So Many Appraisal Cost Approach Questions!
So Few Answers! Such Low Fees!
By Tim Andersen, MAI
Excerpt: It is clear most appraisers do not like to do the Cost approach. Generally, we are not too familiar with it. So, it is clear that most appraisers, because of this, do not appreciate the deep analytical power the Cost approach really has. So Many Appraisal Cost Approach Questions!
Therefore, I’m going to ask you 10 questions on the Cost approach (and stuff related to it). After you’ve finished reading them, you probably will still not like to tackle the Cost approach. Nevertheless, you just may have a better understanding of, and appreciation for, its powerful analytical capacities.
First Question: On the 1004 form is the indication that Fannie Mae does not require the Cost Approach to Value. Where does the form instruct the appraiser not to complete the analytics of the Cost approach?
To read the other questions and answers click here
My comment: Appraisers, including myself, seem to have a love/hate relationship with the Cost Approach. But, it can be useful. Tim’s much longer article “But Fannie Mae says I don’t have to do the Cost Approach!!” will be in the September issue of the paid Appraisal Today.
NOTE: Please scroll down to read the other sections of this long blog post on glass houses, murphy beds, state boards, appraisal disclaimers, mortgage origination stats, Covid tips for appraisers, etc.
Avoid Appraisal Disciplinary Action with These Do’s and Don’ts
Excerpt: As a professional appraiser, you don’t want to have a disciplinary complaint filed against you, and you certainly don’t want to be the subject of a complaint that results in disciplinary action. So, how can you prevent these undesirable consequences? Here are several do’s and don’ts to help you avoid situations that may get you into trouble as a real estate appraiser.
1. Do familiarize yourself with your state’s appraisal laws and rules/regulations
As an appraiser, you want to make sure that you’re following USPAP, but you also want to make sure that you familiarize yourself with your state’s rules and regulations. Don’t think that following USPAP alone will keep you out of trouble. There is a misconception that some appraisers subscribe to: “If I just follow USPAP, that’s all I have to worry about.” In truth, USPAP is merely a set of minimum standards. There may be additional standards to which you must comply.
For more good tips click here
My comment: If you ever need help with a state board complaint, or advice on how to avoid them, contact Tim Andersen (see above). He has helped a lot of appraisers. I always tell appraisers that they will not be able to appraise without a state license. Usually the appraisers are considering doing something risky. Anyone can check online and see your license has been revoked, severely limiting your appraisal assignments for any purpose.
My New Blog – Covid Science For Everyone!
New Post: Covid Transmission Inside Homes – Ventilation is a major factor
At www.covidscienceblog.com I want to let everyone read what I have written. I will be making many more “general interest” posts to the blog. Appraiser-only posts will be on this blog, of course. I have become both a business and a science writer. I am “called” to do it and must write for the new blog.
After writing about the pandemic since February for appraisers, I wanted to give my information to everyone. Without appraisers, I never would have started this blog.
You may want to ask about ventilation/filtering when scheduling an appraisal. For example, do you have air filtering devices with special virus filters (hepa).
The August 3 issue of the monthly Appraisal Today has lots of appraiser tips for going inside homes, such as crowding, maintaining physical distance, etc. To read, go to appraisaltoday.com/coronavirus
This ventilation article is posted on my new blog at: https://covidscienceblog.com/airborne-covid-transmission-inside-homes/
I am still working on an article on air conditioning in homes.
“Fauci Tracker” is also on the blog. The latest “sightings” of Fauci plus a humorous Fauci parody. Scroll down the page to see the parody.
How A San Francisco Love Story Inspired the Invention of the Murphy Bed
Just For Fun!!
Excerpt: Family legend goes, he had a strong ulterior motive for this invention. At the turn of the 20th century, a young woman would never enter a man’s bedroom. That was a problem for Murphy who really only had a bedroom. In order to entertain Miss Kaighin at home, Murphy needed a parlor.
His “In-A-Dor” bed idea was the perfect solution. With one simple maneuver his bedroom became a parlor. Problem solved!
To check out the podcast (11 min.), fun video, fotos, piano bed and article, click here
My comment: Only in San Francisco, of course ;> I live 10 miles from San Francisco. When I moved to Califonia in 1968 I lived in San Francisco for about a year. One of my brothers still lives there. It is a Very Special Place. I have appraised a lot of apartments and small houses with Murphy beds. Many ways to get the bed in and out. Now I know there was really someone named Murphy who started it all! Getting too many ad-only emails?
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Reduce your liability: Sample disclaimers and statements for your appraisals
In the July issue of the paid Appraisal Today
Appraisers are not home inspectors – very important to include in all your reports – a significant issue for borrower claims, the majority of claims today.
