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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 appraisals under contract price, bias, vacant land, hybrids, fannie bad appraiser list, unusual homes, mortgage origination stats, etc.


Appraising in a “Crazy” Market
Significant increase in the number of appraisals under contract price

by Isaac Peck, Editor

Excerpts: July 22, 2021, Freddie Mac published an article titled “Appraising in a Rapidly Changing Market,” authored by Scott Reuter, Freddie Mac’s Single-Family Chief Appraisal Officer.

The article piqued my interest for a number of reasons, chief among them being that the article points out that between 2013 through 2019, the “annual average” of appraisals which came in below contract price was between seven and nine percent. In April and May of 2021, the number of appraisals coming in below contract price had risen to 20 percent.

That’s a pretty stark increase. Such a stark increase, in fact, that Freddie Mac thought it was worth publishing an article addressing how appraisers can “keep up with the market.”

With closed sale transactions lagging current trends, Reuter advises appraisers to look at all market behavior, not just the behavior reflected by closed sales.

These sources of information include:

  • General market inventory
  • Trends in listing prices
  • Contract-to-listing ratio (pending sales)
  • Contract dates vs. closes dates (market change)
  • Exposure time and marketing time
  • New construction patterns
  • Number of available competing properties

To read more, click here

To read the full Reuter article, click here 

My comments: Worth reading the full Reuter article.  Understandable and practical. I wonder what is happening now? I am hearing about lower markets in different areas.


Freddie Mac Research Note | May 10, 2022
Racial & Ethnic Valuation Gaps in Home Purchase Appraisals – 0.7% a $1,703 difference.

Excerpt: After controlling for important factors that affect house values and appraisal practices, we find that properties in Black and Latino tracts are more likely to receive “appraisal value lower than contract price” than those in White tracts.

The minority tract flag helps explain appraisal gaps even after controlling for important factors. Findings indicated a 2.4% higher likelihood of “appraisal value lower than contract price” for the Black tracts compared to White tracts, and 2.9% higher likelihood for Latino tracts.

Based on our dataset, when “appraisal value lower than contract price” takes place, the average contract price of these properties in Black tracts is $243,343; thus, the estimated dollarized impact is $1,703 according to both the OLS model and the ML model ($243,343*0.7%).

To read more, click here 

My comments: This Research Note has a detailed discussion of the modeling done plus tables. Warning: very mathematical analysis. When two (or more) appraisers appraise the same house, a difference of 4% is reasonable. I did many relocation appraisals before a home was listed and sold and hoped to be within 5% of the other appraiser(s) value. Every appraisal was a test, to see how close I came to the later sales price.

When I started my appraisal fee business in 1986, I was shocked when other appraisers (experienced and knowledgeable, I thought) said you always come in at the contract price and never make time adjustments. I made positive time adjustments of 2% per month at the assessor’s office in the late 1970s. Fortunately, I had lender clients that did not have these requirements. It does not seem reasonable that lender appraisers would appraise below contract price for any reason, except the price was too high as indicated by the data, as you would get a lot of hassles from the lender client and the real estate agents.

Online comment from Todd Reddington, a very savvy appraiser:

… (the) report shows less differential than has otherwise been reported, and still does not identify why the differential exists… more studies should be done to identify whatever the special effect is that is causing this ever-shrinking differential in purported biased valuations.

… a $1,703 (0.7%) differential of the appraised value when using the average below contract price appraisal conclusion in predominantly black census blocks, compared to a below contract price appraisal in a predominantly white census block is not what I would consider to be an amount that is worthy of declaring a “systemic” problem in the industry.


Ohio Round House

The Round House in Ohio rolled onto the market in mid-April for $975,000 and immediately attracted offers. 2,185-square-foot, three-bedroom built in 1958 plus guesthouse and a double carport.

It features built-in furnishings and walls of windows to allow in natural light and visually connect with nature. The living room comes with a curved banquette, a cozy wood-burning fireplace, and access to a koi pond and courtyard. The entryway is nearly concealed from view.

To read more and see lots of photos, click here

My comment: Lots of very interesting photos! The carports and guest house are rectangular. Lots more photos in the listing link.


Vacant Land: A Nightmare for an Appraiser

By Claudia Gaglione, Esq.

Excerpts: For many appraisers, the biggest nightmare of their career begins when someone requests a vacant land appraisal. The problem is that the appraiser does not even know the nightmare has begun until the appraisal is complete and the claim served. For a fact, too many appraisers accept vacant land assignments when they lack the experience to approach these assignments correctly.

It may or may not be surprising to learn that most claims arising from vacant land appraisals are caused by the appraiser actually appraising the wrong property. It is especially frustrating when, after the claim is made or the lawsuit is filed, the appraiser admits that he or she was not certain they inspected the correct parcel, but went ahead and did the report anyway.

Other claims problems arise from parcel misidentification, such as determining the access. The appraiser drives up to what he or she thinks is the right property on a paved road, and so assumes that access is not an issue. Counsel comes to learn that the lot that was supposed to be appraised is the adjacent lot which does not have access to that road.

