Desktop Appraisals: Who, When, and Why

Excerpts: The ability to identify property characteristics without a personal inspection is not a new concept. Retrospective appraisals, drive-by (exterior inspection) appraisals, and valuations from plans and specifications, are all valuation assignments where an appraiser develops an appraisal opinion without personally inspecting the property.

Similarly, while not identical, appraisers generally use the cited sources above to identify the physical characteristics of comparable sales in their appraisals. Thus, it’s fair to say that identifying the physical characteristics of the subject property in a desktop appraisal is a similar process to verifying comparable sales.

While they won’t replace a full appraisal for a majority of property transactions, desktop appraisals can offer a more efficient and cost-saving alternative for all involved parties and are often used in low-risk scenarios and non-GSE appraisal assignments, such as:

Helping sellers determine a price: A desktop appraisal provides sellers with valuable insights into their property’s market value, helping them make informed decisions when determining an appropriate listing price.
Home equity lines of credit (HELOCs): When homeowners apply for HELOCs, lenders may request desktop appraisals to ascertain the property’s value and determine the credit limit without requiring a full appraisal.
Tax Appeal Support: When there is a challenge to a tax assessment, a desktop appraisal may be used to provide a current market value.
Insurance purposes: Lenders or other clients may order desktop appraisals for insurance purposes to determine the property’s replacement cost or insurable value.
Managing Investments: For investors who own multiple properties, desktop appraisals provide rapid updates on property values.

To read more, Click Here

My comments: Although the web page title includes “for new appraisers,” this post has ideas for all appraisers. The list of non-lender uses is very good. I have done drivebys for estate appraisals when the home had been sold and I had no access.

Desktop appraisals okay for some Fannie Loans March 2022

Fannie Wants Desktop Appraisals

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 non-lender appraisals, using new construction comps for existing homes, master planned communities, unusual homes, mortgage origination stats, etc.

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North Carolina’s Most Expensive Listing – $50M

Excerpts: 7 bedroom 7.5+ baths, 14,450 sq.ft., 40 acre lot, Built in 2005

“The village of Highlands is some of the most expensive real estate in the Carolinas,” Jackson (listing agent) says. “It was just selected as the Best Small Mountain Town in America by Travel + Leisure. It’s a very exclusive area.”

“The wall coverings, to call it wallpaper is kind of a crime—most of them were shipped in from Europe, and some of them were hand-upholstered,”

He notes that the home’s craftsmanship is unlike anything he has ever seen—one standout example being the hand-painted hallway ceiling that subtly changes from gold to silver.

Meanwhile, a three-bedroom, three-bath guesthouse is connected by a covered breezeway and is fully outfitted with a kitchen, laundry area, and living space.

There’s also a hidden media room downstairs.

“It’s actually behind a bookcase, and you open it up, and there’s a two-level media room with dual gaming stations,”

Part of the “eight-figure, decade-long enhancement” included the addition of a multipurpose, outdoor amphitheater which is also a helipad. Those additions alone cost at least $1.5 million. The estate is a short helicopter ride from a few smaller airports.

To read more, Click Here

To see the listing with 40 photos Click Here

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Can a New Construction Sale be Used as a Comp for an Older Home?

By Tom Horne

One of the biggest issues, if not the biggest, in using a new construction sale as a comp for older homes is accounting for the depreciation. As noted previously, this depreciation typically comes in the form of aging of the components of the building. Even though some parts of the house may have been replaced other parts are original.

In addition to the physical depreciation, the house may reflect functional differences such as the floor plan layout. Some older homes have bedrooms that you must pass through to get to another bedroom.

Even though an older home has been extremely updated it can be difficult to use new homes as comps because of the superior market perception of new construction. Everybody likes new things and knowing that a home has not been lived in and is made of new construction materials will result in it selling for more.

