Appraisal News and Business Tips

1/24/18 News//New USPAP Q&A-Hybrids .Dying Appraisal Profession? .Cat Urine & Big Data

Is the Appraisal Profession Dying?

By George Dell
Excerpts: Yes. Appraisal as we know it is dying.
Can it be saved?  No.
So what should I do?  What should “we” do?

To answer these questions, we need to look at causes and conditions. Some of these are obvious.
– Judgment is good; Analysis is better.
– Human generalization is excellent; Computation is fast…

So what can we do? If we cannot be saved. If computers are faster. If we have complete data. If we too have software.  If we too can provide results instead of opinions…  Leads to an obvious question: Can an experienced appraiser do these things as well as, or better than those others?

Worth reading at:

Public Standards of Length

19th-century scientists would make the pilgrimage here to verify the precision of their measuring sticks.
Excerpts: The Standards were determined with an obsessive degree of craftsmanship and were designed to be used to their fullest accuracy at 15.5° Celsius. (Any warmer or colder and the rulers’ thermal expansion and contraction gives off a misleading measurement.)

Edward Walford’s hefty book Old and New London noted in 1878 how “Any one who desires to secure an accurate yard-measure may do so by carrying to Greenwich a rod about a yard long, and truly adjusting it by means of the appliance there exposed for the public benefit.”

My comment: I always wondered where physical objects with the actual lengths were located in the past. Today, there are much more sophisticated scientific methods, of course. Of course, I much prefer the metric system, which almost every other country uses. I used it when I studied science in college and worked in labs.
Education

2018 will see refis plummet as interest rates increase

Rates expected to rise 90 basis points by end of year

Excerpts: Like other economic forecasts about 2018, CoreLogic also predicts rates will continue rising, hitting 4.8% by the end of the year. While CoreLogic Principal Economist Molly Boesel explained these rates are still historically low, it is up 90 basis points from today’s levels.

“One thing we know that’s happening is mortgage rates are going to go up,” Boesel said…

However, while the share of refinances continues to drop, it will not fall to zero, Boesel claimed. This is because in 2017 about 200,000 refinances, or 10%, refinanced out of FHA and into conventional in order to shed the mortgage insurance. This share of mortgage refinances will continue to hold a place in the lending market, she predicted.

My comment: Nothing new on this forecast. Appraisals will go down. Save your money. Consider non-lender work. I write about this option a lot in my paid Appraisal Today newsletter and am planning an writing an article soon on “quick start” to getting non-lender work.
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In the February issue of the paid Appraisal Today, Available Feb. 1 

  • Staying positive with unreasonable fees, excessive Scope Creep from AMCs, BPOs, appraisal waivers, etc. Seeing the glass as half-full, rather than half-empty makes your business (and your life) much more satisfying.
  • New liability issues: Hybrid appraisals, appraiser identity fraud, etc. Lots of issues with hybrid appraisals.
  • Do you have to be crazy to appraise real estate? By Barry Bates – What are the desirable, and undesirable, traits for appraisers 
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The term “Hybrid appraisals”

I don’t know who, besides appraisers, is using this terminology. However, I like it as it indicates specifically that third party companies are doing the inspections. There are companies soliciting appraisers to do them, who use other terms.

Machines, humans, & appraisal waivers

 By Ryan Lundquist
Excerpt:
3) Cat urine & big data: We put so much weight on big data, but it’s not always right. It’s like we think something intelligent must be happening since math and computers are involved. Google Flu Trends is a perfect example because Google tried to predict flu patterns, but the project ended after being very inaccurate compared to CDC data (Center for Disease Control). Anyway, there is a place for big data in real estate, but let’s remember valuing properties doesn’t always fit into a neat little equation. Algorithms cannot smell cat urine, know about condition or quality of upgrades, understand layout, analyze the impact of non-permitted additions, etc…

Read the full post, plus the comments at:

My comment: I love the cat urine quote!! Ryan has some other interesting comments.

New USPAP Q&As on desktop appraisals and third party inspections

Excerpt: Question: A client has asked me to perform an appraisal, but instead of requiring me to physically inspect the subject, they will provide me with the results of an inspection of the property done by someone else.
– Does USPAP allow this?
– Does USPAP require me to disclose this person’s name as having provided significant appraisal assistance and describe the assistance they provided?
– If I rely upon that inspection, should I employ an Extraordinary Assumption?

For the answers, click here

My comments: Good that the ASB is saying something. I wonder what state boards will think about this, as they enforce USPAP. The Q&As are a bit confusing to me as the “hybrid appraisals” are done by third party companies. I don’t think the name of the “inspector” is known. Fees, of course, are the big issue. The February 2018 issue of the paid Appraisal Today had a good analysis of the liability issues: “New liability issues: Hybrid appraisals, appraiser identity fraud, etc.”

Wall Street Turns to Drive-by BPOs

Excerpt: When Blackstone Group LP wanted to borrow hundreds of millions of dollars to buy foreclosed homes after the housing crash, it needed a quick, inexpensive way to value thousands of houses the investment firm already owned and was offering as collateral.

When Fannie Mae last year guaranteed about $1 billion of Invitation Homes debt, it accepted BPOs for the 7,204 houses serving as collateral. Assuming a typical appraisal price of $450 and the $95 that Invitation Homes pays per BPO, the company saved about $2.6 million.

Well written article. Worth reading.

My comment: Nothing new. This has been going on for decades. This article covers many sides of the issue. The original article was in the Wall Street Journal, a well respected publication. Note: I have not subscribed to the WSJ for awhile and was not able to get a copy of the article

$10 BPOs from India

Excerpt: “AbVin co-founder Abhishek Shimoga Onkaraswamy said his staff of 50 in Bangalore churns out as many as 300 BPOs a day using the clearinghouses of sales and listings data compiled by Realtors, who he said provide AbVin with login information[i], as well as websites like Zillow.”

“There’s not a big difference between what a broker can do and what we can do,” he said. “We know what these companies are expecting from the brokers.”

Excerpts from the Wall Street Journal article and some interesting comments by Michael Ford (and others) 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 www.mbaa.org 
 
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Mortgage applications increased 4.5 percent from one week earlier

WASHINGTON, D.C. (January 24, 2018) – Mortgage applications increased 4.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 19, 2018. This week’s results included an adjustment for the MLK Day holiday.

The Market Composite Index, a measure of mortgage loan application volume, increased 4.5 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 increased 1 percent from the previous week. The seasonally adjusted Purchase Index increased 6 percent from one week earlier to its highest level since April 2010. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 7 percent higher than the same week one year ago.

The refinance share of mortgage activity decreased to 49.4 percent of total applications from 52.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.2 percent of total applications.

The FHA share of total applications decreased to 11.4 percent from 11.7 percent the week prior. The VA share of total applications increased to 10.9 percent from 10.7 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 ($453,100 or less) increased to its highest level since March 2017, 4.36 percent, from 4.33 percent, with points remaining unchanged at 0.54 (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 $453,100) increased to its highest level since March 2017, 4.31 percent, from 4.25 percent, with points increasing to 0.38 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 30-year fixed-rate mortgages backed by the FHA increased to its highest level since September 2013, 4.37 percent, from 4.30 percent, with points remaining unchanged at 0.65 (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 September 2013, 3.81 percent, from 3.77 percent, with points increasing to 0.52 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 its highest level since April 2011, 3.70 percent, from 3.62 percent, with points decreasing to 0.39 from 0.48 (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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