Historical Properties and Their Unique Appraisal Approaches
Excerpts: Appraising historical properties involves a complex interplay of factors, making it a specialized field within real estate valuation. This article provides an insight into the appraisal process of historical properties, emphasizing the role of market data, potential buyers, specialized databases, appraisal methods, and the significant impact of preservation restrictions.
The appraisal process begins with a thorough analysis of market data, focusing on sales of properties that share historical or antique characteristics. This comparative market analysis extends beyond standard parameters like size and location to include age, architectural style, and historical significance. The scarcity of historical properties often requires appraisers to expand their search to find comparable sales, both geographically and over longer time frames.
The distinction between a historic property with preservation restrictions and an old house without them is crucial in the appraisal process. Preservation restrictions, often governed by the National Register or local historical commissions, can add value by ensuring the property’s integrity. However, these restrictions may also limit modifications, potentially affecting the property’s market appeal.
To read more, Click Here
My comments: If you don’t want to appraise a historic property, be sure to check it out before accepting the assignment!
Worth reading. A good summary. I suspect that a company based in Boston, MA sees lots of historic homes!
For many years I appraised in the nearby city of Berkeley, CA. There were definitely adjustments for homes built by famous, widely known, architects. Fortunately, their names were listed in the MLS.
In my small city, there are a few homes by famous architects. One was sold about 20 years ago by a famous architect, Julia Morgan. She designed more than 700 buildings in California during a long and prolific career. She is best known for her work on Hearst Castle in San Simeon, California. No effect on value. I was surprised. If it was in Berkeley, there would be a substantial adjustment.
Some cities have large historic buildings, such as the City Hall in my city, built in 1895, twenty years after the city charter in 1872. The Gold Rush in California started in 1848, which brought many people to Northern California.
But, in my city, there are many restrictions on what can be done with older homes, such as Victorians. For example, window replacements must replicate the original windows, plus some other restrictions on exterior modifications. Restrictions are from the city, the county, and the state. In my city of 78,000 population, there are over 10,000 buildings constructed prior to 1930, including many classic Victorians.
Many downtown mixed-use buildings (retail and apartments) are in my city. I appraised many of them, but never noticed any effect, plus or minus, for historic designation.
Knowing what modifications are allowed is very important for the appraiser. Many people don’t like them. You need to know the market. Sometimes buyers like them and sometimes not.
See how many historic homes and buildings are where you do appraisals and where you live. You may be surprised!
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NOTE: Please scroll down to read the other topics in this long blog post on appraiser fights back against bias accusation, ok behavior when taking Zoom CE classes, estate appraisal liability issues, unusual homes, mortgage origination stats, etc.
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The Most Expensive Home for Sale in the US Is This $295 Million Property in Florida
Excerpts: The expansive property has humble roots: It started as a small fishing cottage on 4.3-acres of coastal land. (Purchased in the 1980s for $1,000,000). According to WSJ (Wall St. Journal), John and Rhodora were flying above a peninsula known as Gordon Pointe when John saw—and became enamored with—a plot of undeveloped land on the coastal stretch. The couple paid $1 million for it in 1985 and slowly amassed an additional 55 surrounding acres. Here, they built a rolling private escape for their family, which eventually encompassed 13 children, 84 grandchildren, and 175 great-grandchildren.
… the price of the Naples compound was justified not only because of the size, location, and yacht basin, but also because it would be difficult to construct such a property again. According to Redfin, the average home price in Naples is $800,000, while, on average, homes sell for $9.1 million in Port Royal, the neighborhood where the Donahue home is located.
To read more, Click Here
My comments: Over-improvement? HBU? Comps? Does any of this matter in this ultra-luxury price range? I decided a long time ago not to do them as there are few where I live. If I were in a location with lots of them, it would be worthwhile, and you may meet some celebrity owners! So, say appraisers who specialize in these properties.
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What behaviors are okay for appraiser CE Zoom Classes?
Survey: What behaviors do Americans say are acceptable in virtual meetings? Similar to Zoom ce?
This survey is for meetings, but many appraisers, including myself, have been doing CE on Zoom. More appraisers are taking live classes, but with Zoom, you don’t have to travel.
Excerpts: Americans’ opinions on the kinds of behaviors that are acceptable during remote meetings? While clear majorities reject some behaviors, other meeting actions exist in a gray area. And there are significant age divides: Americans 65 and older are less likely than younger adults to accept each of the 22 meeting behaviors polled about.
According to a 2023 YouGov survey, 32% of Americans participate in virtual meetings for work and 37% do so for personal calls. Majorities of Americans deem some behaviors unacceptable in any kind of virtual meeting, including having music or a TV playing in the background, smoking or vaping, and eating a meal. American opinion is more divided for behaviors such as eating a snack or sitting on a sofa, with larger shares saying it is acceptable to do these in informal meetings or in all meetings.
