Understanding Basement Contributory Value

By Jo Traut

Excerpts: Determining how a basement contributes to a residential property’s value requires an appraiser to determine what type of basement the home has, its level of finishing, and take into account common concerns, like evidence of mold or signs of structural concern.

By following best practices, including separating the basement from the above-grade finished area, understanding the intended use of the space, and completing comprehensive research, you can evaluate the basement’s contributory value more accurately.


  • Know your basic basement types
  • How is the basement finished? Determining levels
  • Best practices when appraising a basement
  • Know the intended use and client requirements
  • Common problems in basements
  • Environmental hazards: One of the most significant issues appraisers run into is mold.

To read more, Click Here

My comments: This is one of the best discussions of basements I have read. It is worth reading. In my area, there are few fully underground basements, as we have a mild climate. Most homes were built prior to 1930, and there are many types of “basements.” They are not easy to determine added value, if any. I research, check with agents, check permit histories, try to get comps with the same type of basement, etc. The type and level of finish are critical.

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NOTE: Please scroll down to read the other topics in this long blog post on non-lender appraisals and diversification of your appraisal business, home insurance problems affecting values, unusual homes, mortgage origination stats, etc.

See the Transformed Azria Estate in L.A. Before It Heads to Auction – Bids Start at $38m

Excerpts: 17 bedrooms, 25 baths, 30,000 sq.ft., Built in 1939

Bidding opens in May, and starting offers are expected to come in as high as $38 million, the listing notes. Bidding on the estate is scheduled to start May 9 and close May 23.

The Azrias first put the property on the market in 2015 for $85 million, and it’s been on and off the market at ascending and descending prices ever since. Max Azria, the award-winning designer and founder of the fashion retail line BCBG, died in 2019.

When the house hit the market that year for $78 million, it was the most expensive home that week on Realtor.com®.

While the price has come down, the interiors have been similarly toned down. Once fearlessly flamboyant, the spaces are repainted and updated to appeal to a broader pool of buyers. Gone are the colorful carpets and ornate decor hanging from the ceiling. While they’ve been replaced by more neutral selections, at least one cheerful, kaleidoscopic carpet remains.

The estate features several luxe structures. In addition to the main house, there’s a separate 5,500-square-foot entertainment center with a theater, game room, and chic home office.

Check out this posh home theater in the Azria Estate.

The beautifully manicured grounds include rolling lawns, mature trees, a pool and sauna, a partially glass-walled tennis court, Japanese- and Mediterranean-themed gardens, and a lovely greenhouse for growing produce and exotic flowers. There’s also a Moroccan bathhouse encased in marble tile. The red tennis court is partially enclosed by glass walls.

To read more and see many photos, Click Here


Home Insurance Rate Increases, Affect on Value?, Which States Are Affected Most?

Here’s How Much Home Insurance Rates Have Risen in Every State

NAR: Apr 29, 2024

Excerpts: Home insurance costs have been steadily rising across the country over the past few years as climate risks increase following a spate of natural disasters.

Nationally, home insurance rates rose 11.3% in 2023, according to S&P Global Market Intelligence. They shot up 33.8% from 2018 through 2023. However, costs have risen by much more in many states. In Texas, they were up 59.9% over the past five years.

“We know the trajectory of climate risk,” says Benjamin Collier, a risk management and insurance professor at Temple University in Philadelphia. “As we expect the risks to go up, the costs of insurance have to go up over the next couple of decades.”

Nearly half of all U.S. homes are at risk of severe or extreme damage from environmental threats, affecting nearly $22 trillion in real estate, according to a recent Realtor.com® report.

To read more, Click Here

My comments: What’s happening in your state?


How much could home prices be affected by higher insurance premiums?

NAR: Apr 29, 2024

Estimates vary on how much home prices could be affected by climate risk and higher insurance costs.

If home insurance premiums were expected to rise 20% annually for the next 20 years, home prices could fall as much as 10%, according to a recent report from S&P Global Market Intelligence.

Homes at risk of flooding could face even deeper price reductions. For every $1 increase in someone’s flood insurance premium, their home value falls by $41, says Shan Ge, a finance professor at New York University. In areas with high sea level risk, that $1 increase translates into a $250 home value decline. Home price appreciation also falls.

“If premiums go up by $100, home values go down by $4,100 for homes not exposed to sea level rise and by $25,000 for homes that are exposed to sea level rise,” says Ge. She was one of the authors of an academic paper that looked at how the increases in the National Flood Insurance Program premiums affected home prices.

To read more, Click Here

My comments: What is a home worth if insurance is not available?

