we truly are to identify every source of information we rely on in the report by name, shouldn’t we also provide the names of the county clerk who provided us with the deeds, the assistant in the map department who emailed us a copy of the plat, the assessor’s assistant who gave us the owner’s name, parcel number, and legal description, and more?  In other words, I believe the ASB sees the potential ridiculousness that would domino if a requirement to provide the name, title, and assistance given of every person who assisted in the appraisal process.  Keeping it to ‘appraisers’ seems prudent.

Does that mean an appraiser should not say anything about the third-party inspector, if his/her data was relied upon?  I don’t believe that is a good appraisal practice either.  USPAP is clear that an appraiser should not be misleading.  Therefore, it would be best, in my opinion, to indicate where the data came from and make an assumption that it is true and correct; just don’t do it on the certification page.

A simple statement like the following might suffice:
“This appraisal report is based on information obtained from a third-party inspector who completed a drive-by and took photos from the public road.  I am relying on this information (in addition to other data as outlined) to discern information about the subject property for such features as quality, condition, and any amenities that may be revealed from this third-party inspector.  I am making an assumption that my conclusions from this data are true and correct.”
Read the full, well written, post, plus the comments at:

I am waiting for the new tax plan

– Lower rates for pass-through appraisal businesses, like mine. I am very close to the top personal tax rate. I want the corporate 20% tax rate!!
– Cap on mortgage interest and property tax deductions – affect prices in my area? Median price around $850,000 (including condos).
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New in the DECEMBER 2017 issue of Appraisal Today, Available 12/1/17

 

2018-2019 USPAP. What you need to know. Mostly clarifications, but there is a new AO on using statistical software for adjustments which is very well written and easy to understand. Plus, practical examples and sample statements for revised AO on Sales History. Also, more info for residential lender appraisers including sample statements for reports and examples, such as for Sales History.
How to get into trouble: 8 great ways for real estate appraisers! By Barry Bates “Insider” war stores on appraisal regulator, fun fotos, and Bates-ish humor. Never boring!!
– MileIQ – an easy way to track your mileage and audit proof your tax return. By Wayne Pugh, MAI, CRE, CCIM, FRICS Don’t do what I did: no mileage logs for over 25 years. I miserably failed my recent random audit. Next month’s newsletter will include an article on Taxbot, which I am now using for mileage.
To read the articles, plus 2+ years of previous issues, subscribe to the paid Appraisal Today.

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If you are a paid subscriber and did not get the November 2017 issue, emailed November 1, 2017, please send an email to info@appraisaltoday.com  and we will send it to you!! Or, hit the reply button. Be sure to put in a comment requesting it.

What went wrong?

Excerpt: How did a vibrant profession of experts in property value begin to disappear?  Who’s at fault?  Is it the appraisers?  The Standards?  The “appraisal process”?  The regulators?  Or could it be even the users and clients?

Inertia does not come easy.  Change is even more difficult. Inertia requires defending the old way of doing things.  It requires avoidance, a conscious avoidance or unconscious avoidance – and denial.
My comment: I love George Dell’s blog posts. Very creative titles!! George writes longer articles regularly for the paid Appraisal Today newsletter.

My Client the FBI

By Don Gossman, SRA

Excerpt: In 2006 the American and world economies teetered on the edge of collapse as investors traded near-worthless mortgage securities created by fraudulent lending practices.

In the midst of this mayhem, a Kansas City real estate appraiser said enough was enough. When asked by a lender to appraise a house for twice its value, he called the FBI and set in motion a chain of events that both brought down a fraud ring, and led to a role in crafting regulations that help protect the industry today.

My comment: Around 2007, Gossman wrote an article: My New Client-THE FBI. A story of mortgage fraud that occurred in October 2006 in Kansas City. I wrote about it around 2010. Now there are lots more details in his new book!! The book is available at amazon.com for $9.99 (Kindle) and $14.99 (paperback). I will be reviewing it in the paid Appraisal Today newsletters.

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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 7AM to noon, Pacific time.

Mortgage applications decreased 3.1 percent from one week earlier

WASHINGTON, D.C. (November 29, 2017) – Mortgage applications decreased 3.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 24, 2017. This week’s results include an adjustment for the Thanksgiving holiday.

The Market Composite Index, a measure of mortgage loan application volume, decreased 3.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 34 percent compared with the previous week. The Refinance Index decreased 8 percent from the previous week to its lowest level since January 2017. The seasonally adjusted Purchase Index increased 2 percent from one week earlier to its highest level since September 2017. The unadjusted Purchase Index decreased 32 percent compared with the previous week and was 6 percent higher than the same week one year ago.

The refinance share of mortgage activity decreased to 48.7 percent of total applications from 49.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.2 percent of total applications.

The FHA share of total applications increased to 10.8 percent from 10.6 percent the week prior. The VA share of total applications increased to 11.0 percent from 10.7 percent the week prior. The USDA share of total applications increased to 0.8 percent from 0.7 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged from the week prior at 4.20 percent, with points decreasing to 0.34 from 0.42 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100) decreased to 4.14 percent from 4.16 percent, with points decreasing to 0.27 from 0.30 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 4.07 percent from 4.08 percent, with points decreasing to 0.37 from 0.42 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.57 percent from 3.56 percent, with points decreasing to 0.40 from 0.42 (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 3.42 percent from 3.31 percent, with points increasing to 0.58 from 0.38 (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.

Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
2033 Clement Ave. Suite 105
Alameda, CA 94501 Phone 510-865-8041
Fax 510-523-1138
Email   ann@appraisaltoday.com

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