Why do appraisers hit the sales price?

By George Dell

Excerpt: A recent study includes a graph which shows that some 90% of appraisals hit the sale price exactly, or were higher, while only some 10% were below the sale price (when the sale price is known).

Is this a bias on the part of appraisers, or is the bias the cause of the system? What could possibly cause this strong upside skew?

First, ignore the ongoing pressures from the entire ‘loan industry’ to make the loan, make the commission, make the quota, make the bonus, and look successful. Ignore the claimed purpose of the public trust (of our quasi-governmental standards and licensing quagmire).

The goal of protecting the public trust failed, and will fail again— this time with different excuses and blaming— but it will fail again.

Let’s look at some underlying economic truths and social/governmental policy. What economics and public policies come into play here? Three come to mind immediately:

To read the full, very interesting post click here

My comment: When I started my appraisal business in 1986, I was told by local very experienced appraisers to appraise at the sales price or I may be kicked off a lender’s approved list. Of course, since I was trained at an assessor’s office, I was shocked and refused to do this… There was always another lender client I could get.

Dell’s blog has very short posts. My June paid newsletter will have a much longer article written by him: “Old Versus New: Conflict or Opportunity?” It has a brief look into the past, including a photo of an acoustic coupler for connecting to remote sites. Plus, of course, comments on the future! I remember 30 baud transmission rates in the early 1980s connecting from my home PC to my company’s servers;>

Appraisal Business Tips 

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Appraiser memories – just for fun!!

Excerpt: I love music. In the spring, I like country music. A lot of country songs make me think of flip-flops, soaking up the sun and having some fun! Country songs also make me reminisce about yesteryear. Country music has a way of doing that.

When I started appraising in 1998, things were very different. The other day I was listening to an Alan Jackson song (because its spring time), that made me think about how things have changed in the appraisal profession. So, I thought it would be fun to take a trip down memory lane. Don’t worry, this is just a happy little trip. Nothing negative or deep. Just a little fun. I hope you enjoy the trip, and the song that inspired this blog, at the end.

To read more and see the fun photos and animated gifs click here

My comment: Just For Fun!!! Nothing at all serious. Yay!!


Grocery store is most-desirable neighborhood amenity, Federal Reserve report shows

Excerpt: people said the most important neighborhood amenity is a grocery store. About 87% of respondents said it is “moderately or very important” to have nearby.

Next on the list of desired neighborhood amenities was a combined category of “shops or restaurants,” which 75% of people cited as being important to have nearby. The next slot went to banks, with 65% of people citing them as important, then places of worship, at 48%, a library, at 48%, a park or playground, at 43% and public transportation, at 37%.

For more data and comments click here

My comment: Most of the homes in my small city were built prior to 1940. There is a relatively large home development across a bridge from the Main Island, developed from the 1970s to the early 2000s. A small shopping center was built, but the Safeway grocery store and CVS are very small. The bank branch closed. Vacancies are hard to fill. The other desired features are there. There is a large shopping center about 4 miles away on the Main Island. The homes sell well because it is a planned development with relatively new homes, but the small shopping center has not been updated since it was built. The walk score is not very good.


Tariff wars: What do Walmart and Target prices have to do with the housing market?

Excerpt: When a top executive at Walmart told Wall Street analysts and journalists on a conference call last week that tariffs on Chinese goods would lead to higher prices for his customers, people who follow the housing and mortgage industries felt a sense of foreboding. Higher consumer prices lead to higher inflation, which leads to higher mortgage rates that put a chill on home sales.

“Increased tariffs will lead to increased prices, we believe, for our customers.” Walmart chief financial officer Brett Biggs on a call after the world’s largest retailer reported earnings for the first quarter of 2019. Since then, executives at Target, Home Depot, Kohl’s, and Macy’s have made similar statements.

To read more, click here

My comment: Higher mortgage rates mean fewer lender appraisals.


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Coming in the June 2019 issue of the paid Appraisal Today. Something for Everyone!!

  • Fannie’s Big Changes: New Forms, Revised UAD and Bifurcated (Hybrid) Appraisals – A long article, combining lots of different sources, including “insider” interviews…
  • Old Versus New: Conflict or Opportunity? By George Dell – Much longer than his blog posts so you can get the “full picture” of George’s comments and opinions! Interesting contrast to my Fannie article above!!
  • PC and Macintosh Keyboard Shortcuts by Wayne Pugh  – I put them on laminated pages next to all my computers. Can never remember those darn keyboard shortcuts I don’t use very often :<

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Guitar-shaped hotel in Hollywood, Florida

Just For Fun – and maybe a vacation ;>

Excerpt: A skyline-defining hotel shaped in the form of back-to-back guitars is scheduled to open this fall northwest of Miami as the centerpiece of a $1.5 billion expansion designed to try to make the Seminole Hard Rock Hotel & Casino an international gaming destination.

