At What Point Does an Appraiser Need Geographic Competency?

Excerpt: It seems that some, and I emphasize some, agents are of the mindset that if the appraiser’s office is not in relatively close proximity to the property being appraised, or if the appraiser doesn’t live in a nearby area, that they do not possess geographic competency. And they may be right.

However, the appraiser’s office location or where they live, in relation to the property being appraised, has little if anything to do with geographic competency!

To be geographically competent simply means that the appraiser has the skills and resources needed in order to competently complete the assignment, in harmony with the Uniform Standard of Professional Appraisal Practice (USPAP).

My comments: Why has this become so important? Once again, Lenders Run Appraising. AMCs do what they say. They put restrictions on how far away appraisers could be from their offices. Similar to the restrictions on how far away, or recent, comps should be.

Before USPAP and lender meddling, I used to appraise a large geographic area. If you are an experienced appraiser it is not hard to figure out neighborhoods, positive and negative factors, and read MLS for clues. Plus, contact local real estate agents and appraisers if needed.

I have been doing appraisals only in my small city for the past 2-3 years. The longer I appraise, the more I realized what I don’t know. I can hardly keep up with my very local market. Maybe I should only appraise within 2 blocks of my office ;> I go on tour every week but sometimes I miss a house if there area lot to see. Of course, that is always my best comp!!

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

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NOTE: Please scroll down to read the other sections of this long blog post on dangerous neighborhoods, USPAP, future of residential appraising, dangerous neighborhoods, mortgage origination stats, etc.

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AVMs vs. appraisers

Excerpt: Different AVMs are designed to deliver different types of valuations. And therein lies confusion.

Consumers don’t realize that there’s an AVM for nearly any purpose, which explains why different algorithms serve up different results, said Ann Regan, an executive product manager with real estate analytic firm CoreLogic. “The scores presented to consumers are not the same version that is being used by lenders to make decisions,” she said. “The consumer-facing AVMs are designed for consumer marketing purposes.”

Written for consumers, but very well written and worth reading.

My comment: How often does someone tell you what Zillow says their home is worth? What do you say? I say Zillow works well on tract homes built in the past 10 years. This article discusses AVMs, regulators, appraisers, etc.


Fannie’s UAD plan update – Industry Stakeholder Input Phase 1 Executive Summary

Undated, but the Announcement is dated December 19, 2018
Excerpt: From early 2018 through mid-October, the Freddie Mac – Fannie Mae UAD Working Group collected initial feedback from industry stakeholders…. (note: included appraisers and AMCs)

High level objectives:
1. Provide the industry with a higher degree of clarity of data that will be used to drive risk analytics and underwriting decisions.
2. Provide updates and additions to the existing data elements that are representative of the current appraisal technology environment, but flexible to support future changes in a timely manner.
3. Redesign the appraisal forms to improve usability for all stakeholders.

Download the Executive Summary and the Announcement here (top of page in blue box)and read both documents (very short).

My comment: New forms are coming…. someday. No one knows what they will look like. If they know, they are keeping very quiet.


Appraising Home Purchase Appraisals

December 4, 2018
By the Federal Reserve of Philadelphia

Excerpt: Home appraisals are produced for millions of residential mortgage transactions each year, but appraised values are rarely below the purchase contract price: Some 30% of appraisals in our sample are exactly at the home price (with less than 10% of them below it). We lay out a basic theoretical framework to explain how appraisers’ incentives within the institutional framework that governs mortgage lending lead to information loss in appraisals (that is, appraisals set equal to the contract price)…

Click here to read this 54-page working paper

My comment: The 54-page paper does statistical analysis on big data sets and is a bit technical (has some math formulas), but can be understood by most appraisers.

I have been hearing about this issue since I started doing lender appraisals in 1986. I was warned by other appraisers that if I “came in” below sales price, there would be problems. I assume this had been going on for a long time. I had worked at an assessors office and was shocked by the value pressure. I’m sure I lost a some clients as I did not do this. That darn assessor’s office training!!

Third Exposure Draft for 2020-21 USPAP – Webinar

By Appraisal Foundation
Published December 12, 2018
Comments deadline: February 1, 2019.
send to
The Board intends to adopt any revisions for the 2020-21 edition of USPAP at its public meeting on February 8, 2019. Any such revisions to USPAP would become effective on January 1, 2020.

Excerpt: Learn more about the Third Exposure Draft of proposed changes to 2020-21 edition of Uniform Standards of Professional Appraisal Practice (USPAP) in this webinar with Wayne Miller, 2019 Chair of ASB, and John Brenan, Director of Appraisal Issues.