There are situations, due to limited sales, where it may become necessary to use a new home as a comparable sale. This is not an ideal scenario and should be avoided if at all possible. I believe it would be much better to look in a competitive market area to the subject to locate sales more similar in age or use a sale with a slightly older date of sale and adjust for time.

To read more, Click Here

My comments: Of course, you should use the comps you think are best. But if for lending, it might be rejected on review by GSE computers or humans. I had never seen anything written about this situation. Thanks to Tom for writing this blog post. It is written for real estate agents and has general information on appraisal at the beginning. I was lucky to have never had to use new construction as a comp on an existing home. But in today’s market with relatively few sales, it may be needed.

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What types of non–lender appraisals are best for you?

Types of non-lender work – samples

Estate and Trust – the most popular non-lender appraisals.
Divorce Appraisals – much higher fees than AMC/lenders.
Assessment Appeals – Marketing, Reassessment Opportunities, Fees, Critical dates, etc. Very easy marketing – letters or postcards.
Home Measurement Services – How to Use Your Appraisal Skills to Make More Money
Expert witness for residential appraisers – high fees, little competition
Bail Bond Appraisals – all cash, very high fees, little competition

How non-lender appraisals differ from lender appraisals. To help you decide if you want to do them.

Pluses and minuses of the many different types of non-lender appraisals to help you choose what you want to do
Communicating with non–lender clients: Very different from lenders. Side-by-side comparisons will help you understand.

To read much more about non-lender appraising, plus 2+ years of previous issues, subscribe to the paid Appraisal Today. I have been writing about this since 1992 and have done many types of non-lender appraisals.

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What are Master Planned Communities (MPCs)?

Excerpts: MPCs are a growing trend in new construction in which developers aim to offer homebuyers nearly everything they might desire—grocery stores, restaurants, hiking, and biking trails, a gym, a swimming pool, a golf course, and more—within walking distance or a short drive.

While some people might confuse an MPC with a traditional new-construction subdivision, they are distinctly different. Both include dividing a larger parcel of land into smaller plots for homebuyers. An MPC usually covers at least 2,500 acres, sometimes spanning as much as 10,000 (over 15 miles).

The defining feature of an MPC is that the entire community is mapped out on a “site master plan,” or blueprint laying out how the land will be used for development, what types of buildings will be constructed and where, the layout of streets and sidewalks, park and public spaces, and all of the other features.

In other words, every facet is meticulously orchestrated.

“Master-planned communities will typically have hundreds of homes, several different options for recreation, and even retail/commercial businesses located within minutes of the residences,” adds Tiffany Sears, a broker and agent with The Sears Group in Charlotte, NC.

Nationwide, Realtor.com® data shows that about 0.4% of listings mention “master-planned” or some variation of this in their description.

Master-planned listings are highly concentrated in the South and West, with the highest among the top 150 metros being Provo, UT (2.9%), Houston (2.3%), and Charleston, SC (2.0%). Interestingly, in all three of these metros, listings that signify they are part of a master-planned community are priced lower per square foot than the typical listing for the area. That might come as a surprise to many given all the amenities they offer.

To read more, Click Here

My comment: Worth reading. The best article I have read on MPCs. There is one in my city. Construction started in the 1970s.

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Why Doesn’t Anyone Want Tulsa’s Frank Lloyd Wright-Designed Home?

Excerpts: 5 bedrooms, 4.5 bath, 10,405 sq.ft., 1.49 Acre lot, Built in 1929

With a nearly half-price discount, a Frank Lloyd Wright-designed home in Tulsa, OK, is back on the market.

The 10,405-square-foot manse was designed in 1929 by the famed architect for his cousin, Richard Lloyd Jones. It was listed last spring for $7,995,000 with Rob Allen, of Sage Sotheby’s International Realty.

But a buyer didn’t materialize, so the home was slated to be put up for auction, with starting bids expected to range from $1,500,000-$3,250,000.

However, the seller ended up taking the home off the block before the Dec. 14 auction date.

