Desktop Appraisal to Become the New Norm
by Isaac Peck, Editor
Excerpts: Sketch vs. Floor Plan
One notable requirement that is expected of the Desktop assignments is that they will require a floor plan instead of just a sketch. A floor plan takes the sketch a step further by including interior walls and room labeling, in most cases.
The obvious question is how are appraisers going to get these floor plans?
…the requirement for a floor plan in the desktop appraisal strongly suggests that appraisers will be required to work with real estate agents and/or the home seller and have them use a third-party tool to walk through the house, take pictures, and use advanced mobile app to generate a floor plan based on the agent or seller walking through the house.
… There is also the question of whether the introduction of desktop appraisals will potentially lead to a broader range of alternative appraisal products into the mix. Given that some senior executives at Fannie Mae were predicting that hybrid appraisals would become mainstream by 2022, it is actually a little surprising that desktop appraisal assignments are the first alternative product to get a permanent place on the GSE’s valuation roster. Appraisers will just have to wait to see what the future holds!
To read more, click here
My comments: Who will do the floor plans? They take much time for appraisers to measure and use appraisal sketching software. Many years ago, Fannie required them for a year or so, but quit due to appraiser complaints. I still do rough sketches for myself, so I don’t miss a bathroom or small bedroom!
Fannie met with Cubicasa and Inside Maps, who agreed to make their software conform to ANSI. Cubicasa is $34.90 per use. I have no idea how a homeowner will be expected to have an expensive smartphone (iPhone 12 Pro +) and learn how to use this software. In my market, many real estate agents are having these done or doing it themselves.
Some AMCs are recruiting appraisers to do these desktops with someone else using the floor plan apps. I don’t think many fee appraisers will want to hassle with finding someone to do them and pay for using the app.
Webinar – Policy Update – Desktops and ANSI Square Footage Calculation
Mon, Feb 21, 2022 10:00 AM – 11:30 AM PST
Excerpt: Fannie Mae recently announced new policies that will result in changes to mortgage appraisal process and procedure. This session will provide an overview of the key elements of upcoming changes to desktop appraisal assignments and new square footage measurement requirements.
Lyle Radke, Senior Director, Collateral Policy, Fannie Mae
Allen Gardiner, MAI, SRA, Owner, Gardiner-Ray Real Estate Appraisal and Consulting
Dawn Molitor-Gennrich, SRA, AI-RRS, President, Molitor-Gennrich Consulting
Mark Verrett, SRA, Chief Innovation Officer, Accurity Consolidated
To register, click here
My comment: Lyle Radke makes it worthwhile attending this webinar. He Knows All. Sometimes he provides an interesting “insider” view. The webinar will be recorded and should be available the next day on the Appraisal Institute’s youtube channel.
Subterranean (Berm) Home in Tennessee
Excerpts: It was built in 1978, and local rumor has it that the place was built by someone who needed extra safety and security for their business.
Instead of wood, the house is constructed from concrete and steel. Most importantly, it’s built right into a hill. Three bedrooms, two bathrooms, and 2,078 square feet of living area on 5 acres of land.
To read more and see lots of interesting photos, click here
My comment: I have never seen this type of home. I have no idea why this was selected as an example for ANSI. I use hillside homes with all the finished living areas at below grade, which everyone can understand.Getting too many ad-only emails?
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‘In the February 2022 issue of Appraisal Today
Compared to UAD, ANSI is much less hassle!
Excerpt: What if comparable sales are measured differently? (Fannie Fact Sheet)
“GLA for properties in local MLS systems and assessor records may not be ANSI-compliant. The appraiser may not know what method an MLS listing or assessor used to calculate the GLA”. “Through research and their knowledge of the local market, appraisers determine if the GLA provided through alternate sources should be adjusted. The
adjustment process does not change the requirement to report subject GLA to the ANSI standard.”
My comments: What are you doing now?
