How to Handle the Weird Stuff: Appraisal Methods from an Experienced Florida Appraiser
Excerpt: Going further away or back in time
One method is to go further back in time for comparable sales.. Another method is to use sales that are more distant to find data to utilize. Both of these techniques have long been available to appraisers. When using these appraisal methods, most often a comparison is made between properties with similar characteristics to the question at hand to extract a ratio/percentage which is then brought current or to the locale and applied. This could work for the above illustration with only four houses on leased land and no similar nearby sales. Most appraisers are familiar with and have utilized these techniques… Appraising Weird Stuff is Challenging!
Well written and worth reading. To read more, click here
My comments: Lots of good tips. All of us are asked to appraise the “weird ones”. Of course, sometimes we don’t know a house is weird until we drive up and see it!! A very good discussion of methods. I have used all of them except the depreciated cost, which is a good method. Plus, lots of tips on doing them for lenders. Of course, sometimes I just say “no” as it will take too long.
I have learned that they often are money losers due to the increased time. This is what can happen with lender UAD appraisals for AMCs due to the excessive amount of questions and trying to fit the appraisal on the form. I sometimes accept the weird ones for non-lender work with no time pressures. They can be very interesting and challenging.
Appraisal Process Challenges(Opens in a new browser tab)
Common Appraiser Violations(Opens in a new browser tab)
NOTE: Please scroll down to read the other sections of this long blog post on humor, castle in Ohio, ADUs, Increasing positivity, Crazy home sale market, Covid tips, mortgage origination stats, etc.
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Historic Castle With Old-World Charm in Ohio
Excerpt: A 7,500-square-foot, European-style castle on Fairway Lane is available for $950,000 in Alliance, OH. Completed in 1930, the 26-room castle is listed on the National Register of Historic Places.
A library sits in the tower and has views of the gardens. The property’s 13 acres include manicured gardens and a stocked pond.
“It has seven levels to the house, all of which are above grade. It’s very unique. It’s not just a traditional two-story-style house,” says listing agent.
To read the good writeup plus see lots of great fotos click here
Fannie Appraiser Update on ADUs, 9-2-20
On September 2, Fannie Mae announced one clarification and two updates to the Selling Guide on appraising properties with Accessory Dwelling Units (B4-1.3-05, Improvements Section of the Appraisal Report and B2-3-04, Special Property Eligibility Considerations).
Summary per Dave Towne:
An accessory dwelling unit (ADU) is an additional living area that is independent of the primary property and has basic bathroom, cooking, and sleeping facilities. With this update, we clarified ADU property eligibility and comparable sales requirements in the appraisal as follows:
▪ expanded the current definition of an ADU to improve proper classification of ADUs;
▪ expanded property eligibility by allowing multi-width manufactured homes titled as real property to be eligible as an ADU; and
▪ allow appraisal flexibilities that now include the use of
an aged settled sale to demonstrate market acceptability, and
• an active listing, or a pending sale as a supplemental exhibit to show marketability.
From Dave: NOTE: Some properties have a small living unit called a ‘Park Model Home’ as an ADU, normally for the use of an aged family member. Park Model Homes are no more than 400 s/f in size, and are considered to be PERSONAL PROPERTY. These are not eligible for normal mortgage financing.
Park Model Homes are also not considered to be approved as an ADU under FNMA guidelines. In many cases, the wheels/axles are still attached, and the hitch may be also. These units often are placed on properties under a Conditional Use Permit by the local jurisdiction, with the stipulation that they be removed once the allowed use ends.
Appraisers who encounter a Park Model Home (or similar) on a SFR property should note the existence of the unit, and include at least one photo of it in the report… but do not include the Park Model living space in the home’s GLA, or value this unit in the appraisal.
Effective Date: Lenders may take advantage of these updates immediately.
Thanks again, Dave!!
To read the Selling Guide Section. click here
Increase Our Positivity!
We All Need Some Humor!!!!
<< It’s only flat on the bottom!
By Jamie Owen
Excerpts: When you hear the term “positivity rate” today, sadly, it may invoke negative thoughts. That’s clearly understandable, considering there are different types of positivity. As you will see in this post, I am not referring to the pandemic.
Currently, there are a lot of terrible things taking place. There’s no need to mention them individually. Many are suffering in one way or another. While we are dealing with some really difficult times right now, in my experience, having a positive viewpoint, at least as positive as possible, can help get us through.
When going through your week, see if you can find a little humor in negative things, if appropriate.
To read more and see lotsa fun fotos with great captions, click here
My comment: What I really needed today! Thanks Jamie!!!Getting too many ad-only emails?
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New in the September Issue of the Paid Appraisal Today
- Disability – Your Greatest Risk
- Disability insurance – more important than ever during a Pandemic! by Paul Porter
- But Fannie Mae Says I Don’t Have To Do the Cost Approach! by Tim Andersen, MAI
- The common sense of it all, something we should always try and revisit by Rachel Massey, SRA
- Appraising Solar: New Fannie guidance August 2020 by Mark Buhler
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By Ryan Lundquist
Excerpts: Long time no blog. I don’t know if you noticed, but I haven’t been around these past two months. Today I want to talk about why, say thank you, and then share some cool visuals I’ve been making these past couple weeks.
What happened: In late June I began to have an ulcerative colitis flare and it got really bad to the point I had to be hospitalized for six nights. Fourteen years ago I was diagnosed with UC and this is frankly the worst it’s ever been. Thankfully my flare is subsiding and I’ve since been slowly regaining energy.
I’m blown away at your support: This has been a difficult season for my family. It’s hard to not feel well and it was scary being in the hospital. But in the midst of this it’s been incredible having an army of support rise up. The cards, flowers, meals, text messages, advice, gifts in the mail, DoorDash, emails, prayers… It all meant so much.