Americans 65 and older are twice as likely as adults under 30 to say wearing your pajamas is not acceptable in any meeting.
To read more and see the data graphics, Click Here
My comments: Check out the survey lists. To get CE, appraisers have to be visible on their computer screens. I ate snacks, checked text messages, and held my cat. I have been tempted to eat lunch when I reply to texts and emails during a break. I did not sleep well the night before recently and kept dozing off a little. Fortunately, the AQB has not made any statements about acceptable behavior when taking CE classes on Zoom (or another live synchronous format! I have a 7-hour USPAP class today.
I always look at others on the screen to see what they are doing and their backgrounds. It helps keep me awake. I may finally tidy up my jammed bookshelves in my background! Sometimes, my cat sleeps there, but people like to see cats and dogs in the background. I need something fun in my background for today’s USPAP 7 hour class – A few drums, electric cello, pickleball paddles and balls???
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Estate/trust appraisal liability advice from Peter Christensen
Here are some general pointers:
1. Never use a lending form (such as a 1004) for estate work. Yes, appraisers do this. While most of the time appraisers get away with it (unless it’s an appraisal that goes to the IRS), it sometimes wreaks havoc for appraisers in discipline and claims.
2. Get the relevant date of value from the client or client’s attorney. The date of value can be a legal issue and the appraiser should not be the one accepting responsibility for whether the date of value is correct for whatever the use is (such as an estate tax return).
3. Keep the definition of intended users as narrow as possible. If an executor of an estate is hiring you, for example, just say the executor is your client and only intended user (add the IRS if it’s relevant). Do not say the intended users are all the beneficiaries of an estate or trust. Doing so potentially expands your liability to all those parties.
4. Keep your definition of intended use as narrow as possible to describe how your appraisal will be used by your client. For example, you don’t want your appraisal for the executor being used by a beneficiary down the road to sell the property to someone. So, don’t say something open ended like: “the intended use is to provide a fair market value of the property.” Say, instead, “the intended use of this appraisal is for the executor’s use in administrating the estate of . . . The appraisal should not be used for any other purpose.”
5. For non-lending work like estate work, you can use a good, protective engagement agreement.
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Is Commercial Work for You?
By Tom Armstrong, MAI
Excerpts:
The Commercial Appraisal Path — What to Expect
This article is for those interested in learning what it takes to add commercial and multifamily (4+ units) appraisal services to your practice, whether you work for a firm or run your own practice. This article will focus on non-complex commercial and multifamily appraisal — smaller properties which tend to be locally traded.
It’s not trivial, but the education, tools, and resources are in place for those seeking to expand their residential appraisal skills and services to the rewarding world of commercial and multifamily appraisal.
First things first: is commercial work a good fit for you? Education and skills aside, answering these questions will give you an idea of what to expect:
Are you excited about the opportunity to deeply engage with a single appraisal assignment over the course of a week or more, immersing yourself in the intricate details and comprehensive analysis that it entails?
Are you comfortable working with long narrative documents, shifting frequently from one report section to another?
The Learning Journey
The learning journey is not as arduous as you might think, and in my view, it is super interesting. And you have a huge advantage in learning; as an educated and trained residential appraiser you have an existing tree of knowledge to which you can readily add new knowledge contextually. Research tells us that when we add new knowledge to existing knowledge, it becomes easier to understand, remember and apply.
Gaining Experience
Gaining 1,500 hours of non-residential work is the crux of the experience requirement. Many firms hesitate to undertake this endeavor because it’s a drain on production. On the other hand, many commercial appraisers are aging out and the industry needs new talent. Some national firms have implemented trainee programs to fill the pipeline. My advice is to complete at least two basic courses, sales comparison analysis and income analysis before you seek experience.
To read more, Click Here
My comments: Commercial licensing allows you to greatly expand the types of properties (and clients) you can appraise. I strongly recommend it.
This is one of the best short articles on residential to commercial. I write about this topic regularly. My last long article was “Residential vs. commercial appraisals – fees, reports, reviews, competition, how to get started, etc. Much better than AMC lender residential appraisals!” in October 2023.
Since starting my business, I have always done commercial and residential appraisals. Few appraisers do both in my area.
I have appraised many large estates with SFRs, apartments, and commercial properties.
5+ unit apartments are an excellent way to start. There are forms available. My article “How to get started in commercial appraising: 5+ unit apartments” was published in April 2023.
Today, many newer commercial appraisers start with large companies, especially large brokerages. This differs from residential, where small independent appraisal companies do most of the training. Before licensing, most appraisers were lender staff appraisers. After licensing, lenders outsourced residential appraiser training to fee appraisers, which could have gone better. At that time, most commercial appraisers worked for small appraisal companies until they got their MAIs. Many started their own businesses.
