What’s a comp?

By George Dell, MAI, SRA

Excerpts: Our education tells us a comp is similar and competitive. So how do we measure “comparability”? If our job entails studying market data to get an answer … might it be important to know exactly how to describe a comp?

So what’s the issue? Why should we care? I am a highly trained expert. I have a license. “Trust me. I know a good comp when I see one.”

My comments: George is writing a longer article than his blog posts for the May issue of the paid Appraisal Today. I often wish his blog posts were longer, but they are designed to be short ;>

Octagonal house rotates 360 degrees to chase sun and views

You’ll never have to choose between sunrise and sunset again

Excerpt: The wood-clad home sits atop a meter-wide pillar base, and can swivel both directions via mechanical control. It’s built to be ultra-lightweight with a steel frame and walls made from wood paneling, so it requires less energy to rotate.

More photos and info, plus links to other rotating houses:

The Hottest Real Estate Listing in Every State. Nearly All Have One Thing in Common

Just For Fun!!

Excerpt: Curious to know what buyers really want in a home, MONEY asked real estate listings website Trulia to compile a list of the houses in each U.S. state that potential buyers most often bookmarked for future reference. Despite different locales, styles and amenities, the vast majority of the homes most desired by Trulia’s millions of users have a single thing in common: affordability.

My comment: If all my family did not live here, I would be thinking about moving! Sell my place for $850,000+ (median price in my city, purchased for $125,000 in 1/86) and buy a mansion!!! Or a median priced house for $125,000 and live on the rest.

AMCs respond to FHFA report they bring little value to appraisals. Just as likely to make mistakes

Excerpt: (From Mark Schiffman, Executive Director of the AMC trade group, the Real Estate Valuation Advocacy Association via email) “Our review of the research has uncovered real concerns about the methodology, measures of quality, errors and the insertion of staff opinion that seems to indicate bias. REVAA is documenting its concerns and plans to speak to the FHFA about these matters.”

Original article on FHFA report:

My comments and brief rant: AMCs are destroying residential lender appraising, driving appraisers away from working for AMCs. Some appraisers are giving up their appraisal licenses and quitting appraising. For many years after 2008, I was neutral on AMCs and saw working for them as a business decision, but recently I have become anti-AMC. The response from AQB to appraiser “shortage”: drop requirements to get more appraisers for AMCs. Useless. (Disclosure: I have never worked for an AMC but have been writing about them since 1993 and heard a lot about them since they took over. But, I am an appraiser and completely understand appraisers’ frustration.)
Getting too many ad-only emails?
   4 ways to get only the FREE email newsletters
and NOT the ad-only emails.
1. Twitter:  @appraisaltoday.com (same time delivery)
https://twitter.com/appraisaltoday – all recent newsletters
2. Appraisal Today blog
https://appraisaltoday.com/blog  (posted by late Thursday) Sign up for email notifications when a new email newsletter is posted.
3. Email Archives: https://appraisaltoday.com/archives  (posted early Thursday) Newsletters start with “Newz”. Contains all recent emails sent.
4. Link to 5 most recent newsletters (no ads) at www.appraisaltoday.com scroll down past the big yellow signup block.
When you have set up one of the choices above and  it is working, you can unsubscribe from this email list, which includes getting ads, click the unsubscribe button at the bottom of every email newsletter.
For more info, such as why I take ads, etc.

In the paid Monthly Appraisal Today

Sample articles

– Highest and Best Use: Reviewers and State Boards Want More Than Just a “Check Box”

– What is Fannie really up to?
– Residential Cost Approach: complying with USPAP when lenders require the Cost Approach
– Practical tips for dealing with complex residential appraisals
We all need help for those tough ones!!
Want to do appraisals for lenders, but not for AMCs?
– Quick Start – how to get non-lender work ASAP!
– What will happen to residential mortgage lending in 2018?
How can you plan for the changes?
– Appraisals for estates and trust – the most popular non-lender appraisals No court testimony, No AMCs, reviewers, etc. etc.
To read the articles, plus 2+ years of previous issues, subscribe to the paid Appraisal Today.

$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 
To purchase the paid Appraisal Today newsletter go to
www.appraisaltoday.com/products   or call 800-839-0227. 
If you are a paid subscriber and did not get the April 2018 issue, emailed Monday, April 2, 2018, 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.

Appraising in Changing Markets

By Rachel Massey, SRA
Excerpt: It is easy to miss the market. Sometimes subtle changes are occurring and it is too early to pick up on a trend. Or there is conflicting information indicating both an increasing and a declining market at the same time, depending on the market segment.

