Functional Obsolescence Can Be Challenging

By McKissock

Excerpts: For appraisers, functional obsolescence can be a challenging concept because the elements that influence property values may not be obvious or immediately apparent. To help you better understand what it means and how to pinpoint it, we’re exploring some examples, the different types of functional obsolescence, and how it can influence property values.

Additionally, we’re sharing insights from appraisers who answered our survey question, “When dealing with functional obsolescence in real property appraisal, what aspect do you find most challenging?”

Topics include:

  • Types of functional obsolescence
  • Curable obsolescence
  • Incurable obsolescence
  • Superadequacy

What aspects of functional obsolescence do appraisers find most challenging? We asked our appraisal community, “When dealing with functional obsolescence in real property appraisal, what aspect do you find most challenging?”

The top two answers were “supporting adjustments for it” and “finding comparable properties with similar obsolescence.” Here are the full survey results, followed by comments from appraisers who shared further insights into these two common challenges related to functional obsolescence:

Supporting adjustments: 46%

Finding comps: 33%

Sample appraiser comments:

“Functional obsolescence is not a searchable criterion in any MLS database I’ve found. The ability to find a credible impact on other homes repeatedly is an anomaly. So, I may be able to generate a factor or dollar difference but having only one comp to determine with leaves you deciding on credibility or making no deduction if you don’t feel it’s a credible adjustment.”

To read more, Click Here

My comments: We all encounter Functional Obsolescence when appraising. The blog post is well-written and understandable. It is worth reading the full blog post and the appraisers’ comments. Plus, the explanations about functional obsolescence are good reminders.

Functional Obsolescence for Appraisers

Appraisal Business Tips 

Humor for Appraisers

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NOTE: Please scroll down to read the other topics in this long blog post on home gets 147 offers, cutting costs, manufactured homes, appraisal analysis, unusual homes, mortgage origination stats, etc.


$18.5M Mansion With Fighter-Jet Vibes Soars Onto the Market Near Las Vegas

Excerpts: 7 bedrooms, 7.5 baths, 10,067 square feet, 0.59acre lot, built in 2021

The 10,067-square-foot home in Henderson, NV, is nicknamed Albatros because of its unintentional resemblance to a Aero-L39 Albatros plane, which the home’s owners also own.

Ceilings soar close to 30 feet in some places, and everything is designed around the views.

“The way the home was built, every part of it has that view,” Harris says. “You have it from multiple bedrooms. You have it from the living room, from the primary bedroom. There’s almost nowhere in the home where you don’t see beautiful Vegas scenes.”

There are seven possible bedrooms, with three currently being used for other purposes, including a gym and a home office space.

Outside, there’s a large infinity-edge pool and a spa, also surrounded by views. The pool water flows inside, near the three-story floating staircase.

It’s “supposed to help with mood and positive energy in the home,” Harris says of the design. “The way the water flows under the stairs, you still have that great visual when you’re in the living room, but it’s not something that intrudes into your everyday life.”

To read more, Click Here

To see the listing with 77 photos, Click Here


When a property gets 147 offers

By Ryan Lundquist

Excerpts: MLS has since pulled this sale, so it is not longer available. I’m not sure why they pulled it, so I won’t speculate. I do have a screenshot from yesterday where it shows the number of offers.


One of the temptations in real estate is to build housing narratives based on extreme examples. This happens on the doom side when people isolate properties with sensational price reductions and say, “The market is collapsing.” Or some find a non-performing Airbnb and say the entire short-term rental market is a bust. But this happens on the rosy side too with situations like this. The narrative can become, “Bro, everything is getting one hundred offers. This market is insane.” But, let’s step back and ask why this many offers happened. By the way, I’m not on Team Doom or Team Rosy. I’m on Team Market Stats.


Did this many offers happen because the market is so competitive? Or was it due to the marketing (pricing)? Well, in this case, a 1744 sq ft property in Rancho Cordova was priced at $199K before closing at $425K. Look, this is already a competitive area, but pricing over 50% below what the property sold for created an auction-like environment. Bottom line.