Some small commercial appraisal companies are okay with training residential appraisers. Others are not. Often you can do residential appraisals on the side while you are for some income (evenings and weekends).
My comments: Several commercial appraisal software programs are available to do the reports. Commercial lender appraisal has little work available now. I am predicting more appraisals due to foreclosures, buybacks, etc. To read a recent MBA Article, 20% of commercial and multifamily mortgage loans to renew in 2024 Click Here
A link to a 78-page commercial sample report for an apartment building is included in the article. My reports for smaller properties are shorter, typically 30-40 pages, including maps, photos, etc.
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Shane Lanham Countersuing Black Homeowners for Defamation
Excerpts: Shane Lanham, a Maryland appraiser, has found himself in a difficult situation as he is being sued in The United States District Court of Maryland. However, he is not backing down and fully intends to fight these allegations through trial. In addition, he is countersuing the accusers for defamation and seeking $500,000 in damages.
Lanham firmly believes that the accusations of racism against him are baseless and he has engaged a consultant with significant experience in handling such cases. To ensure he has the best chance of success, Mr. Lanham has engaged a consultant with extensive experience in similar cases. However, due to the limited funds available through his insurance policy, which only covers $100,000, Mr. Lanham is seeking to raise an additional $50,000 through a GoFundMe campaign. This will enable him to cover the expenses of both defending himself from the false allegations and prosecuting the defamation case. Shane Lanham is committed to seeing this case through to the end and is grateful for any support in his pursuit of justice.
GoFundMe Link Click Here
To read more, Click Here
My comments: Over $15,000 has been raised in GoFundMe. All appraisers are very worried about these bias complaints. Many are thinking about quitting or retiring over the bias issue. Please contribute to an appraiser who is fighting back!
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This design in a suburban location has been well-preserved in Worthington, Ohio. Listed at $780,000, Sold for $800,000 2-13-24
Excerpts: 5 bedrooms, 2.5+ baths, 2,973 sq.ft., built in 1971, 0.34 acre lot
A unique home with modern architectural features seldom seen in a suburban setting. This totally renovated 5 bedroom home is tucked in the woods on a secluded cul-de-sac.
Stand out features include a labyrinth of outdoor spaces along with a captivating Koi pond courtyard in the center of it all.
The new kitchen has a massive quartz island & top-tier appliances. A double sided fireplace, courtyard views & charming window nooks in the Living Room. The primary suite offers a soaking tub & cedar-lined walk-in closet.
An entertainer’s dream, the walk-out lower level rec room has a wet bar, wine fridge, fireplace, bedroom & a spacious mudroom that connects the garage. Many updates include roof, gutters, drain lines, electric, H2O heater & more
To see the listing, with 58 photos, Click Here
My comments: Comps? Higher Fee? just Say No?
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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: MORTGAGE LENDING IS VERY SLOW NOW. WHEN RATES GO UP, AS THEY ALWAYS DO, THERE WILL BE LOTS OF BUSINESS FOR THE APPRAISERS WHO ARE AVAILABLE.Mortgage applications decreased 2.3 percent from one week earlier
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Mortgage applications decreased 2.3 percent from one week earlier
WASHINGTON, D.C. (February 14, 2024) — Mortgage applications decreased 2.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 9, 2024.
The Market Composite Index, a measure of mortgage loan application volume, decreased 2.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 2 percent compared with the previous week. The Refinance Index decreased 2 percent from the previous week and was 12 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index increased 4 percent compared with the previous week and was 12 percent lower than the same week one year ago.
“Application activity was weaker last week, as mortgage rates moved higher across the board. The 30-year fixed mortgage rate was up to 6.87 percent – the highest rate since early December 2023,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications remained subdued as elevated rates continue to add to affordability challenges along with still-low existing housing inventory. Refinance applications declined and remained depressed, with rates still higher than a year ago.”
The refinance share of mortgage activity decreased to 34.2 percent of total applications from 35.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.0 percent of total applications.
The FHA share of total applications increased to 13.4 percent from 13.1 percent the week prior. The VA share of total applications decreased to 13.1 percent from 14.1 percent the week prior. The USDA share of total applications remained unchanged at 0.4 percent.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.87 percent from 6.80 percent, with points increasing to 0.65 from 0.59 (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 $766,550) increased to 7.00 percent from 6.88 percent, with points decreasing to 0.39 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 30-year fixed-rate mortgages backed by the FHA increased to 6.68 percent from 6.57 percent, with points increasing to 0.89 from 0.84 (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 6.53 percent from 6.41 percent, with points increasing to 0.94 from 0.71 (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 6.30 percent from 6.14 percent, with points increasing to 0.6 from 0.48 (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.
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Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
1826 Clement Ave. Suite 203 Alameda, CA 94501
Phone: 510-865-8041
Email: ann@appraisaltoday.com
Online: www.appraisaltoday.com
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