Age adjustments in appraisals

Age adjustments in appraisals

By Jamie Owen

Excerpts: Sometimes, two homes with wide age differences can have the same effective age. For instance, a thirty-year old home may have an effective age that is the same as a fifty-year old home, if the fifty-year old home has been renovated to a degree that is comparable to the younger home. If this is the case, while there is a relatively wide age gap, no age or condition adjustment may be supportable.

Once the home is lived in, it can never be considered “new” again. Subsequently, a new home typically has a higher market value than one that has already been lived in. The joyful homeowner makes these choices, the home is built, and they move in. Now starts the wear and tear. The degree of wear and tear depends much on the homeowner and how well they maintain their home. With new homes, typically homeowners go for a number of years without needing to do anything major to the property. However, at some point, they will need to.

To read more and see some fun animated gifs and a video, click here

My comment: Written for homeowners (an excellent marketing tool) but interesting comments for appraisers. I love Jamie’s blog posts!!

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Orchard Smith Homestead From 1678 in Massachusetts

Excerpt: Price: $599,000

Orchard Smith Homestead: Described as “perfect for a history buff,” this property has been under the care of the same owner for the past 45 years.

The four-bedroom Federal farmhouse has wide-pine flooring, five working fireplaces, exposed wood beams, and other period details. Outside, the grounds feature an illuminated waterfall, patio, and privacy. Amenities from this century include a lower-level game room and wine cellar.

To read more, including 8 more homes built in the 1700s, and see more photos,  click here

My comment: In my city, there are very few, if any, homes built before 1850. The Gold Rush started in 1878. My city became a suburb of San Francisco, with trolleys taking workers to ferries to San Francisco, 10 miles away. Wish we had some old historic homes!

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Is Advisory Opinion 16 a Game Changer?

Excerpt: The Appraisal Foundation has issued an exposure draft for Advisory Opinion (AO) 16. Advisory Opinion 16 is Fair Housing Laws: Avoiding Bias in Real Property Appraisal and Appraisal Review Development and Reporting. Unlike other exposure drafts, the text of the AO opinion has been rewritten. The traditional strike through of word or phrase changes is nonexistent. The Appraisal Foundation acknowledges “the Advisory Opinion was extensively rewritten.”

Comments on the changes are due to The Appraisal Foundation by March 31, 2021, via SurveyMonkey or email, asb@appraisalfoundation.org.

Although an Advisory Opinion is not a standard of practice, it does express what is expected of appraisers. Every appraiser needs to read this exposure draft. It could be a game changer for appraisers.

To read more, including the AO, plus appraiser comments, click here

My comment: A very controversial topic! FYI, the ASB reads all comments submitted.Getting too many ad-only emails?

 

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How affordable, really?

By Rachel Massey, SRA, AI-RRS

I am not sure about you, but I keep reading about how affordability remains excellent even with housing prices increasing. This is due to low-interest rates compared to house price changes. In my experience, this does not follow what I see occurring in the field.

Instead of theory, let us look at reality. The example below is a real situation, with numbers taken from the city assessor for taxes, interest rates from macrotrends.net, and median income from the department of numbers (see website addresses below). Below is an example of a house that sold three times in seven years, with no significant changes in condition between the sales.

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Quirky ‘Cave’ Compound Is the Ultimate Gold Country Retreat in Northern California

Excerpts: The cavelike home on Sheep Ranch Road near the historic gold rush town of Murphys, CA, sits on 40 acres of hills. It’s the hub of a multi structure compound in the Sierra Foothills now available for $2,685,000.

“The house was built to be part of the natural native landscape,” says the listing agent, Nicole Goostree. “The soil in these parts is the same color as the cave structure, so it kind of blends into the hill.”

Completed in 2003, after 10 years of construction, the home has won several design awards and was featured on HGTV’s “Dream Builders.”

To read more and see lots of photos, click here

NOTE: Video from an Idaho home is in the middle of this post. Comments and photos for this home continue after this video. 

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9 Ways to Handle Appraisal Pressure and Still Maintain Your Ethical Reputation

Excerpt: When you are faced with appraisal pressure, here are some ways to manage the situation and still maintain your reputation as an ethical, unbiased appraiser.

1. Educate your appraisal clients

A lot of what appraisers consider pressure from clients is merely a result of the client’s lack of knowledge about appraisal standards and ethics. A lender might ask an appraiser to guarantee values beforehand simply because he or she is unaware that it is unethical for an appraiser to do so.