The Zestimate on this property was above $450K before it listed for sale, but as soon as it listed at $199K, the Zestimate chased the list price (this is really common to see). Oh, and look what happened when the property closed at $425K? Yep, the Zestimate changed. I talked about this dynamic on a reel this week with a different property. I’m not a Zillow-hater, but I do hope people who get overly-fixated on the Zestimate will question credibility when seeing price-chasing games like this. Ultimately, Zillow touts itself as a ballpark estimate, but it’s really a benchmark for many consumers.

To read more, Click Here

My comments: Very interesting. See Ryan’s graphs and appraisers’ comments from all over the country.


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How to cut appraisal business expenses

We have all been working on our income taxes and are very familiar with our expenses. Now is a good time to review them and cut costs.

Where do you spend your money?

When you review your bookkeeping records and credit cards, look for unnecessary expenses. Do this for both your personal and business expenses. As I usually do when writing an article on this topic, I tried the ideas myself. I am now saving over $1,000 per month.

Many credit card companies have downloadable data that is sortable by vendor or type of expense. Look through recurring credit card charges.

We often need to remember about monthly, quarterly, and annual services that we use sparingly. Although they are usually nominal individually, they can add up. These are typically for online services and business publications.

Review your credit card statements. Here are a few ideas I found:

  • A data service I used sparingly and downgraded my plan.
  • I stopped a monthly computer checkup that I can do myself.
  • Here are a few ideas for what you can look for:
  • MLS in areas where you work less often. You can find another appraiser or real estate agent who can help you.
  • A less expensive public records data service.
  • Downgrade your Internet service to a slower speed.

Forms Software

  • Business is slow for most appraisers. Consider switching forms software.
  • Try other forms software vendors with lower prices. Most are offering a free trial.
  • Do you need an expensive support contract? How often do you call support? I never buy support contracts. I seldom call and am willing to pay the fee, usually around $50 to $100 per call. Often, this is less expensive than a contract.
  • Are you using all the “bells and whistles” that cost extra? Do you need all of them?

Change appraisal software

Look at your other software. Do you pay to upgrade Excel and Word? It is

not always necessary. Do you use other appraisal software much? Is there another alternative?

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FHA Expands Loan Limits for Manufactured Homes

Excerpts. The Federal Housing Administration (FHA) has announced new loan limits for its Title I Manufactured Home Loan Program. The increased amounts use new methodologies for calculating and updating the program’s limits, which were announced in a final rule published on February 29, 2024.

Today’s increase in loan limits marks the first update to the Title I program loan limits since 2008, and supports the Biden Administration’s efforts to increase the supply and use of manufactured homes as a source of affordable housing.

The increases issued by the FHA align with current market prices, and are expected to encourage more lenders to offer the program to homebuyers seeking to purchase manufactured homes and the lots on which they sit.

To read more, Click Here


FHA Title I Letter 488

March 18, 2024

The provisions of this Letter are effective for FHA case numbers assigned on or after March 29, 2024.

All updates will be incorporated into a forthcoming update of the HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook (Handbook 4000.1).

Affected Programs: The provisions of this Letter apply to the Title I Manufactured Home Loan program.

Title I Manufactured Housing Nationwide Loan Limits are established in accordance with Title I Section 2(b) of the National Housing Act based upon loan type:

• Manufactured Home Loan (Single-section), $105,532

• Manufactured Home Loan (Multi-section), $193,719

• Combination Loan (Single-section), $148,909

• Combination Loan (Multi-section), $237,096

• Manufactured Home Lot Loan, $43,377

To read FHA Title 1 Letter 488 Click Here

To read Fannie information for appraisers about Appraising Manufactured Home and available Classes Click Here

My comments: An opportunity for more appraisal business? There are not many infill manufactured homes in my area, so I have only appraised a few for lenders using good nearby comps. You probably have manufactured homes if you’re in a less developed area. Many appraisers don’t like to do them. Say Yes to lenders/AMCs and get more appraisals.