Okay, enough about me and my colon….
The Market Went Crazy!!
While I was gone the market went absolutely nuts. In short, competition has been fierce and we’ve begun to see one of the most competitive markets we’ve had.
To read more and see lots of graphs, click here
My comment: Ryan is back! I really missed his blog posts for the past two months…
Why is the housing market thriving in a pandemic?
Low mortgage rates coupled with a shift to working at home are driving demand
Excerpts: “The buyers are coming in because of the low interest rates – that’s the No. 1 reason,” said Lawrence Yun, chief economist of the National Association of Realtors said in an interview with HousingWire. “The secondary demand is coming from the work-at-home phenomenon that has people looking for bigger homes and caring less about commuting time.”
People now see their home not only as a place to live, but as a shelter during a national health crisis, Yun said. It’s also an office and, for families with children, often a part-time school.
Existing-home sales jumped 25% to a seasonally adjusted annual pace of 5.86 million in July, NAR said in an Aug. 21 report. It was the highest sales level since 2006 and the biggest monthly increase on record. The prior record for a monthly gain was the 21% jump seen in June, according to NAR data.
The supply of homes on the market was the lowest for any July since NAR started tracking the data about five decades ago, Yun said.
Short and worth reading. To read more, click here
My comments: This crazee housing market makes me nervous, of course. I remember the bad market downturns over the past 45 years I have been appraising.
I see two categories: those who have a good income and those who do not. Fortunately, appraisers have a good income.
Homeowners are doing better than renters. Mortgage forbearance really helps. (Can make partial or no monthly payments and the amount due is added to the loan balance).
Renters will be in big trouble if there is little or no assistance, such as help in paying rent or receiving increased unemployment insurance. Restrictions on evictions help but the tenants still owe the rent. I really worry about tenants.
CoreLogic Reports July U.S. Home Price Appreciation at 5.5% Reached Highest Level Since 2018
Excerpts: CoreLogic® recently released the CoreLogic Home Price Index (HPI™) and HPI Forecast™ for July 2020. Nationally, home prices increased 5.5 percent in July 2020, compared with July 2019, and were up 1.2 percent compared to last month, when home prices increased 4.3 percent.
“Lower-priced homes are sought after and have had faster annual price growth than luxury homes,” said Dr. Frank Nothaft, chief economist at CoreLogic. “First-time buyers and investors are actively seeking lower-priced homes, and that segment of the housing market is in particularly short supply.”
“On an aggregated level, the housing economy remains rock solid despite the shock and awe of the pandemic. A long period of record-low mortgage rates has opened the flood gates for a refinancing boom that is likely to last for several years,” said Frank Martell, president and CEO of CoreLogic.
“In addition, after a momentary COVID-19-induced blip, purchase demand has picked up, driven by low rates and enthusiastic millennial and investor buyers. Spurred on by strong demand and record-low mortgage rates, we expect to see more home building in 2021 and beyond, which should help support a healthy housing market for years to come.”
To read more, click here
My New COVID-19 Blog – New Posts
Dr. Fauci is Back! Comments on deaths, schools, asymptomatic testing, etc. (VIDEO)
5 min. 39 seconds Plus an explanation of why he is everywhere, including youtube, Facebook live, Instagram, etc. To listen and read more, click here
Note: The article title is somewhat negative but Fauci explains what the CDC was trying to say.
How the death rate is determined in a pandemic
This is somewhat controversial. There are two basic methods.
To read, click here
Who gets the vaccine first? Discussion Draft Released with 4 Phases 9-1-20
When we hear about vaccines one of our first questions is “Who will get it first?” There are many, many issues. To read more, click here
For appraisers, our primary criteria for getting the vaccine is age (maybe 50+) (Phase 2)
Younger appraisers may be eligible for Phase 3 (“essential to the functioning of society and at increased risk of exposure”)
If you want to get notified of new blog posts, please signup for email notifications on the upper right side of each page. I will be posting many new writeups.
Link to the blog with lots of Covid-19 info plus a little Fauci Humor
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 2.0 percent from one week earlier
WASHINGTON, D.C. (September 2, 2020) – Mortgage applications decreased 2.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 28, 2020.
The Market Composite Index, a measure of mortgage loan application volume, decreased 2.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 3 percent compared with the previous week. The Refinance Index decreased 3 percent from the previous week and was 40 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 0.2 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 28 percent higher than the same week one year ago.
“Both conventional and government refinancing activity decreased last week, despite 30-year fixed and 15-year fixed mortgage rates declining to near historical lows. Mortgage rates have remained below 3.5 percent for five months now, and it’s possible that refinance demand may be slowing and will not significantly increase again without another notable drop in rates,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Purchase applications were essentially unchanged over the week and were 28 percent higher than a year ago – the 15th straight week of year-over-year increases. Lenders are reporting that the strong demand for homebuying is coming from delayed activity from the spring, as well as households seeking more space in less densely populated areas.”
The refinance share of mortgage activity decreased to 62.5 percent of total applications from 62.6 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 2.6 percent of total applications.
The FHA share of total applications decreased to 10.2 percent from 10.5 percent the week prior. The VA share of total applications decreased to 11.4 percent from 11.8 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) decreased to 3.08 percent from 3.11 percent, with points decreasing to 0.36 from 0.38 (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) remained unchanged at 3.41 percent, with points increasing to 0.38 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 increased to 3.19 percent from 3.16 percent, with points increasing to 0.34 from 0.29 (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 decreased to 2.67 percent from 2.70 percent, with points decreasing to 0.36 from 0.39 (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 decreased to 3.08 percent from 3.14 percent, with points increasing to 0.43 from 0.42 (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
1826 Clement Ave. Suite 203 Alameda, CA 94501
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