This Is Where Appraisal Liability Risks Lie (Plus Tips on How to Avoid Them)
Excerpts: While it’s difficult for a litigant to win a judgment against an appraiser, that doesn’t spare appraisers the inconvenience of being sued, which can be costly, time-consuming, and harmful to one’s reputation even if the suit fails.
Attorney Peter Christensen, general counsel at the Christensen Law Firm in Bozeman, Montana, notes that lawsuits against individual residential appraisers, or small residential AMCs, are fairly rare, and successful suits rarer still. However, it’s a good idea to know where the risks lie—and how to avoid them.
- USPAP and state laws
- Types of lawsuits brought to appraisers
- Disclosures and disclaimers to reduce appraisal liability risks
To read more, click here
My comments: Peter Christensen is very knowledgeable. Well written, short, and worth reading. As we all (should) know, any person or company. can sue you for any reason at any time.!
NOTE: Please scroll down to read the other topics in this long blog post on AVMs and AI, good appraisal book, Real estate market, Fannie, non-lender appraisals, unusual homes, mortgage origination stats, etc.
Click Read More below to read lots more!
Private Island for $22M in North Carolina
Excerpts: Just 30 minutes from uptown Charlotte, Merancas Island is accessed by causeway. Beyond its gated entry, a retreatlike 14,000-square-foot mansion with 4.5 acres.
“The property was built to resort standards,” says listing agent Jessica Grier. The five bedrooms and eight bathrooms at 14051 Island Drive are spread across the main home and guesthouse. Other notable features include a tennis court, indoor pool, private boat dock, and a spacious garage.
“The home has a gourmet kitchen with a scullery and wine cellar,” Grier says. “The primary suite takes up the whole east-facing side of the upstairs and includes a spa bath, three walk-in closets, and access to the exercise room and dance studio.”
Walking trails and one-of-a-kind sculpture are throughout the rambling acreage, which was curated by architect Harry Schrader. He designed the estate, completed in 2000, from the ground up.
To read more click here
My comment: You can drive to the island along a narrow road, which is a significant plus!
How Residential Real Estate Appraisers Can Benefit and Help Accountants Do Their Job
By Tim Horn
Excerpts: Topics include:
- Determining Asset Values for Financial Reporting
- Assessing Property Investments
- Resolving Property Disputes
- Tax Planning and Compliance
- Mortgage and Financing
In summary, residential real estate appraisers are not just invaluable to buyers and sellers in determining property values. They also play a vital role in supporting accountants in various financial matters. From determining asset values for financial reporting to assisting with investment analysis, property disputes, tax planning, and mortgage financing, appraisers offer a wealth of knowledge and data that accountants can rely on for accurate and informed decision-making.
By collaborating with appraisers, accountants can provide clients with comprehensive financial guidance, ensure compliance with legal and tax requirements, and strengthen their overall professional services. The synergy between residential real estate appraisers and accountants creates a solid foundation for successful financial transactions and optimal client outcomes.
To read more, click here
My comments: I had never thought of some of these ways appraisers can help accountants! I almost always do them for accountants for estates and trusts. I’m sure! I have almost always been the only appraiser attending them. Check with local CPAs to see if there are any meetings they regularly attend.Appraising the Tough Ones
Creative Ways To Value Complex Residential Properties
By Henry Harrison, MAI Book Review
This is my favorite appraisal book, published in 1996!
Why you need this book
Have you ever had to appraise a home with “no comps”? The one home with a huge addition in a tract of small homes? A home modified for handicapped access? Or a home with asbestos siding or an underground heating oil tank?
In today’s changing residential appraisal business, taking non-typical,
more difficult assignments is critical to your future success. Have you ever turned down assignments such as a retrospective value (going back in time) or a life estate? They are actually relatively easy to do.
The book has an excellent discussion on how to do life estates on
homes. The best I have ever read.
New books about residential appraising have been scarce. Unfortunately, some times they are just updates of books initially published many years ago that rehash 50-plus-year-old appraisal theories and techniques.