What if the cost is rapidly increasing? Will buyers be reluctant to purchase because of the uncertainty?

I have two friends who had problems. One had insurance canceled because, in her neighborhood, some homes were “too close together.” She was able to get insurance from another company. Another friend had his canceled and has not been able to find insurance. He lives in a home built in 1906 in San Francisco.

I’m watching my local social media posts to see if it is happening in my city, which has many 2,500 sq. ft. lots and very old Victorians.

Not everyone has home insurance. It is only required if you have a mortgage loan. When we had a big firestorm in Oakland in 1989, some homes had no insurance. I’m sure there will be more now in areas where rates are going way up.

Why are rates and cancellations going up? Insurance companies insure against risk, such as E&O and car insurance. They must know their risks so they don’t go bankrupt. With climate change, no one is certain about the future, significantly increasing their risks. Understandable that they are trying to reduce their risks.


How the insurance crisis is affecting the housing market in Sacramento CA – a close up view

By Ryan Lundquist, 4-24-24

Excerpts: When talking to the local real estate community, it’s emphatic we’re seeing the effect of uncertainty in the insurance market within real estate transactions. As one agent put it, neighborhoods that shouldn’t have a problem with insurance are having a hard time getting new policies or getting dropped. So, it’s not just fire territory with issues these days.

Getting dropped is even without claims

Some insurance companies have left the state, which has led to consumers being dropped. Other times insurers are simply increasing the policy or asking owners to make repairs to keep a policy. I talked to a friend today who had her policy increase by 80%. My advice was to shop for a different policy to hopefully find something less expensive.

But backing up, there are many stories about people getting dropped and then paying 2 to 3 times the amount for a new policy. And this is NOT just in fire territory or due to a claim. In short, it feels like walking on eggshells with insurance companies.

To read more, plus 20+ appraiser comments from different states. Click Here


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How to Diversify Your Appraisal Clients to Get a More Reliable Income Than Lender Appraisals

Sample of Articles available:

Easy marketing – similar to the old mortgage broker days. Very little competition. Meet in their offices and/or do mailings

• Assessment Appeals – Marketing, Reassessment Opportunities, Fees, Critical dates, etc. Very easy marketing – letters or post cards.

• Private Money Lending – fast turn times, high fees. Meet in person. Mailings possible.

• Home Measurement Services – How to Use Your Appraisal Skills to Make More Money. More MLSs are requiring square footage. You can do the “tough ones to measure” using Cubicasa and other phone apps (or the easier ones). Agents don’t want to do them. Postal mailings to agents is possible.

• Bail Bond Appraisals – all cash, very high fees, little competition. Meet in person in offices. Don’t market to attorneys. Mailings possible.

More marketing required – typically real estate agents and website and/or Google Business Profile. All articles below have specific marketing tips for each type.

• Estate and Trust – the most popular non-lender appraisals. Parts 1 and 2

• Divorce Appraisals – much higher fees than AMC/lenders.

• Expert witness – the Highest Fees. Very little competition. Very few residential appraisers are willing to testify. Helpful tips on testifying.

I have been doing non-lender work since 1986 and started writing about it in 1992 in my monthly newsletter. I write from experience about what is required in your appraisals and how to market each type.

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Why Diversify? Multiple Income Streams, Personal Relationships

By Blaine Feyen

Excerpts: We’ve been in an unstable era for a while now, whether we knew it or not. For at least ten good years, appraisers have had a flood of business. But it’s easy to mistake boom times for stability. Trouble has long been brewing.

Some of us are old enough to have experienced the inherent instability in the system.

By the mid-2000s, I’d built up a large residential and commercial appraisal business with a partner and was now striking out on my own. Then came 2008: I suddenly found myself with a three-year old appraisal firm, a large office building full of furniture and equipment, several employees and trainees, and two young children—as the global economy imploded.

The appraisal profession was rocked to its core. Our fees were cut in half overnight, and the AMC model suddenly walled us off from clients with whom we had worked so hard to build rapport.

I wanted a business that was relational instead of merely transactional. The value of a good client was one of the foundational metrics driving our strategy.

Shifting your business away from a primarily lender-based business requires a different mindset, process, marketing, and customer service strategy—and unlike the AMC model, many of these services DO reward strong relationships.

So don’t think of diversifying as an obstacle; consider it a challenge—because anybody can make money when times are good. We want to study and emulate the creative problem-solvers who continue to thrive during rough times.

To read more, Click Here

My comments: Good advice and analysis from Blaine, plus his personal business example. Worth reading.

Long-time local appraisers who do both lender and non-lender appraisals are doing okay. But, they have lost almost all their lender work, which is mostly from direct lenders.

