Nothing New Under the Sun: The Varied Face of Appraisal Property Inspections
By Joshua Walitt
This article focuses on property inspections, which – to an outsider – might seem to be a straight-forward topic. However, given current changes in the valuation space, nothing is further from the truth: valuation, specifically the collection of data that supports a valuation method, has never been one-size-fits-all. There are many property inspection issues for appraisers
Excerpt: Sample of the questions about data sources:
The appraiser determines physical characteristics of the subject structure from limited-data county records, recent family photos showing two rooms, and a 15-year old appraisal.
A determination must be made whether appliances and utilities are functional and/or whether the property meets local codes
An appraiser performs an Exterior-from-street appraisal and reports a value opinion of $500,000; the next week, she performs a Exterior-and-Interior appraisal on the same property and reports a value opinion of $630,000.
To get the answers and more questions click here
My comments: Worth reading. Summary of a recent presentation by Walit. Lots of different scenarios presented. Note: I publish a graph of mortgage orgination 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 firstname.lastname@example.org . Or call 800-839-0227, MTW 7AM to noon, Pacific time.
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NOTE: Please scroll down to read the other sections of this long blog post on Frank Lloyd Wright fixer, collections, fascinating ceilings, mortgage origination stats, etc.
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Spreadsheets: A Shackle to the Appraisal Profession?
Excerpts: How can spreadsheet software hinder the profession? A Wall Street Journal article, and a presentation at the Appraisal Institute National Conference have similar stories. One addresses accountants, the other is about appraisers.
The 2015 AI meetings presentation: Will Appraisers Have to Learn to Use Real Analytics Software? was given by George Dell. The main point was that accountant’s software was primarily developed for record-keeping, mimicking paper columns and rows, with analysis a later goal. Other points are:
- Validating and tracking data is difficult.
- No built-in audit trails, nor tracking of changes.
- Regulatory compliance is difficult to accomplish.
- Susceptible to trivial human errors ETC.
To read more, click here
My comment: Read this article. I totally agree. I started using spreadsheets in 1981 for financial analysis. When I started my appraisal business in 1986, commercial appraisers were using spreadsheets for Discounted Cash Flow. I knew the many problems with spreadsheets’ reliability.
They are particularly unsuitable for statistics as they are not statistics programs. In my MBA program in 1979, I used SPSS for multiple regression analysis, connecting to a large computer.
The invasion of tech companies in real estate
By Ryan Lundquist
Excerpts: Tech companies want a piece of the real estate pie. Amazon. Zillow. Opendoor. Rex. It seems like every week there’s a new company announcing its venture into the game. Here are some things swirling through my mind as I think critically about this trend.
2) The obsession with speed: There is space for escrows to be faster as tech firms say, but I hope we don’t lose sight of the importance of time. It’s okay to have space for necessary inspections, negotiation based on those inspections, and a reasonable contingency period so buyers and sellers are sure about their decision. There’s this idea that real estate should be instantaneous, and maybe one of these days it will be on the blockchain, but mistakes are easy to make if we go too fast. On that note, let’s be cautious about expecting too much from appraisers in this climate because speed can water down quality. Do you know what we need more than fast appraisals? Reliable appraisals.
For lots more info and comments click here
My comment: Written for real estate agents (Ryan’s primary blog target) but good for appraisers.
No, The Fed Didn’t Cut Mortgage Rates!
Excerpt: Mortgage rates were mostly unchanged today, which will come as a surprise to scores of consumers who mistakenly believe the Fed’s 0.25% rate cut equates to a 0.25% drop in rates. The Fed does not set mortgage rates!
Actually, to be fair, the Fed Funds Rate (that thing everyone is talking about today) is in fact the basis for Home Equity Lines of Credit (HELOCs) in many cases, but that’s it as far as the mortgage world is concerned. The most common mortgages are determined by other parts of the financial market.
To read more, click here
My comment: I just had to include this one!! Good, relatively short, explanation of what is happening.
