Appraisal News and Business Tips

5-10-19 Newz: Fannie Changes – Appraisal Changes – Very Crooked House

How is Appraisal Gonna Change?

By George Dell

Excerpt: What new “appraisal methods and techniques” have we seen? As I speak to reviewers who see valuations from around the country, there seems to be a degradation of quality. Less analysis rather than more. Less explanation rather than clearer logic. More “trust me” and less “see my reasoning.”

What does the world really need? Trust my opinion-or see the result? Trust my comps-or see market parameters.

Competitors for valuation, risk, and investment needs want “better, faster, cheaper.” For now, lets just look at “better.” What is “better?”

“Better” is actually fairly simple. There are only three parts: 1) is the right question being asked; 2) is the result true (accurate); and 3) how sure (precise) is the result? So, let’s look briefly at each of these needs, and how each can be helped with today’s technology.

https://georgedell.com/how-is-appraisal-gonna-change/

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Fannie Mae Plans Massive Changes to Appraisal Process

by Isaac Peck

Excerpt: In its March 21, 2019 Appraiser Update, Fannie Mae revealed that it is currently testing a concept called Property Data Collection (PDC), where a property data collector, not necessarily a licensed appraiser, would inspect a home and report back on the condition of the property.

…Fannie Mae, expounded on this, explaining that Fannie Mae is testing appraisers, real estate agents/brokers, insurance inspectors, and home inspectors, among other professionals, to try to determine who collects data most accurately and effectively. In other words, non-appraisers are very likely to be included in the list of “approved providers” who will be allowed to serve as property data collectors.

My comment: There are a few large lenders and AMCs who will not do bifurcated appraisals. Last week I attended an excellent presentation by Jeff Bradford (Clickforms, Bradford technologies). Topics included a 1004p form report, a one page form, MLS comp photos, big reduction in data elements, plus lots more. I will be writing about these issues in my next paid Appraisal Today newsletter. If you ever get a chance to hear Jeff speak, Just Do It!! He is local here and I have heard him speak many times over the years.

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When the best comps are four years old

By Ryan Lundquist

Excerpt: Some details: The subject is located in Old Folsom and was built less than ten years ago whereas most neighborhood homes were built many decades ago. The subject is about 2500 sq ft with a 572 sq ft Accessory Dwelling Unit (ADU). It had a high-quality of construction and the builder nailed the architecture because it resembled the old world charm found in nearby homes.

Lack of recent comps: There were no recent similar sales. Zero. Most other areas of Folsom are much newer in age too, so using other neighborhoods wasn’t ideal in my book. This is why I chose to focus on older sales to understand the neighborhood market.

Well written and worth reading. Good tips for lenders. Lots of good ideas.

My comment: The easiest adjustment to make is market conditions. I have gone back as far as 20 years to find comps for properties with non-standard features which seldom sell. Agent surveys are ok, but I prefer going back in time. I use percent adjustments, which don’t change much over time, depending on what non-standard features I am looking for. For example, a 3 bedroom condo, which is unusual in my market. I determined the percent adjustment between a 3 bedroom and 2 bedroom condo. It was to establish a sales price for a tenant purchase. Who knows what the lender’s appraiser did!
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The History of Modern Kitchens, starting in 1926 with the Frankfurt Kitchen

Excerpts: There are “dream kitchens,” and then there’s the Frankfurt Kitchen, designed by architect Margarete Schütte-Lihotzky in 1926.

The idea of a dedicated space to cook, which might also be stylish and even fun to spend time in, was only possible because of two major impacts of industrialization. First, mass production, along with municipal gas, water, and electricity, made modern appliances affordable…

My comment: We all see modern kitchens in homes and apartments, but I never knew about how they got started. Very interesting with lots of old photos and commentary. I regularly see almost original Victorian kitchens (with gas or electric heating and modern appliances added).
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What is a Bedroom?

By Doug Smith, SRA

Interestingly, Fannie Mae does not offer a specific definition of a bedroom.

Excerpt: The following guidance is offered in the most recent Selling Guide:

Layout and Floor Plans (Fannie Mae)
“Dwellings with unusual layouts and floor plans generally have limited market appeal. A review of the room list and floor plan for the dwelling unit may indicate an unusual layout, such as bedrooms on a level with no bath, or a kitchen on a different level from the dining room. If the appraiser indicates that such inadequacies will result in market resistance to the subject property, he or she must make appropriate adjustments to reflect this in the overall analysis. However, if market acceptance can be demonstrated through the use of comparable sales with the same inadequacies, no adjustments are required.”