In contrast to previous downturns, many appraisers are reluctant now to learn how to do non-lender appraisals today. I have very little competition and regularly refer business to other appraisers I have known for over 30 years.

I experienced a significant downturn in the early 90s, in my sixth year of business, when there was a big crash for lender business. Most of my lender business was from one local lender. I laid off five of my six employees, downsized office space, and had $100,000 in credit card debt. I finally paid off my credit card debt, which took a long time. I did many balance transfers at a lower rate.

Fortunately, I had been doing non-lender appraisals since I started my business in 1986 and had many good real estate agent contacts. I started building it up and quit doing residential lender appraisals in 2005.

I learned from my mistake: Do Not Be Dependent on Lender Appraisals!


There Are a Record High of 550 ‘Million-Dollar’ Cities in the US

Low inventory is keeping competition high and home values rising

Excerpts:  There are currently 550 U.S. cities where the typical home value is $1 million or more, up from 491 a year ago.

California easily boasts the most million-dollar cities, followed by New York and New Jersey. Florida, Texas and Delaware are the only states with a net loss in million-dollar cities over the past year.

The U.S. has a record-high 550 “million-dollar” cities — cities where the typical home is worth $1 million or more — new Zillow data shows. That is 59 more million-dollar cities than a year ago, reversing losses from when home values were wobbling this time last year.

Affordability is still a big challenge for buyers, but that hasn’t stopped home values from climbing. The housing market is tight with few homes available, and competition is still high for attractive homes. That competitive pressure is pushing home values higher across the U.S.

While million-dollar cities were affected more than the typical U.S. city when home values fell in late 2022, they have generally tracked with the national market over the past year. The typical U.S. home is worth 4.2% more than it was a year ago. In current million-dollar cities, the median year-over-year home value growth is 4.6%.

To read more, Click Here

My comments: I am one of the 40% of homeowners who could not afford to buy their current home. I purchased it for $135,000 in 5/86, and it is worth about 1.35M today.


Castle of Joy in Murphy, NC $1,150,000

Excerpts: 3 bedrooms, 3.5 baths, 10.67 Acre lot, Built in 2004

This estate’s got a friendly, medieval feel that’s been a hit for events far and wide. You’ll find little slices of heaven all over the place, like the heart-shaped pond where the Koi and Goldfish are practically part of the family and the toasty fire pit perfect for s’mores under the stars.

And let’s not forget the magical barn that’s all kitted out in fairy lights – your go-to spot for larger gatherings or imitate get-togethers. Plenty of space for guest parking or growth, we’re talking space for 50 guests and then some for the folks helping out.

Property sold furnished less a few personal items. The property has a 5-bedroom septic system installed.

To see the listing with Virtual tour and 75 photos Click Here


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.

Mortgage applications decreased 2.3 percent from one week earlier

WASHINGTON, D.C. (May 1, 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 April 26, 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 decreased 1.4 percent compared with the previous week. The Refinance Index decreased 3 percent from the previous week and was 1 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 14 percent lower than the same week one year ago.

“Inflation remains stubbornly high, and this trend is convincing markets that rates, including mortgage rates, are going to stay higher for longer. No doubt, this is a headwind for the housing and mortgage markets, with the 30-year fixed mortgage rate increasing to 7.29 percent last week, the highest level since November 2023,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Application volume for both purchase and refinances declined over the week and remain well below last year’s pace. One notable trend is that the ARM share has reached its highest level for the year at 7.8 percent. Prospective homebuyers are looking for ways to improve affordability, and switching to an ARM is one means of doing that, with ARM rates in the mid-6 percent range for loans with an initial fixed period of five years.”

The refinance share of mortgage activity decreased to 30.2 percent of total applications from 30.8 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.8 percent of total applications.

The FHA share of total applications decreased to 12.7 percent from 12.8 percent the week prior. The VA share of total applications decreased to 11.3 percent from 11.7 percent the week prior. The USDA share of total applications remained unchanged at 0.4 percent from the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 7.29 percent from 7.24 percent, with points decreasing to 0.65 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 $766,550) decreased to 7.39 percent from 7.45 percent, with points decreasing to 0.46 from 0.56 (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 increased to 7.09 percent from 7.01 percent, with points increasing to 0.98 from 0.94 (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 decreased to 6.74 percent from 6.75 percent, with points decreasing to 0.63 from 0.64 (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 6.60 percent from 6.64 percent, with points decreasing to 0.75 from 0.87 (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

Email:  ann@appraisaltoday.com

Online: www.appraisaltoday.com

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