What should appraisers look for in a sales contract?
By Steven W. Vehmeier
Excerpt: When should we analyze the contract?
Looking at the sales contract early on allows the appraiser to identify any “subject to” items or other conditions that could influence the value conclusion.
However, reviewing the contract early might also put the sales price in the back of the appraiser’s mind. And although it shouldn’t, it may unintentionally influence the appraiser’s comparable selection and eventually impact a direction in value.
Maybe looking at the sales contract only after developing the appraiser’s opinion of value would help avoid the above concern?
To read more, click here
My comment: Some interesting, and maybe controversial, ideas. Short and worth reading.
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To read more of this long blog post with many topics, click Read More Below!!
NOTE: Please scroll down to read the other topics in this long blog post on unusual homes, AMCs, appraiser survey on the future, real estate market, waivers, turn times,mortgage origination stats, etc.
AMC/Lenders – fees, turn times, low appraisals.
From the Other Side
Source: Email newsletter from Housing Wire, Appraised Value. No link to an online version. 8-17-21
…”talked with Shawn Telford, chief appraiser at CoreLogic, and their stats show that the frequency of appraisals coming in below the agreed-upon price is dropping. That number was down 4 percentage points from June to July but still sits at 16%. For context, back in January 2020, only 7% of appraisals came in below the agreed-on price.”
“Appraisal turn times, on the other hand, aren’t showing any improvement. From January 2020 through July of this year, national average appraisal turn times for purchase loans increased from 10 to 16 days, and for refis from 13 to 19 days, Telford said. And both those timelines are trending upward: appraisals for purchase took 14 days in May, 15 in June, and 16 in July. Likewise, appraisals for refi loans took 18 days in May and June but increased to 19 days in July”
Source: Rob Chrisman’s newsletter 8-14-21.
“The only parties in the loan transaction that can count their income on their balance sheet before the loan closes are appraisers and AMCs. Lenders, title companies and real estate agents all need the loan to get to the finish line before any ‘real’ profit is made. And now, aside from the market itself, AMCs and appraisers are the main source of frustration in trying to get a loan done. There seem to be a lot of really expensive appraisals now days due to price increases and volume. Borrowers are paying out the nose for appraisals and lenders are having to ‘cure’ the excess cost if they quote too low of an appraisal fee. My most recent example of this was an appraisal I quoted in Austin, TX. I quoted $1,200 thinking that was safe, and yet a week after it’s ordered, we received an email from the AMC stating that they bid it out to 50 appraisers and only one appraiser could do it with a 3 week turn time for $1,550. What else could we do but agree to move forward?
“So no, a lender can’t really count a locked loan on its balance sheet (again IMO), but an AMC and appraiser sure can. And they seem to be able to charge whatever they want, take as much time as they need, and pick and choose what orders they want or don’t want. All of this doesn’t have much to do with your original question, but it sure would be nice if somehow, someway, we could find a better way to navigate value for a home loan. Then, maybe, lenders could be more confident that loans they lock will make it to the finish line so they really can start counting them as revenue.”
Source: Rob Chrisman’s newsletter 8-14-21. He writes for brokers and lenders.
To see his full newsletter, click here Search for appraiser.
My comments: This lets you see what lenders and AMCs say. The first one is factual. The second one is complaints we have heard a lot, but now you can read what exactly they say.
10 ways the housing market is slowing
By Ryan Lundquist
Excerpts: The housing market has turned the corner, and we see definitive slowing. Here are ten ways I’m seeing slowing in the market. If you’re not local, what are you seeing in your area?
10 ways the market is slowing. Here are some of them:
3) It’s taking longer to sell
4) More homes are selling below the list price
7) More listings are hitting the market
To read more, click here
My comments: Ryan writes about his local market. Most Excellent appraisal marketing! He speaks a lot, does videos, and is quoted in many publications and sometimes seen on TV. I have seen him speak many times. I can say I knew him “back when” before he was famous!
You can use his analysis methods to see what is happening in your market. No one knows when a market will peak, but there are definitely indicators to watch for. If I knew, I would be Very Rich and Very Famous ;>Getting too many ad-only emails?
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GSE Prevalence of Appraisal Waivers Continues to Drop
Report on June 2021 originations by American Enterprise Institute
Data sources: Fannie Mae & Freddie Mac, tabulated by the AEI Housing Center.
• The share of appraisal waivers for both GSEs continued to drop in June 2021, which is largely due to share shifts
away from No Cash-Out refis, which have the highest waiver usage.
• Waiver usage for both GSEs combined stood at 37% in June 2021, down 12 ppts. from its peak in May 2021.
• Waiver shares by loan type increased slightly in June 2021 from the prior month.
• Waivers are granted using a data based analysis of the reasonableness of the applicant’s self valuation.
• This change did not correlate with the individual underwriting factors such as LTV, credit score, and DTI.
• It appears that the GSEs have made changes to their risk assessment model, which has led to a decline in waiver eligibility over the last months.