Among several important changes, the draft proposes a reporting model that reduces specificity without diminishing USPAP reporting requirements.

From the Draft:
– Remove multiple report options (i.e., Appraisal Report
and Restricted Appraisal Report)
– Have one set of minimum requirements for all reports
(less than Appraisal Report and more than Restricted
Appraisal Report)

Link to 1 hour webinar
Link to webinar PowerPoint summaries (PDF) from webinar
Appraisal Foundation Q&A database – ask the experts

My comment: The Powerpoint summaries don’t take much time to look through and the 1 hour webinar is easier than reading the Exposure Draft. Lots of chat online, positive and negative, mostly about report type changes

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The Future of Residential Lender Appraisers, in My Opinion

What if you don’t want to do desktop bifurcated appraisals or the very tough appraisals that don’t work for AVMs? Or, wait, once again, for the lender market to finally come back.

There are many forces trying to get field appraisers out of doing full valuations for mortgage loans. Automation and Artificial Intelligence will increase this trend, as it has done in other professions. For example, Quicken dramatically decreased demand for manual bookkeepers. Once lenders can determine which properties will work with an AVM, there will be fewer human appraisals.

Recently, several appraisers emailed and called me saying their non-lender work would go down due to fee competition from desperate lender appraisals. Yes, this does happen in downturns, especially when it first starts going down fast. Estate appraisals are easy, and this market is affected. Plus other non-lender markets.

What is the answer? The only answer I know is to do litigation support. In my area, there are very few residential appraisers who will testify in court. When they go up against an MAI who does 1-2, or fewer, residential appraisals per year, they win. Good demand, repeat business, fees much, much higher than any other type of appraisal business, respected as an expert. Almost the opposite of AMC appraisals.
Why are residential appraisers very reluctant to do Expert Witness court testimony? Fear of the unknown I guess. I did them in the past and had no problems with testifying as an expert in court or in a deposition.

Next month in my monthly paid newsletter, I will have an article on Litigation Support and Court Testimony.  I have been writing a lot about doing non-lender work. There are lots of options, but this is by far the most profitable with very little competition.


Top 25 Most Dangerous Neighborhoods in America

Excerpt: Even the most dangerous cities in America can have relatively safe neighborhoods. This is because there is more variation in crime within most cities than between cities. So where are the most dangerous neighborhoods in all of America? Think of the city you live in, or cities that you know, and how some areas are very safe, while other neighborhoods – maybe just minutes away – are ripped apart by violence.
Click here to check it out at:

My comment: Very Interesting. Most of the photos in this article are scary. I look out the windows in my office and my home and see the city of Oakland across the estuary. When I first started appraising there over 30 years ago, I was surprised to see the same small bungalow at $100,000 in the in the flat areas near the Bay, if relocated to the hills, be worth over $250,000. They all looked the same on the outside.

I quit working in the high crime neighborhoods when machine pistols that could shoot multiple bullets were being used. None of the shooters went to the firing range to practice. With regular handguns, it was many fewer shots. I was worried about being in the wrong place at the wrong time.
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 
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Mortgage applications decreased 2.7 percent from one week earlier

WASHINGTON, D.C. (January 23, 2019) – Mortgage applications decreased 2.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 18, 2019.

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 0.3 percent compared with the previous week. The Refinance Index decreased 5 percent from the previous week. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index increased 4 percent compared with the previous week and was 13 percent higher than the same week one year ago.

“Mortgage application activity cooled off last week after two consecutive weeks of sizeable increases. Both purchase and refinance applications saw declines but remained at healthy levels, with the purchase index remaining close to a nine-year high, and the refinance index hovering near its highest level since last spring,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Reversing the recent downward trend, rates increased for most loan types last week, due to better-than-expected unemployment claims, easing trade tensions and stabilization in the equity markets.”

The refinance share of mortgage activity decreased to 44.5 percent of total applications from 46.8 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 8.3 percent of total applications.

The FHA share of total applications decreased to 10.5 percent from 10.9 percent the week prior. The VA share of total applications decreased to 10.3 percent from 10.4 percent the week prior. The USDA share of total applications decreased to 0.4 percent from 0.5 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 4.75 percent from 4.74 percent, with points decreasing to 0.44 from 0.45 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate remained unchanged from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) increased to 4.59 percent from 4.53 percent, with points decreasing to 0.25 from 0.31 (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 increased to 4.82 percent from 4.76 percent, with points increasing to 0.62 from 0.52 (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 decreased to 4.12 percent from 4.13 percent, with points increasing to 0.53 from 0.45 (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 4.12 percent from 4.08 percent, with points increasing to 0.42 from 0.32 (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

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