Appraisers Are NOT Needed???
Excerpt: You can buy a car in little to no time so why not a house? Over the years I have heard that the home buying process is too long. There are too many headaches for buyers and the process should be easier.
We are in a microwave society and everybody wants things instantly. This should, of course, carry over to the home buying process, right?
A house is probably the most expensive purchase people will ever make but that doesn’t mean that the process needs to consume your entire life, right? The appraiser just adds to the stumbling block that most home buyers face in getting into the house of their dreams. Today I am going to discuss 6 reasons that appraisers are not needed (wink, wink) in the home buying process.
Written for home buyers but good explanations for appraisers to use.
To read more click here
My comment: I have appraised many apartment properties. 2-4 unit properties are more difficult to appraise than a 60 unit apartment building, which I appraised recently! Owner occupants, motivations, etc. are big issues. 4 units are the most difficult.
My city has had rent control, which keeps getting stricter, for 4 years. CA recently passed rent control for the state. Must use actual, not market, rents in appraisals. Very, very difficult to appraise. 3 weeks ago I decided not to do them any more.
But, last week a family was thinking about selling their 4 unit property. I pre-screened them. If it had low rents, I don’t know who would buy it. Fortunately the rents were around 80% of market. They wanted to know if it was good time to sell. I told them I would let them know, then do the appraisal. Not a good market now.
I met one of the owners this week at the inspection. He brought a copy of the 2005 date of death appraisal and asked for an “update” or an “evaluation”, for a lower fee, which his sisters requested. I told him I could not do it and did not know any licensed appraiser who would do it. And told him to use a local real estate agent for free. I doubt if they would recommend not listing now as I speak with them regularly at open houses.
To read about lots more appraisal topics, continue reading below!
NOTE: Please scroll down to read the other sections of this long blog post on outlier sales, Appraisal Foundation and USPAP, obsolete appraisers, mortgage origination stats, etc.
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Not getting distracted by outlier sales
By Ryan Lundquist
It’s been a record-breaking couple of years. In New York we saw the highest residential sale ever in the United States at $238M. Then a couple months ago California got a new record with the Beverly Hillbillies mansion at $150M. And now there’s a listing in Bel-Air that just hit the market at $500M. The truth is it’s easy to get distracted by the bling of outlier sales because of how lofty the prices are, but here are a few things to keep in mind
1) These sales don’t pull the market up: Outlier sales don’t pull the rest of the market up, and they have nothing to do with the entry-level market or affordability for the average person.
2) I just gotta have it: My observation with the highest sales is sometimes cash buyers offer prices that seem disconnected from what looks reasonable on paper. This doesn’t happen in all situations, but sometimes it does where the buyer simply says, “I just gotta have it.”…
For lots more tips, plus a few graphs, click here
My comment: When doing any type of statistical analysis, it is important to look at the outliers, high or low, so you can eliminate them in your data set. Very easy to do.
Indoor-Outdoor 1,200 sq.ft. house on narrow lot
Just For Fun!!
Excerpt: The Silhouette Hytte House in Ellwood, Australia, is tucked into a narrow plot surrounded by trees, its compact footprint overshadowed by dashing style. Clad in black metal and a shiplap timber that’s also used on the interior, the home is streamlined and modern without feeling the slightest bit cold.
The roughly 1,200-square-foot house, designed by FIGR Architecture & Design, features an asymmetrical roofline observed in the ceilings inside as well. FIGR swathed the interiors in chic neutral colors: white walls, light timber, and black and gray accents.
To read more, click here
For lots more fotos, site plans, etc. click here
My comment: Don’t ask me to appraise this unless there is a Very High Fee… plus a round trip plane ticket to Australia ;>
Apartment 5 day turn times using AVMs and human appraisers
Excerpts: Apprise delivers Government-Sponsored Enterprise-compliant (GSE) commercial real estate (CRE) appraisals in five business days or less, with unprecedented property- and market-level insights, presented with consistent data structures that produce superior quality reports. Apprise is a joint venture that combines Walker & Dunlop’s industry-leading multifamily underwriting experience, GeoPhy’s data science and analytics technology prowess, and the expertise of some of the most trusted MAI-certified appraisers in the country…
Final appraisals including inspection in five business days or less….
Among the Apprise analytical tools they can use is GeoPhy’s supplemental Automated Valuation Model (AVM) as an additional input into the valuation process, complementing traditional appraisal valuation approaches.
To read more, click here
Link to press release: click here
My comments: Another nail in the coffin for appraisers. But, I don’t think they will be doing 2-4 units ;>
I have been waiting for this for a long time. I do a lot of apartment appraisals. Apartment values are based on income and expenses. Not very difficult to do, if you have that data. Don’t know if it works with rent control where actual rents are used. Don’t take much time if you use the old Freddie apartment forms. Narratives can take a long time.
Once again, I am sooo glad I quit lender work in 2005!!
What is a bedroom?
Excerpt: What is a bedroom depends on city building codes, Fannie, FHA, what local buyers say, etc. A tandem room is a good example. It can be a problem for lender appraisals if the assessor has a different number of bedrooms than your appraisal.
Interestingly, Fannie Mae does not offer a specific definition of a bedroom.
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 also includes what FHA, National Bulding Codes, etc. say about bedrooms.
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8 Wondrous Bridges to Nowhere
Just For Fun! Fascinating, mysterious, and weird!!