If appraisers had crystal balls into the future, we would be doing something other than appraising. The money would be in predictions, not in measuring the current market. We are expected to be in touch with the market however, but basing our opinions on past, closed transactions is not necessarily the current market. This is one reason analyzing current offerings, pending sales, expired and withdrawn listings, and listening to the chatter of those involved in real estate sales is important.

Well written and worth reading

My comments: Rachel Massey is a regular contributor to the paid Appraisal Today. She loves to write!!

I have a lot of experience with changing markets. At my first job at a CA assessor in the late 70s, prices were going up 2% per month. Then, interest rates went up to over 18% and the market crashed. In 1986, rates went down and prices skyrocketed, then crashed in the early 1990s (30-40% drop), then went way up in the 2000s (up to 5% per month), then crashed in 2008 (30-80% drop). About a year ago prices stabilized in my market (condos still going up) but other nearby cities are still having significant price increases. Although I quit making adjustments on form appraisals a few years ago, I still do market condition adjustments, the easiest adjustment to make.

I have always used listings, pendings, expireds (for res and commercial) to tell me what is really happening and especially when it is changing. Unfortunately, many appraisers only looked at “comps”. I have always looked at the data that Rachel uses.  Commercial appraisers seldom looked at listings, pendings, etc. here even though the information was readily available for the past 20 years on Loopnet, a very reasonably priced Sacramento-based listing service. It was purchased by Costar a few years ago and is now very expensive.

Multiple offers & paying above the appraised value

April 4, 2018 By Ryan Lundquist
MULTIPLE OFFERS: The other day I heard about a property that had 20 offers and the contract price ended up being 16% above the list price. What the? Clearly the market was willing to pay more than the list price, so maybe the property was priced too low. Yet if the seller accepted the very highest offer, are there really comps and data to support a value that high? That’s always the question. Here are some things to keep in mind.
1) Magic
2) Getting stuck on the list price
3) One Buyer vs everyone

And more…
Well written for real estate agents but good for appraisers also. May help you explain your “low” value to clients and real estate agents.

My comments: I see a lot of online appraiser discussion about this, mostly appraisers confused about what to do. (Of course, there is the long time issue of “coming in under sales price” and being hassled and/or losing clients.)

I have been through this regularly over the years in my market. What I have done is view these high bids and sales as an “auction price” and do not consider them to be market value. I regularly speak with local agents and remind them that our definition of value (for lending purposes) is the most probable sales price. Their job is to get the highest possible price. Can be quite a difference!!

Fannie Mae’s efforts to ease mortgage access show how hard it is to balance risk and access

Excerpt: Several private mortgage insurers (PMIs) announced recently that they will be more restrictive in insuring mortgages for borrowers who have debt that is 45 percent or more of their income. Some PMIs will insure mortgages for these borrowers only when the borrowers’ credit scores are 700 or above, and other insurers will charge higher fees for insuring these mortgages.

The PMIs realized that a purportedly “risk neutral” change in Fannie Mae’s underwriting criteria, implemented last summer to ease access to mortgage credit, had actually increased the risk these mortgages would default.

A bit technical, but worth reading for the issue of access vs. risk
My comment: of course, I think of risk vs. access when using desktop appraisals and drivebys, AVMs, waivers, etc.
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 
If you’re wondering what all this means for the future, read the recent article in the March 2018 paid Appraisal Today “What will happen to residential mortgage lending in 2018?” Lots of graphs, tables and analysis!!

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 1.9 percent from one week earlier

WASHINGTON, D.C. (April 11, 2018) – Mortgage applications decreased 1.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 6, 2018.

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.9 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 2 percent from the previous week. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 0.5 percent lower than the same week one year ago.

The refinance share of mortgage activity decreased to its lowest level since September 2008, 38.4 percent of total applications, from 38.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.3 percent of total applications.

The FHA share of total applications increased to 11.0 percent from 10.1 percent the week prior. The VA share of total applications increased to 10.9 percent from 10.3 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) decreased to 4.66 percent from 4.69 percent, with points increasing to 0.46 from 0.43 (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 $453,100) decreased to 4.53 percent from 4.56 percent, with points increasing to 0.31 from 0.27 (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 4.66 percent from 4.74 percent, with points increasing to 0.76 from 0.54 (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 decreased to 4.08 percent from 4.09 percent, with points increasing to 0.50 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 its highest level since February 2011, 3.93 percent, from 3.87 percent, with points increasing to 0.60 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.

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

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