Avoid this by explaining why you cannot guarantee a value or remove that deferred maintenance photo from your report. You might be surprised at your client’s response if you take the time to educate him or her.

To read the other 8 tips, click here

My comments: Good ideas, especially in today’s crazy home sale market!! Published in April 2020 but has good ideas for today’s market, or any time. When I first started appraising, I was trained not to do what they wanted, even if it cost me a client or my job. I learned that most clients are looking for “a number” or nondisclosure of a “problem.” This is the “bottom line” of appraiser ethics.

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Are appraisers keeping up with rapid price growth?

By Ryan Lundquist

Excerpts: So the question becomes, are appraisers keeping up with the market? I’d say YES and NO. Here are a few things on my mind.

SMOKING PRICING CRACK: Some offers are disconnected from reality, so we SHOULD NOT be seeing appraisals anywhere near the contract price. We have a market where buyers are sometimes making irrational offers.

WORD ON THE STREET: I’m hearing stories of appraisals coming in at or above the contract price and ones that are lower than the contract price. It’s not all one thing, though I think the negative stories get the most attention.

THE JOB: An appraiser’s job is not to “hit the number” or make the deal work. The appraiser’s role is to reflect the market and assess risk for the lender. It’s not about whether the buyer wants the house. It’s about whether the lender should make the loan. Thus an appraisal should be a reflection of what buyers would reasonably pay as opposed to an outlier buyer willing to pay more than anyone.

NOTE: MOST OF RYAN’S ANALYSIS IS DOWN THE PAGE AFTER HIS GREAT GRAPHS. 

To read lots more, plus the interesting appraiser comments, click here

My comments: Appraisals are tough when prices are going up. I call them “auction” prices. I experienced several periods of this type of market in the past. It is the same now.

But It is so hard to understand prices are going up so fast when so many people are struggling to survive today. This has never occurred before. We are very, very lucky. My bank balances keep going up as I haven’t spent much money in the past year. I have been spending lots more money on deferred purchases since March 5, when I was fully vaccinated. My bank accounts kept going up and up in the past year>

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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 info@appraisaltoday.com . Or call 800-839-0227, MTW 7AM to noon, Pacific time.

Mortgage applications decreased 1.3 percent from one week earlier

Link to last week’s correct MBA data I sent out a duplicate of the previous week accidentally. (March 3, 2021) – Mortgage applications increased 0.5 percent from one week earlier

WASHINGTON, D.C. (March 10, 2021) – , according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 5, 2021.

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.3 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 decreased 5 percent from the previous week and was 43 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 7 percent from one week earlier. The unadjusted Purchase Index increased 9 percent compared with the previous week and was 2 percent higher than the same week one year ago.

“The 30-year fixed mortgage rate climbed to 3.26 percent last week, which is the highest since last July and up 40 basis points since the start of 2021. Signs of faster economic growth, an improving job market and increased vaccine distribution are pushing rates higher,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The run-up in mortgage rates continues to cool demand for refinance applications. Activity declined last week for the fourth time in five weeks.”   

Added Kan, “With the spring buying season at the doorstep, the purchase market had its strongest showing in four weeks, with gains in both conventional and government applications. Overall activity was 2.4 percent higher than a year ago, and loan sizes moderated for the second straight week – potentially a sign that more first-time buyers are entering the market.”  

The refinance share of mortgage activity decreased to 64.5 percent of total applications from 67.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 3.0 percent of total applications.

The FHA share of total applications decreased to 11.6 percent from 12.1 percent the week prior. The VA share of total applications decreased to 11.1 percent from 12.3 percent the week prior. The USDA share of total applications remained unchanged from 0.4 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.26 percent from 3.23 percent, with points decreasing to 0.43 from 0.48 (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 $548,250) increased to 3.34 percent from 3.33 percent, with points increasing to 0.50 from 0.41 (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 increased to 3.20 percent from 3.19 percent, with points increasing to 0.37 from 0.30 (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 2.63 percent from 2.64 percent, with points decreasing to 0.37 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 2.69 percent from 2.84 percent, with points decreasing to 0.37 from 0.58 (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

Phone 510-865-8041

Email  ann@appraisaltoday.com 

www.appraisaltoday.com

By Ann O'Rourke on March 12, 2021   /   adjustments, bias, lender appraisals, mortgage loan volume   /   Leave a comment

Tags: adjustments, appraisal business, appraisal how to, bias, real estate market