We still have to compare our GLA to the assessor’s office, agent measuring which can vary widely, another appraiser’s measurement, or no GLA in MLS. Disclose, Disclose, Disclose. In my appraisals, I did not discuss this much. I have changed to discussing the differences.
Some agents are using ANSI because their MLS requires it. This may
increase now that Fannie is adopting it. When my square footage differs from the assessor for the subject, I discuss the difference and how I did my own measurements.
I worked for a California assessor. We measured to the closest 1/2 foot.
I am now measuring to the one-tenth foot. One inch is also ok. I include all stairs. I use the 5 ft. rule on sloping ceilings. I have full disclosure of what I did for everything I measured.
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NCUA, CFPB, HUD, FHFA, more call out TAF appraisal bias standards on Feb. 7, 2022
Excerpts: The NCUA, CFPB, and several other agencies, including the Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), Department of Housing and Urban Development (HUD), Federal Housing Finance Agency (FHFA), and Federal Reserve Board (FRB) Friday wrote to The Appraisal Foundation (TAF), a private, non-governmental entity with the sole power to set professional standards for appraisers, regarding appraisal discrimination. The agencies called out TAF for failing to “include clear warnings about the requirements of federal law in the standards it sets, and in the training, it provides for appraisers.”
The agencies provided specific feedback on TAF’s proposed changes for the 2023 Edition of the Uniform Standards of Professional Appraisal Practice (USPAP). The agencies commented on a provision under the USPAP which states that an “appraiser may not rely on unsupported conclusions relating to characteristics such as race, color, religion, national origin, sex, sexual orientation, gender, marital status, familial status, age, receipt of public assistance income, disability or an unsupported conclusion that homogeneity of such characteristics is necessary to maximize value.”
The joint agencies, also part of the interagency task force on Property Appraisal and Valuation Equity (PAVE), cited that the provisions do not prohibit appraisers from relying on “supported conclusions” based on such characteristics, suggesting that such “reliance may be permissible.”
To read more click here
My comments: I have wondered for a long time when someone would notice this part of USPAP: unsupported conclusions. It seems like lots of regulators, and others, are looking at the Appraisal Foundation. Appraisal textbooks (until 1963), FHA requirements, etc. told appraisers to discriminate for redlining purposes. I don’t see any of the older appraisal organizations apologizing, such as ASA and AI (AIREA and SREA), which started in the 1930s. I plan to write about it soon.
Some of these issues were discussed in the January 2022 report commissioned by the ASC on USPAP and Appraiser Licensing Criteria. One of the authors was Peter Christensen, who understands the appraisal issues. To read about what is in the ASC Report and get a link to the report, click here
Could You Live in This California Home Made From Hay?
Excerpts: A woman who recently passed away built the home in 1997 from hay and stucco, using a technique commonly referred to as straw-bale construction.
Inside the house, she says, it is possible to see that it’s constructed from hay bales.
“It doesn’t look like it from the outside,” she adds, noting that “It holds heat and cold well” and provides a comfortable living temperature that adjusts to the summer and winter months. Inside, the yurtlike main living space is circular, with a pole in the middle and large beams on the ceiling.
The approximately 1,800 sq. ft. house is located in a remote part of Humboldt County—an area of northern California known for nonconforming and nontypical homes. Benbow’s population currently is 422 people.
To Read more and see lots of interesting photos, click here
My comment: I have never appraised a straw-bale construction home but have spoken with appraisers who have done them. Very interesting. The appraisal would be challenging!
Letter From NAR to Fannie Mae on ANSI Measurements
February 11, 2022, Fannie Mae & Freddie Mac (GSEs), Appraisal & Valuation
By: Sarah C. Young
On February 7, 2022, NAR sent a letter to Fannie Mae and the Federal Housing Finance Agency regarding Fannie Mae’s recent announcement that appraisers will be required to use ANSI® Z765-2021 (American National Standards Institute®) for measuring, calculating, and reporting above-grade and below-grade square footage for appraisals requiring interior and exterior inspections with an effective date of April 1, 2022. NAR requests that Fannie Mae delay implementation of this new requirement until Freddie Mac, FHA, VA and USDA adopt the same requirement to reduce confusion. Real Estate professionals and appraisers also need more time to become familiar with how the standard is applied.