It is clear, then, that at least Fannie Mae depends on the appraiser to determine the definition of a bedroom and whether a room used as a bedroom meets local market acceptance, suggesting that adjustments for unusual layouts, be derived from the local market.

This article, about this sometimes controversial topic, includes info on FHA, the The National Building Code, updated in 2018, other building codes, etc. In the January 2019 issue of Appraisal Today.

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What You Can Learn from “The Other” Appraisers

By Rachel Massey
Excerpt: Over the past couple of days, I have had two appraisers complain to me about “the other” appraiser. The appraiser who is sloppy, lazy, incompetent, and even crooked. One asked me if I could do reviews to find standards violations, and the other just wanted to vent. Both were ready to turn other appraisers over to the state regulators for disposition. Both may be 100% correct in their assessment, but it makes me wonder why we are so quick to blame others as opposed helping others become better appraisers. Do accountants complain so readily of “others”? Do plumbers trash talk their competition? Or is our disdain for “the other” appraiser part in parcel of not interacting with others in our profession except as internet warriors?

Getting to know other appraisers from various backgrounds and in various positions within the appraisal world is a good way to break down the wall of “otherness” and realize we are all people. People with similar passions related to the valuation of real property.

https://www.appraisalbuzz.com/what-you-can-learn-from-the-other-appraisers

My comments: This has bothered me for a long time, since I started doing lender appraisals in 1986. Maybe it is because there are lots of reviews done. Also, the internet has lots of negative comments about appraisers as well as lots of other people.

I never an issues like this when I previously worked at an assessor’s office. We saw each other every day.

This article has a promo for an upcoming conference, but you can meet appraisers face to face at any time. From a small group with a few local appraisers to a national conference. I regularly have lunch with two appraisers in my city and attend local AI chapter events.
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I Accidentally Bought a Marijuana Grow House: Why Even Weed Lovers Should Be Very Afraid

Excerpt: The house was riddled with an unusual amount of wiring-far more than a house built in the 1960s would normally have. Aluminum foil scraps were stuck on the walls of the two sheds, as well as inside a closet and the garage of the house. With some research, we learned that this was not some new design trend, but a way to reflect expensive light to keep plants growing.

My comment: Very interesting. The owners purchased a foreclosed property needing lots of work. I have seen marijuana growing outdoors and in sheds when doing appraisals. I also saw crack pipes, etc. I never reported it to the lender or the police. But, be very careful when you think there is a grow room inside a house. Could have significant fire hazards from inadequate wiring. A friend of mine had a rental he used as a grow house. The owner was doing a refi. I told him to remove everything from the bedroom that was being used as a grow house before the appraiser came.

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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 I have been following this index since it started in 1990.
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 increased 2.7 percent from one week earlier

WASHINGTON, D.C. (May 8, 2019) – Mortgage applications increased 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 May 3, 2019.

The Market Composite Index, a measure of mortgage loan application volume, increased 2.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 3 percent compared with the previous week. The Refinance Index increased 1 percent from the previous week. The seasonally adjusted Purchase Index increased 4 percent from one week earlier. The unadjusted Purchase Index increased 5 percent compared with the previous week and was 5 percent higher than the same week one year ago.

“We saw a good week for the spring homebuying season, as a 5 percent increase in purchase applications – both weekly and year-over-year – drove the results,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Average loan amounts also stayed elevated, with government purchase applications rising to the highest in the survey. Even with slower price appreciation in higher-priced markets, home prices are still rising enough to push average loan sizes higher.”

Added Kan, “With purchase activity increasing and mortgage rate movements mostly unchanged, the refinance share of applications were at their lowest level since last November.”

The refinance share of mortgage activity decreased to 37.9 percent of total applications from 38.8 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.4 percent of total applications.

The FHA share of total applications remained unchanged from 9.5 percent the week prior. The VA share of total applications increased to 11.1 percent from 10.9 percent the week prior. The USDA share of total applications remained unchanged from 0.6 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.41 percent from 4.42 percent, with points increasing to 0.47 from 0.46 (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) decreased to 4.27 percent from 4.31 percent, with points remaining unchanged at 0.23 (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 4.44
percent from 4.39 percent, with points increasing to 0.56 from 0.47 (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 remained unchanged from 3.81 percent, with points increasing to 0.42 from 0.40 (including the origination fee) for 80 percent LTV loans. The effective rate remained unchanged from last week.

The average contract interest rate for 5/1 ARMs increased to 3.88 percent from 3.81 percent, with points decreasing to 0.26 from 0.54 (including the origination fee) for 80 percent LTV loans. The effective rate decreased 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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