Excerpt: Bridges, by definition, are there to get you from one place to another. But you won’t get far on any of these. They dot the globe, fragments of abandoned infrastructure standing as reminders of urban planning gone wrong. Some of the bridges were built for projects that never achieved their destiny, throttled by dwindling funds. Others were victims of natural disasters, demolished by nature’s wrath. Though no longer useful, these abbreviated spans still have an allure. From a flooded footpath in Scotland to a dead-end road in South Africa, here are eight wondrous bridges to nowhere.
3. Hillandale Bridge
This abandoned bridge to nowhere stands secluded in the woods of a Cleveland suburb.
To read more, click here
My comment: Worth taking a break from grinding out appraisals!!
Cobra Breeding: the Appraisal Foundation and USPAP
By George Dell
Excerpts: I’ve started to read the “Cobra”. Jeremy is an excellent writer, and seems to have done some really deep and well-documented research on the Appraisal Foundation and complex intertwined quasi-administrative law (as was documented by Joan Trice). It seems to throw light on how and why appraisers are bureaucratically and financially squeezed as compared to other valuation services (like AVMs, BPOs, and ‘Evaluations’) which seem to escape taxation and regulation and the requirement to buy Foundation books and monopoly-like compulsive education contracts.
To read more, click here
My comments: Last week I mentioned this book. I read the book this weekend. Very interesting!! Long explanation about why USPAP is copyrighted. Issues are USPAP updates every two years (very unusual) which has to be included in state laws, etc. Also what the Appraisal Foundation does with your money. Plus find out about Cobra Farms and the Cobra Effect.
Correction from last week: David Bunton’s compensation in the book for 2017 was $760,000. It included a one time payment of accrued retirement payments. I obtained IRS Form 990s from 2015, 2016, and 2017. His base salary for 2016 was $263,280 plus $80,704 in “other” compensation with a total of $343,980.
At a recent USPAP update class I took last week, one of the attendees (a well known and respected local appraiser) brought a copy of the book and gave a brief summary at the end. Very lively discussion among the few of us who knew about the book!!
The author was recently interviewed on Voice of the appraisal. To listen to the interview get an idea of some of what is in the book. To listen, click here
To order the book, Dispatches from the Cosmic Cobra Breeding Farm by Jeremy Baggot, MAI go to amazon click here . I subscribe to Kindle Unlimited and it was free. Paperback is $13.98.
I will be writing an article about the book and other information I obtained, in the March issue of the paid Appraisal Today.
Are Appraisers Becoming Obsolete?
Excerpts: Like cows, is technology making us functionally obsolete?… Cows are Obsolete! Pigs and chickens too!
I just ate an “Impossible Burger” for lunch at Burger King. It tasted great! It looked great too. I could not tell the difference between this fake burger and the real thing. Goodbye cows!…
Yes, we all deteriorate physically. Call it normal “wear and tear”. Is this loss of value curable? Are you a “fixer upper”? Would a new hip, a face lift, or losing 20 pounds extend your life and increase your value? It would!
To read more about functional and external obsolescence, plus the comments, click here
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Mortgage applications increased 5.0 percent from one week earlier,
WASHINGTON, D.C. (February 5, 2020) – Mortgage applications increased 5.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 31, 2020. The previous week’s results included an adjustment for the Martin Luther King Jr. holiday.
The Market Composite Index, a measure of mortgage loan application volume, increased 5.0 percent on a seasonally adjusted basis from one week earlier to its highest level since May 2013. On an unadjusted basis, the Index increased 20 percent compared with the previous week. The Refinance Index increased 15 percent from the previous week – its highest level since June 2013 – and was 183 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 10 percent from one week earlier. The unadjusted Purchase Index increased 8 percent compared with the previous week and was 11 percent higher than the same week one year ago.
“The 10-year Treasury yield fell around 20 basis points over the course of last week, driven mainly by growing concerns over a likely slowdown in Chinese economic growth from the spread of the coronavirus. This drove mortgage rates lower, with the 30-year fixed rate decreasing for the fifth time in six weeks to 3.71 percent, its lowest level since October 2016,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Refinance activity jumped as a result, with an increase in the number of applications and a spike in the average loan amount, as homeowners with jumbo loans reacted more resoundingly to lower rates.”
Added Kan, “Prospective buyers weren’t as responsive to the decline in mortgage rates – likely because of suppressed supply levels. Purchase applications took a step back, but still remained 11 percent higher than a year ago.”
The refinance share of mortgage activity increased to 64.5 percent of total applications from 60.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.9 percent of total applications.
The FHA share of total applications decreased to 9.6 percent from 10.7 percent the week prior. The VA share of total applications decreased to 10.2 percent from 11.7 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 ($510,400 or less) decreased to 3.71 percent from 3.81 percent, with points remaining unchanged at 0.28 (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 $510,400) decreased to 3.70 percent from 3.78 percent, with points decreasing to 0.19 from 0.20 (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 3.80 percent from 3.82 percent, with points decreasing to 0.26 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 15-year fixed-rate mortgages decreased to 3.19 percent from 3.24 percent, with points increasing to 0.23 from 0.22 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interet rate for 5/1 ARMs increased to 3.23 percent from 3.15 percent, with points increasing to 0.15 from 0.12 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
2033 Clement Ave. Suite 105, Alameda, CA 94501