Fannie Mae and the Cost Approach

Excerpt: We often receive questions from appraisers regarding Fannie Mae and the cost approach. For example: “I’m appraising a property and have been instructed to comply with Fannie Mae guidelines. I understand that Fannie Mae requires the sales comparison approach, but what if there aren’t enough good comps? Can I use the cost approach as the primary method of valuation?”

Answer: No!

In order to comply with Fannie Mae guidelines, the sales comparison approach must be the primary method used to determine the value. In fact, Fannie Mae will not purchase a mortgage on a property if the cost approach is the primary or only method of valuation used.

Quite simply, if there isn’t enough data for the appraiser to develop a reliable opinion of value by the sales comparison approach, the mortgage will not be marketable to Fannie Mae.


To read more, click here

My comment: I included this article plus the one below, which both address the Cost Approach’s common appraisal questions.


The Cost Approach: An Underutilized Approach to Value

Excerpt: In residential appraising, the cost approach and the income approach have in many cases become less utilized in favor of sole reliance on the sales comparison approach.

There are occasions when the income approach can be the primary indicator of value for residential properties, such as developments with a high percentage of homes owned by investors.

The fact that Fannie Mae won’t accept reports that rely solely on the cost approach, with a few rare exceptions, doesn’t mean that approach can’t be the primary indicator of value. It just means Fannie Mae won’t buy that loan.

To read more, click here 

My comments: I started with an assessor’s office in the 1970s. At that time, my county was changing from only using the Cost Approach for decades to a sales-based approach. I never liked to use only the Cost Approach when I started doing fee appraisals.

In my area, there are very few land sales. There has not been one for over 20 years in my city. Depreciation is always iffy when appraising Victorian homes built before 1915.

But, I always use the Cost Approach for new construction to determine the financial feasibility of custom homes. I use a few land sales from other cities. If the new proposed home is on a vacant parcel, I go back to when the parcel was purchased, sometimes many years ago, and do a market condition adjustment.


So Many Appraisal Cost Approach Questions

Appraisal Business Tips 

Humor for Appraisers

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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 Bias complaint, George Dell, Get a Google Business Profile, unusual homes, mortgage origination stats, etc.


Castle on a Hill: $50M Malibu Rocky Oaks Estate and Vineyards

Excerpts: Resembling a Mediterranean castle, the villa was designed by architect Bob Easton. It measures 9,000 square feet, offering five bedrooms and five bathrooms. But those are just numbers. The true beauty is in the details.

Inside, you’ll find cathedral ceilings, polished hardwood floors, stone countertops, custom iron railings, and chandeliers.

This landmark estate is also a key location for film, TV, and advertising shoots. Dates for “The Bachelorette” have taken place on the premises, and the Kardashian clan made an appearance here for its eponymous show. It’s also been featured on TV’s “Good Trouble,” “90210,” and “Jay Leno’s Garage.”

Other amenities include a media room, elevator, loggia with a fireplace and dining area, and infinity pool and spa. To top it all off, the property comes with a helipad. Rocky Oaks is also a working vineyard, with grapes planted on 10 of its 37 acres.

The unique geography and volcanic soil of the estate have produced award-winning varietals.

To read more and see lots of photos, click here

My comment: The helicopter pad is a nice feature ;>


How to get a FREE Google Business Profile
A Most Excellent way to get more
appraisal business!
In the September 1 issue of Appraisal Today

Excerpts: Google Business Profiles is an excellent marketing tool; it is free and easy to set up. I have successfully an older version for many years, which I recently updated.

This is the best way to market your appraisal business with little time and no money.

Put your appraisal business near the top of Google searches by signing up for a Google Business Profile. You don’t need a website.

This advertising works very well for non-lender appraisals. Many appraisers are slow now. If you’re busy, this is the best time to get non-lender work while your competitors are turning it down. Doing non-lender appraisals is a very good option to help you during the current slow times.

To read more about this topic, plus 2+ years of previous issues, subscribe to the paid Appraisal Today.

If this article helped you learn how to set up a Google Business Profile and get more appraisals, it is worth the subscription price!



If you have any comments or info on any topics, please hit the reply button!! I’m always looking for something new ;>


Futuristic Tulsa Tower

Excerpts: The design inspiration for this one-of-a-kind home in Oklahoma came from a postcard. Resembling a Space Age wonder, this residence is now available for $295,000.

Known to Tulsa locals as the Jetsons House, it’s a four-story home with a remarkable view. It was initially listed in June for $415,000.

The living space can be found in the windowed tower, and a five-car garage sits below, obscured from view. The home is equipped with an elevator. “It only has an elevator, no stairs,” Barnett (real estate agent) explains. “There are fire escapes on every level, which go down the center tube where the elevator is.” The 1,300 square feet of living space includes two bedrooms and three bathrooms.

There is a balcony off one side, which proved helpful for getting furniture into the living space. The owners “would hoist it up with a crane or a rope,” Barnett says

The home will need some work, Barnett says. Since the home’s never had an appraisal and banks are unlikely to finance unique properties like this one, Barnett says the buyer will most likely have to pay cash for it. A recent pending offer fell through.