Frank Lloyd Wright Fixer-Upper Is for Sale, but the Repairs? Scary!
Excerpts: Wright first built the place in 1909, then added a second story with more bedrooms in 1922. Architect Walter Sobel bought the house in 1957, and lived there until his death at the age of 101 in 2014. Family members have lived there since, but it’s now vacant and awaiting the right buyer.
This home’s listing agent, Kyle Pane, makes it clear that the house needs a whole lot of updating—which means a major cash outlay. For starters, the roof is leaky, requiring repairs amounting to around $63,000. What’s more, these leaks have damaged the floor. Plus, the kitchen and bathrooms could use some updating, and landscaping is needed.
To read more, click here
My comment: Worth reading. Very interesting article about Wright’s homes, useability, maintenance, etc. and photos!
How to collect all your billings.
Don’t work for free!!
The primary source of problems – fear and greed
Why do appraisers keep accepting orders even after they have past due billings from a client? Why do appraisers accept all clients without checking them out? Why don’t appraisers contact clients soon after a billing is past due?
Fear – they won’t get another appraisal order from the client, or they will never get another appraisal order from anyone.
Greed – want to make as much money as possible (or at least bill out as much as possible).
Don’t ever, ever put all your eggs in one (AMC) basket
Don’t ever rely on one client for a large part of your billings. Why? Clients come and go, for all types of reasons, including going out of business.
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23 Ceilings Worth Craning Your Neck For
Just For Amazing Fun!!
Excerpt: here’s wonder all around, but it’s easy to forget to look up. There’s the ever-mutable sky up there, and for centuries, architects, artists, and designers have tried to outdo it, often in churches, libraries, mosques, and museums. Many of those buildings save their greatest, most jaw-dropping sights for their own versions of the heavens: ceilings. We recently asked the readers in our Community Forum to tell us about the most startling ceilings they’ve ever encountered. What we found was heavenly (unsurprising, since many of them reside in houses of worship) and worth all the neck strain.
For more info, click here
My comment: take a break from appraising and scroll down the page looking at the photos from all over the world. Amazing!!
Mortgage applications decreased 1.4 percent from one week earlier,
WASHINGTON, D.C. (July 31, 2019) – Mortgage applications decreased 1.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 26, 2019.
The Market Composite Index, a measure of mortgage loan application volume, decreased 1.4 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 increased 0.1 percent from the previous week and was 84 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 6 percent higher than the same week one year ago.
“Mortgage applications were lower last week, driven by a 3 percent decrease in purchase applications. While purchase activity was still up 6 percent from a year ago, the index has now decreased for three straight weeks and reached its lowest point since March. Despite healthy demand, inadequate supply levels continue to hold back some would-be buyers,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Rate movements were mixed, with the 30-year fixed rate remaining unchanged (at 4.08 percent), but the FHA rate decreasing to its lowest level since 2017 to 3.94 percent.”
Added Kan, “Refinance applications were essentially flat, but the components told different stories. Conventional refinances were up 1.1 percent, but government refinances were down almost 3 percent – led by a drop in VA applications.”
The refinance share of mortgage activity increased to 50.5 percent of total applications from 49.8 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 4.7 percent of total applications.
The FHA share of total applications remained unchanged at 11.3 percent from the week prior. The VA share of total applications decreased to 12.6 percent from 13.1 percent the week prior. The USDA share of total applications remained unchanged at 0.6 percent from the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) remained unchanged at 4.08 percent, with points increasing to 0.34 from 0.33 (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) remained unchanged at 4.04 percent, with points decreasing to 0.22 from 0.25 (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 3.94 percent, the lowest level since September 2017, from 3.98 percent, with points decreasing to 0.29 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 15-year fixed-rate mortgages increased to 3.48 percent from 3.45 percent, with points decreasing to 0.26 from 0.32 (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 decreased to 3.52 percent from 3.57 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 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
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