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The 10 Most Affordable Small Towns Where You’d Actually Like To Live, 2023 Edition
Excerpts: at some point, many city dwellers realize they’ve had enough of the tiny, exorbitantly priced apartments, the noise and gridlock, the angry drivers, and the packed sidewalks. They find themselves longing for a simpler life—perhaps even putting down roots in small-town America, where they’re not always in a rush and a walk through town is sure to include at least a few friendly faces.
Some of these smaller communities have carved a niche for themselves, whether it’s live music, like in Branson, MO, or the old-world German charm of New Ulm, MN. Each has a different flavor.
To find these desirable small towns, the Realtor.com data team looked at real estate in every U.S. “micropolitan area,” the collection of counties with a population between 10,000 and 50,000. (With the surrounding areas included, a micropolitan area can technically have a population as large as 200,000, but we’re focusing on the core town within.)
Then we pulled together U.S. Census Bureau data detailing the dining, entertainment, recreation, and quality-of-life business establishments in the area, and calculated their rate per 100,000. We ranked the towns using an equal combination of those categories, as well as home list prices.
We limited our list to places where the median list price per square foot is less than 150% of the national average, and we selected only the highest-ranking micropolitan area in any given state, to ensure geographic diversity.
Prices are from $127,425 (Galesburg, IL) to $559,000 (Taos, NM)
To read more, click here
My comments: I could sell my house for at least $1,000,000 and buy 3-4 of the lowest price homes and have lots of money left over.
Faster and Cheaper: Fannie Says Appraisals No Longer the Default
by Isaac Peck
Excerpts: The appraiser profession has been abuzz with alarmed discussions since Fannie Mae’s now-historic update to its Selling Guide on March 1, 2023 (Announcement SEL-2023-02).
In it, Fannie boldly proclaims that they are “moving away from implying that an appraisal is a default requirement.” Fannie’s unique choice of words—which one assumes was no accident—has attracted special attention.
Fannie has been upfront about its interest in developing appraisal “alternatives.” However, the timing of Fannie’s update could not have come at a worse time. Appraisers are currently in the midst of historically low transaction volume, with February 2023 clocking in as the slowest transactional month on record—less than 95,000 appraisals being ordered between both GSEs according to the American Enterprise Institute.
However, Fannie insists that it is looking to the future. With respect to volume, executives at both Fannie and Freddie have pointed out that during the crazy-volume times of 2020 and 2021, appraisers were not actually able to keep up with the transactions that were taking place in the market. It is rumored that FHFA approached both GSEs and asked them to “find solutions” to the “appraisal bottleneck.”
Both Fannie and Freddie insist that appraisers remain an integral part of the valuation landscape and demand for appraisal services will continue into the future. But there definitely appears to be truth in Fannie’s unpopular choice of words. When it comes to low-risk, low-LTV, cookie-cutter property mortgage transactions, appraisals are no longer the only game in town—or the default—according to Fannie.
To read more, click here
My comments: A good overview and summary of the issues from different sides: GSEs, Realtors, AI and ASA, and fee appraisers.
From CFPB: Algorithms, artificial intelligence, and fairness in home appraisals
By Rohit Chopra – June 1, 2023
Excerpts: In conjunction with the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Federal Housing Finance Agency, National Credit Union Administration, and Office of the Comptroller of the Currency, the CFPB is proposing a rule that would, if finalized, ensure that automated home valuations are fair and nondiscriminatory. The proposed rule’s safeguards are not a panacea, but represent a recognition of the risks posed by algorithmic appraisals.
The proposed rule supports our work as a member of the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) to promote accurate appraisals, rather than ones computed by models where bias is baked into the equation.