To read more and see lots of photos, click here

My comment: I was born in Tulsa, OK, and cannot imagine a home so unusual there!‘


Ugliest House in America”

PHOTO ABOVE: Linoleum floors, walls, and ceilings!

Excerpts: On “Ugliest House in America,” comedian Retta has been scouring our country’s most scenic destinations looking for the homeliest homes, as nominated by their owners. “Even in paradise, things get ugly,” Retta points out.

Retta’s first stop is a truly obnoxious-looking house in her hometown of Los Angeles. Built in 1955, it has five bedrooms and two baths. It’s also covered from floor to ceiling with linoleum. Literally. For some reason, the previous owner covered the floors, walls, and even some parts of the ceiling with this dated synthetic.

“At least it’s waterproof,” says Evan, a co-homeowner. “You can mop the floors and the walls at the same time.” “I can’t with the linoleum! Literally, I feel like I have vertigo,” Retta cries.

In the fourth episode, “Ugly Homes of the Pacific,” Retta says, “This region has got a lot of pretty from California to Washington, but the ugly is lurking out there among the mountains, the lakes, and the beaches.” And she’s right: These houses have some of the weirdest, most nonsensical features you’ve ever seen. Check them out—either for laughs or in case you might actually have one of them in your own home.

To read more and see more weird photos, click here

For more info on the tv series, click here 

My comments: I had never heard of this HGTV show. This episode is available live on September 2. I will watch it when streaming is available. I gave up my cable tv a while ago. You can rent it on Amazon, Google Play, and Vudu. Appraisers see a lot of Ugly Homes ;> Make an Ugly adjustment? Where does it fit on the grid?Is


Truth a Credible Edible?

By George Dell, MAI

Excerpts: Truth can be hard to swallow! I find their ‘truth’ not credible. Not believable. Why?

Well, for one thing. One important thing. That belief conflicts with MY belief. Clearly, my beliefs are better than theirs! Anybody can see that. At least they should see that. How can they be so stupid?

Brad Cable just sent me a link to an article by Dr. Margie Warrell on LinkedIn. Entitled “Beware blind spots. You don’t know what you’re wrong about.” The basic theme is “What’s more important to you? The truth, or your prior beliefs?”

Appraisal professionals are harangued about the truth: “independent, impartial, objective” is the mantra. The truth is supposed to be unbiased. In ethics, and in analytics.

1. (of 4) Decide you value the truth over being right. This one is hard for me. I love feeling right, even when it may be wrong. Yet it is what my profession requires. My actual survival, more than once in my life, depended on my being willing to seek truth, even when it hurt to be open to change.

There is no doubt my beliefs are easier. Much easier. Beliefs are just there. No effort. Only defense. The truth might be something different. The truth takes work.

To read more, click here

My comments: Worth reading. It will make you think about this topic and how it relates to your life and appraisal profession.


Appraiser Miller Wins Racial Discrimination Case in Marin County, CA

Excerpt: Appraiser Miller wins an important claim in a racial discrimination lawsuit. The judge ruled Plaintiffs did not rely on Miller’s appraisal. The other claims continue, but this was an important claim. It also shows the Plaintiffs lied to the Court.

To read lots of details, including the legal ruling, plus appraiser comments, click here


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

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. Some appraisers are very busy and others have little work. Varies widely around the country.


Mortgage applications decreased 1.2 percent from one week earlier

Mortgage applications decreased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 19, 2022.

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.2 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 83 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 21 percent lower than the same week one year ago.

“Mortgage applications continued to remain at a 22-year low, held down by significantly reduced refinancing demand and weak home purchase activity. Last week’s purchase results varied, with conventional applications declining 2 percent and government applications increasing 4 percent, which is potentially a sign of more first-time homebuyer activity. The average purchase loan size continued to trend lower, as purchase activity at the high end of the market is weakening,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Mortgage rates increased for all loan types last week, with the benchmark 30-year fixed rate jumping 20 basis points to 5.65 percent – the highest in nearly a month. The spread between conforming fixed-rate loans and ARM loans narrowed to 84 basis points from over 100 basis points the prior week. This movement made fixed rate loans relatively more attractive than ARMs, thereby reducing the ARM share further from highs seen earlier this year.”

The refinance share of mortgage activity decreased to 31.1 percent of total applications from 31.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.5 percent of total applications.

The FHA share of total applications increased to 12.5 percent from 12.0 percent the week prior. The VA share of total applications increased to 11.6 percent from 11.2 percent the week prior. The USDA share of total applications increased to 0.7 percent from 0.6 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 5.65 percent from 5.45 percent, with points increasing to 0.68 from 0.57 (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 5.28 percent from 5.14 percent, with points increasing to 0.58 from 0.33 (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 5.43 percent from 5.38 percent, with points increasing to 1.10 from 1.01 (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 5.01 percent from 4.87 percent, with points increasing to 0.84 from 0.64 (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 4.81 percent from 4.43 percent, with points increasing to 0.74 from 0.43 (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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