Given this is such a significant change, the implementation date should be pushed back for the myriad professionals engaged in real estate transactions to learn and adjust to the measurement standard. Once implemented, there should also be a grace period during which real estate agents and appraisers provide feedback to the GSEs to work through any issues that could arise from the new measurement requirement.
Link to the full 2-page letter at the bottom of the page. Worth reading. The full letter has more comments which are familiar to appraisers. Here’s an example: “The areas that will cause the largest problem are those classified as “basements.” If any portion of the space is below grade, it is classified as a basement (with some exceptions). In some areas, there are developments with homes that have low profile berms along a section of the house, which, in the strictest, sense makes the property a basement home. However, no market participants see it that way.
To read more click here
My comments: NAR has political influence. Maybe it will cause a delay in implementation so these many issues can be addressed by Fannie. I have not seen any lenders or appraisal associations asking for a delay.
Many appraisers have been saying they “use” ANSI since 1996, but too many don’t really know what it says. One appraisal instructor said, “Based on my experience teaching over 500 appraisers, most “claim” they already know ANSI and adhere to it. This is obviously not true and it is discovered halfway through class that very few even understand ANSI. I cannot speak for Fannie Mae, but they already have rules around above- and below-grade space in the Selling Guide (and appraisers refuse to follow the guidance) and this is just a formal adoption to ensure adherence.
For info on Resources, including classes, webinars, ANSI book, etc. go to www.appraisaltoday.com/ANSI
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.
My comments: Mortgage rates are going up. Make money while the market is hot!! Give priority to your non-AMC clients which are less likely to forget you when the number of loans drops! Your loyal clients keep you working when business drops off. Mortgage applications decreased 5.4 percent from one week earlier
WASHINGTON, D.C. (February 16, 2022) – Mortgage applications decreased 5.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 11, 2022.
The Market Composite Index, a measure of mortgage loan application volume, decreased 5.4 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 9 percent from the previous week and was 54 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 increased 5 percent compared with the previous week and was 7 percent lower than the same week one year ago.
“Mortgage rates increased across the board last week following the recent rise in Treasury yields, which have moved higher due to unrelenting inflationary pressures and increased market expectations of more aggressive policy moves by the Federal Reserve,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The 30-year fixed rate saw the largest single-week increase since March 2020 and was above the 4 percent mark for the first time since 2019. Consistent with this period of higher mortgage rates, refinance applications fell 9 percent last week and stood at around half of last year’s pace. The refinance share of applications was also at its lowest level since July 2019.”
Added Kan, “Purchase applications saw a modest decline over the week, with government purchase applications accounting for most of the decrease. Prospective buyers still face elevated sales prices in addition to higher mortgage rates. The heavier mix of conventional applications again contributed to another record average loan size at $453,000.”
The refinance share of mortgage activity decreased to 52.8 percent of total applications from 56.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.0 percent of total applications.
The FHA share of total applications increased to 8.3 percent from 8.0 percent the week prior. The VA share of total applications decreased to 9.3 percent from 10.0 percent the week prior. The USDA share of total applications remained unchanged at 0.4 percent from the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 4.05 percent from 3.83 percent, with points increasing to 0.45 from 0.40 (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 $647,200) increased to 3.81 percent from 3.62 percent, with points increasing to 0.39 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 30-year fixed-rate mortgages backed by the FHA increased to 4.01 percent from 3.93 percent, with points increasing to 0.59 from 0.54 (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 3.37 percent from 3.16 percent, with points increasing to 0.50 from 0.47 (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 3.36 percent from 3.13 percent, with points increasing to 0.48 from 0.35 (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