Inaccurate or biased algorithms can lead to serious harm. A home valued too high can lock a homeowner into an unaffordable mortgage and increase the risk of foreclosure. A home valued too low can deprive homeowners of access to their equity and limit the mobility of sellers. In addition to harming homeowners, systemic biases in valuations, either too low or too high, hurt neighborhoods, distort the housing market, and impact the tax base. When it comes to buying or selling a home, we all need and deserve fair and nondiscriminatory home valuations.
To read more, click here
My comments: Well-written and understandable. Worth reading. Any AI or AVM accuracy depends on the data. Real estate data does not have very good data sources: public records (current accuracy varies widely), MLS data and photos(written to sell real estate. Later disclosure to buyers), and appraiser data (only available to GSEs and can vary between appraisers).
Dazzled by Wizardry, Federal Mortgage Regulators Ignore Zillow Debacle
By Jeremy Bagott, MAI
Excerpts: …Six federal agencies are seeking public comment on a newly-proposed rule designed to “ensure” the credibility and integrity of computer models used in automated real estate valuations. This rulemaking is one more sign that federal bureaucrats are all in on a whacky plan to use technical wizardry to tease out the value of individual properties across the country. The wager? The nation’s $12 trillion residential mortgage market, much of which is now backstopped by the full faith and credit of the U.S. Treasury.
These algorithmic valuations replace trained human appraisers with knowledge of local real estate markets. The so-called “black box appraisals” rely on mathematical formulas and Big Data to produce an opinion of value. The problem? The models aren’t able to think like buyers and sellers. They don’t pick up design flaws, emotion-based style preferences, ambient noise levels, smells, street parking issues, market tastes, perceived quality of school districts and responsiveness of local government. It’s too much to ask of a machine.
Rohit Chopra, director of the Consumer Financial Protection Bureau, rightly sounded the alarm in a recent blog post – the models have the potential to do great harm.
To read more, click here
My comments: Bagott’s writing can be a bit “over the top” sometimes, but this post is worth reading. There are some very interesting comments. Of course, groups of appraisers have been working on AVM standards for many years.
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, click here.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 increased 0.5 percent from one week earlier
WASHINGTON, D.C. (June 21, 2023) — Mortgage applications increased 0.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 16, 2023.
The Market Composite Index, a measure of mortgage loan application volume, increased 0.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The Refinance Index decreased 2 percent from the previous week and was 40 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 2 percent from one week earlier. The unadjusted Purchase Index decreased 0.1 percent compared with the previous week and was 32 percent lower than the same week one year ago.
“The 30-year fixed mortgage rate declined for the third consecutive week to 6.73 percent, while other mortgage rates saw mixed results. Purchase applications increased, driven by a 2 percent gain in conventional purchase applications and a 3 percent increase in FHA purchase activity,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “First-time homebuyers account for a large share of FHA purchase loans, and this increase is a sign that while buyer interest is there, activity continues to be constrained by low levels of affordable inventory. Refinance applications continued their decline after the previous week’s increase, with the refinance share of applications just below 27 percent.”
Added Kan, “The rate for jumbo loans exceeded the conforming rate for the second straight week – the last time jumbo rates were higher was in December 2021. Tighter liquidity conditions have prompted jumbo lenders to pull back, increasing rates in the process.”
The refinance share of mortgage activity decreased to 26.9 percent of total applications from 27.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.3 percent of total applications.
The FHA share of total applications increased to 13.3 percent from 13.0 percent the week prior. The VA share of total applications decreased to 11.9 percent from 12.6 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 ($726,200 or less) decreased to 6.73 percent from 6.77 percent, with points decreasing to 0.64 from 0.65 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200) increased to 6.80 percent from 6.79 percent, with points decreasing to 0.49 from 0.50 (including the origination fee) for 80 percent LTV loans. The effective rate remained unchanged from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 6.74 percent from 6.70 percent, with points decreasing to 1.03 from 1.14 (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 6.26 percent from 6.25 percent, with points decreasing to 0.71 from 1.05 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 5/1 ARMs increased to 6.09 percent from 5.90 percent, with points increasing to 1.4 from 1.17 (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