Borrowers can get confused about the difference between appraisers and home inspectors.
“The appraiser is not a home inspector, and this appraisal report is not a home inspection report. It does not guarantee or imply that the property or any structures are free of defects or property condition problems. It is suggested that the borrower
secure a professional inspection of the property and take diligent steps to assure the house and property are acceptable to them prior to closing escrow.”
Disclaimers/statements also included (sample) :
- External or desktop appraisals
- COVID-19 market conditions
- Intended users
Also included is good legal advice from Peter Christensen, on where to put them in your appraisal report, use of hypothetical conditions, signing “disclaimer” forms before you go into a home being sold, getting sued if occupant gets the virus after your visit, and other practical topics.
To read the full article, plus 2+ years of previous issues, subscribe to the paid Appraisal Today.
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Examining Our Profession Through a Sharper Lens
By Michael Perry
Excerpts: Nearly every facet of business can be conducted in part or in whole without the need for physical presence. Advances in technology are so impressive and reliable that you can now tour some of the world’s most amazing locations from your living room couch. Real estate agents have mastered technology throughout this pandemic to provide potential buyers with virtual tours in place of physical showings.
Yet one aspect of the real estate business has remained untouched and antiquated: appraisers are required to take original photographs of comparables used in their reports…
Perhaps it’s time to ask lenders to trust the licensed professionals they have hired or consider upgrading their appraiser panel. Or, perhaps it’s time for appraisers to take back their profession and consider upgrading their client panel.
To read more plus lots of comments click here
My comment: I use my photos a lot. Why? Because I can’t remember what the interior of the house, or the comps, looked like. But, I don’t like someone else telling me how to do my appraisals!!
$7.5M Glass House in Dallas
Excerpts: “It is a really special house. It’s a piece of art,” says the listing agent, Ryan Streiff. “It’s a good house in the day, but it’s spectacular at night.”
The home has three bedrooms, two full bathrooms, and two half-baths and is listed for $7.5 million. The current owners had the home custom-built, but never moved in. 6,325 square feet.
“It was designed to host large parties and spill out on the terraces and the lawns,” Streiff explains, adding that the acoustics are excellent, thanks to the custom-designed ceilings.
For video, photos and a writeup, click here
Transparent House in Japan
Excerpt: Built by Sou Fujimoto Architects, this 914 square-foot transparent house was inspired by our ancient predecessors who inhabited trees. While so-called “House NA” offers plenty of daylight, expect no privacy here.
“The intriguing point of a tree is that these places are not hermetically isolated but are connected to one another in its unique relativity. To hear one’s voice from across and above, hopping over to another branch, a discussion taking place across branches by members from separate branches. These are some of the moments of richness encountered through such spatially dense living,” says Sou Fujimoto.
To see some great photos: click here
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 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 firstname.lastname@example.org . Or call 800-839-0227, MTW 7AM to noon, Pacific time.
Mortgage applications decreased 3.3 percent from one week earlier
WASHINGTON, D.C. (August 19, 2020) – 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 August 14, 2020.
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 5 percent from the previous week and was 38 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 27 percent higher than the same week one year ago.
“Positive economic data reported last week on retail sales, as well as a large U.S. Treasury auction, drove mortgage rates to their highest level in two weeks. The rise in rates dampened refinance activity, but purchase applications continued their strong run and were 27 percent higher than a year ago – the third straight month of year-over-year increases,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Conventional purchase applications drove last week’s increase, while applications for government loans decreased. The housing market remains a bright spot in the current economic recovery and these results, combined with July data on housing starts and homebuilder optimism, suggest that housing supply could be increasing to better meet the strong demand for buying a home.”
The refinance share of mortgage activity decreased to 64.6 percent of total applications from 65.7 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 2.7 percent of total applications.
The FHA share of total applications decreased to 10.3 percent from 10.4 percent the week prior. The VA share of total applications decreased to 11.2 percent from 11.4 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 ($510,400 or less) increased to 3.13 percent from 3.06 percent, with points increasing to 0.36 from 0.33 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) increased to 3.41 percent from 3.40 percent, with points increasing to 0.35 from 0.31 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.16 percent from 3.23 percent, with points decreasing to 0.27 from 0.33 (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 2.73 percent from 2.67 percent, with points increasing to 0.36 from 0.35 (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 2.95 percent from 3.00 percent, with points increasing to 0.41 from 0.30 (including the origination fee) for 80 percent LTV loans. The effective rate remained unchanged 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.
NOTE: NEW POSTAL ADDRESS
Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
1826 Clement Ave. Suite 203 Alameda, CA 94501