The hotel, designed by Klai Juba Wald of Las Vegas, is set to debut Oct. 24 in Hollywood, Florida, featuring guitar faces, necks and strings that extend 450 feet into the air. Seminole Tribe of Florida executives say the 638-room landmark hotel is unlike any other in the world.

“When you think of Hollywood, you think of Hollywood, California,” said Christopher Osceola, a Seminole Tribe representative. “I think this guitar is going to change that.”

For more info and lots of fotos, click here

My comment: WoW!!


Illinois Board Issues Warning on Hybrid Appraisals

Excerpts: While most state boards have remained silent on the issue, the February 2019 issue of Illinois Appraiser, published by the Illinois Department of Financial and Professional Regulation (IDFPR), provides one of the first insights into how state boards interpret this issue. Brian Weaver, Appraisal Coordinator of the IDFPR and editor of Illinois Appraiser, points out that the concept of a third party providing assistance on an appraisal assignment is not new

While Weaver and the IFDPR appear to be warning appraisers and AMCs about the potential for some hybrid appraisal assignments to violate USPAP, hybrid appraisals are not, as a rule, forbidden by USPAP.

To read lots more, click here

To read the IL newsletter click here

My comment: I have been keeping track of hybrids, including the name change to bifurcated for over a year. In the June paid newsletter, I have an article about Fannie’s FHFA-mandated appraisal modernization: “Fannie’s big changes: New Forms, Revised UAD and Bifurcated (Hybrid) Appraisals”. Plus, what it means for you.


Big Changes Are Coming for Appraisers Who Work For Lenders!

How technology enables, rather than replaces, commercial real estate appraisers

Excerpt: Technology has infiltrated nearly every aspect of the commercial real estate transaction process, from listings to lending. The commercial valuation and appraisal process has not been as quick to catch up, for a variety of reasons, the most important of which is that appraising commercial real estate requires a human touch, with each income producing property unique in its own way. The tools an appraiser has at his or her disposal have not improved at all in recent years, with the largest and most advanced appraisal firms in the world still using Excel linked to a Word document, and repeatedly writing over the same old template reports. This can cause immense frustration, result in errors, and create bottlenecks in what are already lengthy and complex transactions.

To read more click here

My comment: This post is written by an appraiser who co-founded an appraisal tech startup. Commercial appraising is not bogged down by what AMCs, Fannie and what the lenders want. I subscribe to propmodo’s free newsletter. Very interesting!!


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Mortgage applications decreased 3.3 percent from one week earlier

WASHINGTON, D.C. (May 29, 2019) – Mortgage applications decreased 3.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 24, 2019.

The Market Composite Index, a measure of mortgage loan application volume, decreased 3.3 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 decreased 6 percent from the previous week. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 7 percent higher than the same week one year ago.

“Concerns over European economic growth and ongoing uncertainty about a trade war with China were some of the main factors that kept mortgage rates low last week. Even with lower rates on three of the five surveyed loan types, refinance activity fell 6 percent, essentially reversing an 8 percent increase the week before,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Purchase applications decreased for the third straight week, but remained more than 7 percent higher than a year ago. It is possible that the trade dispute is causing potential homeowners to hold off on buying, with the fear that further escalation – or the lack of resolution – may have adverse impacts on the economy and housing market.”

The refinance share of mortgage activity decreased to 39.7 percent of total applications from 40.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.6 percent of total applications.

The FHA share of total applications increased to 9.6 percent from 9.4 percent the week prior. The VA share of total applications increased to 11.2 percent from 11.0 percent the week prior. The USDA share of total applications increased to 0.7 percent 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) remained unchanged from 4.33 percent, with points decreasing to 0.42 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 $484,350) decreased to 4.18 percent from 4.24 percent, with points decreasing to 0.23 from 0.35 (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 4.33 percent from 4.34 percent, with points decreasing to 0.43 from 0.47 (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 3.73 percent from 3.78 percent, with points remaining unchanged at 0.40 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs increased to 3.74 percent from 3.57 percent, with points decreasing to 0.34 from 0.37 (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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