To download the PDF report, with graphs and tables, click here
My comment: Worth reading. AEI has regular reports on appraisal waivers plus other mortgage related research.How will you prepare for future unknowns that affect our industry, such as recessions, interest rate hikes, housing crises, or other global emergencies like COVID? (graph above)
The After 2020 Survey – the future of appraisal work
By Appraiser eLearning
Excerpts: We had more than eighty responses from appraisers all over the United States. Respondents were split nearly 50-50 between folks whose main source of income was assignments from AMC vs. assignments from lenders, with a few reporting that they mainly do litigation support. More than half work as solo practitioners and about one-fifth in firms of 2-5 employees.
A few of the stats:
57% reported having more work in the past year than they did before the pandemic. Lots more.
87% did masks and distancing during inspections.
11% (9) got covid and lost time to illness
45% of Clients expecting me to take unnecessary risks
To read more, plus appraiser comments, click here, click here
My Comment: Read the appraisers’ personal comments plus more survey results.
With the Delta variant, appraisal inspection risks have significantly increased. I have some good info on masks etc., at www.covidscienceblog.com I have not updated it since March 5, the day I was vaccinated. My most recent blog posts were about the best face masks, which are still useful. N95 are the best masks and are available now. They are not comfortable to wear, but appraisers only wear them inside homes for relatively short periods of time.
My final blog comment was “Get Vaccinated,” the easiest and best way to stay safe. I spent 20-30 hours a week writing about Covid since last March and don’t regret a minute of the time. If I helped keep one appraiser from getting Covid and going to the hospital and getting very sick or dying, it was worth it.
Famous ‘Skinny House’ in Boston is for sale for $1.2 million
“The story is that there were two brothers who owned a plot of land, and one of the brothers built a bigger complex on the land and left the other brother a very small portion, while he was away at war,” Travis Sachs of CL Properties, the real estate company that listed the home…
When that brother returned from fighting in the Civil War and saw his brother had taken up most of their land, he decided to get back at his brother by building a narrow house on what little property was left — a house that would block the larger home’s views and sunlight, Sachs said.”
To read more and see interior fotos, click here
9 Unique Spite Houses
Here are a few (The Boston spite house is on the list):
Tyler-Spite House — Frederick, Maryland
Montlake Spite House — Seattle
Equality House — Topeka, Kansas
The Cake House — Gaylordsville, Connecticut
To get more info and read the fun intros and fotos, click here
My comment: The first house on the post is in Alameda – 10 ft. wide plus “pop-outs” on the second floor. I saw it a few years ago when it was listed. It had a reasonably good floor plan and was on a corner, so it had good interior light. The writeup made me think about my neighbors from hell that I would like to put a giant something between us. Or, do something ugly or strange to my house ;>
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. I have been following this data since 1993. 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 7 AM to noon, Pacific time.
Mortgage applications decreased 3.9 percent from one week earlier
WASHINGTON, D.C. (August 18, 2021) – Mortgage applications decreased 3.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 13, 2021.
The Market Composite Index, a measure of mortgage loan application volume, decreased 3.9 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 8 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 19 percent lower than the same week one year ago.
“Mortgage rates were at their highest levels in around a month, with the 30-year fixed rate increasing above 3 percent to 3.06 percent. Mortgage rates followed an overall increase in Treasury yields last week, which started higher from the strong July jobs report before slowing because of weaker consumer sentiment and concerns about rising COVID-19 cases,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The increase in mortgage rates caused a 5 percent decrease in refinancing, driven by a 7 percent drop in conventional refinance applications. Even though rates are 7 basis points lower than the same week a year ago, the refinance index is around 8 percent lower. The eligible pool of homeowners who stand to benefit from a refinance is smaller now.”
Added Kan, “Purchase applications also saw a mixed results, with conventional purchase applications down and government purchases up. Government purchase loans, such as FHA loans, are typically popular with first-time buyers. Despite a second-straight weekly decrease, average loan sizes remain close to record highs. This is a continuing sign that sales prices are still elevated, driven by stiff competition leading to accelerating home-price growth.”
The refinance share of mortgage activity decreased to 67.3 percent of total applications from 68.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 3.2 percent of total applications.
The FHA share of total applications increased to 9.4 percent from 8.9 percent the week prior. The VA share of total applications increased to 10.3 percent from 9.6 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 ($548,250 or less) increased to 3.06 percent from 2.99 percent, with points increasing to 0.34 from 0.30 (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 3.19 percent from 3.15 percent, with points decreasing to 0.26 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 30-year fixed-rate mortgages backed by the FHA increased to 3.15 percent from 3.06 percent, with points increasing to 0.31 from 0.27 (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 increased to 2.41 percent from 2.35 percent, with points increasing to 0.28 from 0.25 (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 increased to 2.90 percent from 2.52 percent, with points increasing to 0.23 from 0.15 (including the origination fee) for 80 percent LTV loans. The effective rate increased 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