Concessions, Kickbacks, and the Appraiser’s Nightmare
by Richard Hagar, SRA
Excerpts: What Appraisers Must Do
There are many steps appraisers must follow, more than I can list here. However, you should start off by listing and describing the concessions. Learn how to provide an accurate value conclusion that protects the appraiser from the potential ramifications of their bad acts.
On the first page of FNMA’s form, they ask this question:
“Is there any financial assistance [loan charges, sales concessions, gift or down payment assistance, etc.] to be paid by any party on behalf of the borrower?”
The appraiser has no choice when faced with this question, they must answer and if they get it wrong…then the appraiser is in trouble. After disclosing the information, the appraiser’s next task is to determine how the concessions have impacted the sales price. Federal law, FNMA/FHLMC guidelines and USPAP all point to a solution.
Solutions to Keep You Safe
- Make sure you have a complete signed purchase contract.
- In the appraisal, list how many pages of the contract you have in your possession (In case someone is hiding pages from you).
- List the concessions on page 1 and in the final reconciliation.
- In the sales grid, list any known concessions that were involved with the purchase of a comparable….
To read more click here
My comments: Some good tips on how real estate agents try to deal with this. I have known Richard for many years. He is an expert and is a most excellent instructor. I have taken many of his seminars over the years.
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NOTE: Please scroll down to read the other topics in this long blog post on FHA and ADUs, non-lender appraisals, unusual homes, mortgage origination stats, etc.
To read more, click “read more” below
How to survive when business is slow
Excerpts: How can you bolster your appraisal business during a slow real estate market? This month we asked our appraisal community, “What’s the BEST way to survive a slow market as an appraiser?” The most popular answer was, “Offer your appraisal services to a variety of clients (attorneys, real estate agents, homeowners, property investors, etc.).”
However, many respondents said that all five of the following strategies should be employed to help your appraisal business survive—and thrive—throughout ups and downs in the market.
Offer your appraisal services to a variety of clients (47%) most popular
“While the market has slowed down, I feel like there is still plenty to do to improve your practice and work on your business. I’ve taken this opportunity to network and market to new clients, take additional courses, and work with mentors/coaches. Fortunately, there is still so much opportunity in this industry! You just have to ‘dig your well’ as some well known appraisers in the industry would say.”
Offer more valuation products (11%)
Upgrade your license so that you can appraise more property types (8%)
Market yourself as an expert in a specific niche (9%)
“I made it through the last recession by offering my expertise for insurance appraisals in mobile home parks. I wrote an article in the senior publication and offered good pricing for bulk orders in the park. It worked well at the time.”
To read more plus appraiser comments, click here
My comments: It’s good to see a survey about what other appraisers are doing! Also that non-lender appraisals are the most popular. Upgrading to certified general is a significant plus as you are not trapped in the ups and downs of the AMC world. I have always changed my residential and commercial volume, depending on the best option for fees, etc.
Niche markets are great. I have always marketed my business as appraising in Alameda, my small city. There are very few appraisers here and I am definitely the expert!
The First of Three ‘Glass Ladies’ in Venice CA at$6.2M
Excerpts: Built mainly with glass and steel, the 4,200-square-foot home has five bedrooms and 5.5 bathrooms.“
The home’s lowest level has an underwater viewing window to the pool, the home theater, and a secondary primary suite with a fireplace and outdoor living room.
The main primary suite is upstairs with a private balcony.
The newly constructed trio was inspired by the “Painted Ladies,” a grouping of colorful Victorians on San Francisco‘s Postcard Row. The Glass Ladies were designed by Alon Zakoot and constructed over a period of seven years.
“There’s a lot of outdoor space, and each of the four levels has an outdoor space, which is part of the beach town and indoor-outdoor living of Southern California. The rooftop has a large seating area with a fireplace,” the agent says.
To read more and see lots of photos click here
My comment: Venice, in Southern CA, has always been a very unique city, with lagoons and very unusual homes. In the past, it attracted artists and musicians due to the relatively low home prices.
New in the June Newsletter
- How to get referrals from real estate agents My primary referral source since I started my business in 1986. I have lots of easy tips to get referrals.
- Your Website/Blog – The Easiest and Fastest Way to Get Non-lender work! Completely updated, including information on a la mode XSites
- Appraising the Tough Ones Creative Ways To Value Complex Residential Properties – Book Review. My favorite appraisal book!
To read more about these topics, plus 2+ years of previous issues, subscribe to the paid Appraisal Today.
If this issue helps you understand the topics, it is worth the subscription price!
More Than 2 in 5 Home Sellers Are Making Concessions to Buyers, Nearly Double Last Year’s Share
May 25, 2023
Redfin reports that while many sellers in some parts of the country are handing out freebies to attract buyers as high rates dampen demand, other markets have so few homes for sale that concessions aren’t necessary.