To read more about vacant land appraisals, plus 2+ years of previous issues, subscribe to the paid Appraisal Today.

If this article helped you understand this topic and many more appraisal articles, it is worth the subscription price!!


Historic Minnesota Home Hides Secret Caves

Excerpt: Connected to the 3,000-square-foot home, known as the Plummer Pumphouse, are 3,600 square feet of underground caves.

Built in 1926, this home originally served as the water pumphouse for the much-grander Plummer House.

The caves are about 15 feet wide and about 9 feet tall. Two of the the legs go about 50 feet back, and then the main leg goes 150 feet back. You walk from the living room into a little vestibule, slide open a patio door, and you’re in the caves.

While the background of the pumphouse is known, it’s not clear why the caves exist. It’s possible they predate the pumphouse and could have stored beer for a nearby tavern.

To read more and see very interesting cave photos, click here

My comments: Definitely not ANSI-conforming caves!


Freddie to start using hybrids on, or after, July 17, 2022 Form 1004/70H Dated March 16, 2022

Effective for new Loan Product Advisor submissions on or after July 17, 2022, and will remain in place until further notice.

Excerpt: When a hybrid appraisal is used as the upgrade, the Form 70H must disclose the identity of the property data collector in the body of the report and the completed PDR (Property Data Report) must be included as an addendum to the Form 70H. The appraiser conducting the valuation analysis must be permitted to contact the property data collector to verify any information in the PDR and to adjust that information, as necessary, to complete Form 70H.

To read more, click here Search for hybrid appraisal

My comments: The only difference between Desktops and Hybrid appraisals is that Property Data Collector is required for Hybrids. There is no specific independent data source required for Desktops. I would not accept a desktop unless it had a Property Data Report from a reliable source. I don’t consider MLS and public records (in my area) to be reliable sources for the subject.

The May 2022 Appraisal Today issue featured the article: “Desktops – Yes, No or Maybe?” It also included a review of CubiCasa, used for dimensions and square footage. get your free tests at I will be using CubiCasa in my appraisals.


Updated Appraiser Quality Monitoring (AQM) FAQs
May 2022

Excerpts: The AQM list, accessible to approved Fannie Mae sellers and servicers, includes appraisers whose work is subject to 100% post-acquisition review or is no longer accepted by Fannie Mae.

In response to your questions, we’ve updated the Appraiser Quality Monitoring (AQM) FAQs to provide additional transparency into the AQM process, including AQM letters, the AQM list, and state regulatory agency referrals.

A few appraiser-related questions:

  • What types of monitoring does AQM conduct?
  • What should an appraiser do after receiving an AQM letter?
  • Do appraisers have the opportunity to appeal or offer a rebuttal to an AQM letter?
  • Does AQM report appraisal findings to state regulatory agencies?

To read the FAQs, click here

My comments: I have been unable to obtain much information on AQM, as the information was sent only to lenders using Desktop Underwriter. The names of appraisers on the list have never been available, or the number of appraisers on the list. But, in the first year or so, several knowledgeable people said that not many appraisers were listed.


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 or send an email to . Or call 800-839-0227, MTW 7AM to noon, Pacific time.

My comments: Rates are going up. Make money while the market is still good!!


Mortgage applications increased 2.0 percent from one week earlier

Mortgage applications increased 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 May 6, 2022.

The Market Composite Index, a measure of mortgage loan application volume, increased 2.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 3 percent compared with the previous week. The Refinance Index decreased 2 percent from the previous week and was 72 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 5 percent from one week earlier. The unadjusted Purchase Index increased 5 percent compared with the previous week and was 8 percent lower than the same week one year ago.

“The increase in mortgage applications last week was driven by a strong gain in application activity for conventional and government purchase loans, even as mortgage rates rose to their highest level – 5.53 percent – since 2009. Despite a slow start to this year’s spring home buying season, prospective buyers are showing some resiliency to higher rates. Purchase activity has now increased for two straight weeks,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “More borrowers continue to utilize ARMs to combat higher rates. The share of ARMs increased to 11 percent of overall loans and to 19 percent by dollar volume.”

Added Kan, “The rapid rise in mortgages rates continues to hit the refinance market, with activity 70 percent below a year ago. Most homeowners refinanced to lower rates in the past two years.”

The refinance share of mortgage activity decreased to 32.4 percent of total applications from 33.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 10.8 percent of total applications.

The FHA share of total applications decreased to 10.5 percent from 11.1 percent the week prior. The VA share of total applications increased to 10.5 percent from 10.3 percent the week prior. The USDA share of total applications increased to 0.5 percent from 0.4 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.53 percent from 5.36 percent, with points increasing to 0.73 from 0.63 (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 5.08 percent from 4.92 percent, with points decreasing to 0.42 from 0.43 (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 5.37 percent from 5.27 percent, with points increasing to 0.87 from 0.85 (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 4.79 percent from 4.68 percent, with points increasing to 0.80 from 0.76 (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 4.47 percent from 4.25 percent, with points decreasing to 0.73 from 0.78 (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
Phone 510-865-8041

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