Now, it’s back on the market with a $4.5 million price tag. The residence is known as both the Lloyd Jones House or Westhope. And even with the reduced price, it’s still Tulsa’s third-most expensive single family home for sale.

So, will anyone go for the architectural gem this time around?

“At $4.5 million, it is far more within the Tulsa comparables,” Allen says, adding that pricing is tricky. “It’s not like looking at other 10,000-square-foot homes in Tulsa. Who would be in the market for a Frank Lloyd Wright house? You try to compare it to other architecturally significant homes.”

In 1972, the property was added to the National Register of Historic Places.

In 2021, local developer Stuart Price snapped up the five-bedroom, four-bath home for $2.5 million. Then he embarked on a major (and we have to believe, pricey) restoration.

To read more, Click Here

To see the listing with 40 photos, Click Here

My comments: Tricky appraisal! I was born in Tulsa in 1943. My parents lived in Washington, DC, but Mom went back home for my birth. We moved back to Tulsa when I started high school. I cannot imagine how this house was built there in 1929 (or today)! Tulsa went from a cow town to a boom town in 1901 with the discovery of oil.

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Senators Cramer, Tester Introduce Bipartisan Legislation to Improve Home Appraisal Process in Rural Areas

Excerpts: “Across rural America, housing markets have a shortage of trained appraisers,” said Cramer. “Increasing the number of appraisers is essential to making the homebuying process faster for North Dakotans while also improving access to the housing market.”

Recommendations include:

Add representation from the U.S. Department of Veterans Affairs (VA) and the U.S. Department of Agriculture’s (USDA) Rural Housing Service (RHS) on the Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council.
Add state credentialed trainee appraisers to the national Appraiser Registry run by the ASC.
Allow the Appraisal Subcommittee to decrease annual registry fees if they determine that the fees adversely impact functions.
Renew licensed residential appraisers’ ability to conduct appraisals on FHA properties.

To read more, Click Here

My comments: I have only done a few rural appraisals for lenders, and they are often challenging. For many years, I have been saying that rural appraisers will always be needed. The GSE databases are mostly built on conforming tract homes, and Zillow (and GSEs) computerized valuations don’t work well.

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

Rates will eventually go down. Appraisers that remain in business will be swamped with appraisal orders at good fees.

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Mortgage applications increased 0.1 percent from one week earlier

WASHINGTON, D.C. (April 10, 2024) — Mortgage applications increased 0.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 5, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 0.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 0.2 percent compared with the previous week. The Refinance Index increased 10 percent from the previous week and was 4 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 23 percent lower than the same week one year ago.

“Mortgage rates moved higher last week as several Federal Reserve officials reiterated a patient posture on rate cuts. Inflation remains stubbornly above the Fed’s target, and the broader economy continues to show resiliency. Unexpectedly strong employment data released last week further added to the upward pressure on rates,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The 30-year fixed rate increased to 7.01 percent, the highest in over a month. Purchase applications were down almost five percent to the lowest level since the end of February, but refinance applications were up 10 percent, driven particularly by VA refinance applications.”

The refinance share of mortgage activity increased to 33.3 percent of total applications from 30.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.9 percent of total applications.

The FHA share of total applications increased to 12.1 percent from 11.7 percent the week prior. The VA share of total applications increased to 14.0 percent from 12.1 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 ($766,550 or less) increased to 7.01 percent from 6.91 percent, with points remaining at 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 7.13 percent from 7.06 percent, with points decreasing to 0.56 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 6.80 percent from 6.74 percent, with points increasing to 0.93 from 0.90 (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 6.46 percent from 6.35 percent, with points increasing to 0.60 from 0.56 (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 6.41 percent from 6.37 percent, with points decreasing to 0.67 from 0.68 (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

By Ann O'Rourke on April 12, 2024 / adjustments, non-lender appraisals, real estate market / Leave a comment

Tags: adjustments, non-lender appraisals, real estate market

Desktop Appraisals: Who, When, and Why