Loosening The Knot in Appraisal Analysis

By Brent Bowen

Excerpts: I recently got curious about the word ‘analysis’. As an appraiser, I use this word frequently. I found the etymology of this word, as well as its antonym, very helpful in conceptualizing what appraisal analysis really is.

According to the Online Etymology Dictionary, analysis comes from the Greek word analyein. Analyein is a compound word which combines ana- which means “up, back, throughout” with the word -lyein which means “to loosen or “to unfasten”. The imagery we then have is of a knot being untied, the strands being backed up to release them.

So then, we can view analysis as taking something which is the complex interaction of many parts and loosening those parts so that we can understand them better. By doing so, we are able to not only better understand the individual parts, but the interplay which creates the complex whole.

Of course, this applies to the work of real estate appraisal as well. Consider this in the context of analyzing a potential comparable sale transaction. The transaction is a complex interplay between buyer and seller. Each weaving in their own strands of rational thought, along with the cords of emotion, and tightening those into a braid with knowledge and perception.

To read more, Click Here

My comments: This is worth reading. Brent Bowen has another very interesting approach to appraising, often something I had never thought of. It’s a bit technical, mostly at the beginning, but understandable. I raced my sailboat for 15 years on San Francisco Bay, so I know all about those darn tight knots!


$2.9M Abercrombie Castle in Westchester County NY Needs Full Renovation

4 bedroom, 4 bath, 4,337 sq.ft., 26.5 Acres, built in 1927

Excerpts: “The castle was built in 1927 for Abercrombie’s family and named ELDA after his four children,” says listing agent Christina DiMinno.

(The children’s names are Elizabeth, Lucy, David, and Abbott.)

DiMinno adds, “This is a historical home built in the fashion of the day for the early 1900s.”

Although Abercrombie and his family lived in the home for years, it’s not currently in a livable state. The two buildings—the original stone manse and a barn—are without plumbing or electricity and will require a complete renovation before the next owners can move in.

The property last sold in 2001 for $1.5 million and, for the last several years, has come on and off the market for as much as $3.5 million. And certainly, the next owner will be in for a big project.

To read more, Click Here

My comments: Highest and best use? Tear down house, subdivide, restore house?


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 Or call 510-865-8041, MTW, 7 AM to noon, Pacific time.

My comments: Rates are going up and down. Many appraisers are not busy. Some are busy, usually with non-lender appraisals.

Mortgage applications decreased 0.7 percent from one week earlier

WASHINGTON, D.C. (March 27, 2024) — Mortgage applications decreased 0.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 22, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 0.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 0.4 percent compared with the previous week. The Refinance Index decreased 2 percent from the previous week and was 9 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 0.2 percent from one week earlier. The unadjusted Purchase Index increased 0.2 percent compared with the previous week and was 16 percent lower than the same week one year ago.

“Mortgage application activity was muted last week despite slightly lower mortgage rates. The 30-year fixed rate edged lower to 6.93 percent, but that was not enough to stimulate borrower demand,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications were essentially unchanged, as homebuyers continue to hold out for lower mortgage rates and for more listings to hit the market. Lower rates should help to free up additional inventory as the lock-in effect is reduced, but we expect that will only take place gradually, as we forecast that rates will move toward 6-percent by the end of the year. Similarly, with rates remaining elevated, there is very little incentive right now for rate/term refinances.”

The refinance share of mortgage activity decreased to 30.8 percent of total applications from 31.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 7.0 percent of total applications.

The FHA share of total applications decreased to 12.0 percent from 12.1 percent the week prior. The VA share of total applications decreased to 12.0 percent from 12.1 percent the week prior. The USDA share of total applications remained unchanged from 0.5 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.93 percent from 6.97 percent, with points decreasing to 0.60 from 0.64 (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 $766,550) remained unchanged from 7.14 percent, with points decreasing to 0.38 from 0.54 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 6.75 percent from 6.89 percent, with points decreasing to 0.97 from 1.04 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 6.46 percent from 6.49 percent, with points increasing to 0.75 from 0.70 (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 decreased to 6.27 percent from 6.33 percent, with points increasing to 0.64 from 0.55 (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.


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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