Sellers concessions up most in pandemic homebuying boomtowns
Tampa, FL saw a bigger year-over-year jump in seller concessions than any other metro Redfin analyzed. Sellers in Tampa gave concessions to buyers in 58% of home sales during the three months ending April 30, up from 12% a year earlier.
The next-biggest increases were in Nashville, TN (49%, up from 5.6%), Salt Lake City (46.8%, up from 12.3%), Seattle (45.7%, up from 11.7%) and Raleigh, NC (64.6%, up from 31.2%).
The share of sellers giving out concessions rose over the last year in all metros Redfin analyzed.
Home sellers gave concessions to buyers in 42.9% of U.S. home sales during the three months ending April 30, up from 25.5% a year earlier, as elevated mortgage rates cooled homebuyer demand. That’s just shy of the 45.6% record-high hit in February.
Good analysis, graphs, conditions in specific metro areas, etc. click here
My comments: What is your market like? Be sure to check on concessions. Don’t get into trouble! Some very good tips from Richard Hagar’s article above. Read it!
FHA seeks feedback on proposed changes to increase access to affordable financing for properties with Accessory Dwelling Units.
April 13, 2023
Excerpts: Proposed policy changes would expand the use of affordable FHA-insured financing for homes with Accessory Dwelling Units as part of Biden-Harris Administration’s Housing Supply Action Plan.
FHA programs currently allow for the purchase, rehabilitation, or refinance of properties that include ADUs. FHA does not, however, currently allow for the inclusion of rental income from the ADU in the borrower’s qualifying income.
“At a time when housing supply is constrained and ADUs are gaining popularity nationwide, an updated policy has the potential to expand opportunities for low- and moderate-income homeowners to benefit from the wealth building potential of ADUs while supporting the affordable housing needs of their communities.”
To read more, click here
My comments: Sounds like a good idea to me. Most places need more housing units. ADUs are a good option.
FHA appraiser class in Baltimore MD
June 27, 2023 1:00 PM – 3:30 PM (Eastern)
This free, on-site training will provide an overview of the appraisal requirements outlined in FHA’s Single Family Housing Policy Handbook 4000.1. This training will cover property inspection requirements, appraisal validity period, manufactured homes, well and septic, attic and crawl spaces inspection, and the FHA Appraiser Roster.
Instructions: Advance registration is required no later than June 20, 2023. Due to space limitations, registration is on a first-come, first-served basis. Lunch is on your own.
To read more and register, click here
My comment: FHA regularly sends emails about appraiser classes. Unfortunately, often I don’t receive them in time for my weekly email newsletter as the registration deadline has passed.
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 go to www.appraisaltoday.com/order Or call 510-865-8041, MTW, 7 AM to noon, Pacific time.
My comments: Rates are going up and down. Some appraisers are very busy, and others have little work. Varies widely around the country.
Mortgage applications decreased 3.7 percent from one week earlier
WASHINGTON, D.C. (May 31, 2023) — Mortgage applications decreased 3.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 26, 2023.
The Market Composite Index, a measure of mortgage loan application volume, decreased 3.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5 percent compared with the previous week. The Refinance Index decreased 7 percent from the previous week and was 45 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 31 percent lower than the same week one year ago.
“Inflation is still running too high, and recent economic data is beginning to convince investors that the Federal Reserve will not be cutting rates anytime soon. Mortgage rates for conforming, balance 30-year loans were being quoted above 7 percent by some lenders last week, and the weekly average at 6.9 percent reached the highest level since last November,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Application volumes for both purchase and refinance loans decreased last week due to these higher rates. While refinance demand is almost entirely driven by the level of rates, purchase volume continues to be constrained by the lack of homes on the market.”
The refinance share of mortgage activity decreased to 26.7 percent of total applications from 27.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.8 percent of total applications.
The FHA share of total applications increased to 12.7 percent from 12.5 percent the week prior. The VA share of total applications decreased to 12.1 percent from 12.5 percent the week prior. The USDA share of total applications remained unchanged at 0.5 percent from the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.91 percent from 6.69 percent, with points increasing to 0.83 from 0.66 (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 $726,200) increased to 6.78 percent from 6.57 percent, with points increasing to 0.76 from 0.57 (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 6.85 percent from 6.56 percent, with points increasing to 1.26 from 1.24 (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 6.41 percent from 6.15 percent, with points increasing to 0.84 from 0.72 (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 decreased to 5.39 percent from 5.73 percent, with points decreasing to 0.46 from 1.19 (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.
If you would like to purchase a subscription of MBA’s Weekly Applications Survey, please visit www.mba.org/WeeklyApps, contact firstname.lastname@example.org or click here.
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