Newz: FHA ROVs, Avoiding Court, ADUs and Sq.Ft.
October 18, 2024
What’s in This Newsletter (In Order, Scroll Down)
- Avoiding Court: A Common Sentiment Among Appraisers By Claudia Gaglione, Esq.,
- FHA Q&A on ROV Policy
- One of America’s Biggest Homes Hits the Market for $195 Million
- UAD/URAR Threat, Opportunity, Confusion, Part 2 By George Dell, MAI, SRA
- Why didn’t the appraiser add the ADU in the square footage? By Ryan Lundquist
- Choosing the Right Appraisal Management Companies (AMCs): A Guide for Appraisers
- Mortgage applications decreased 17.0 percent from one week earlier
———————————————————————————-
Appraisal Business Tips
Humor for AppraisersClick here to subscribe to our FREE weekly appraiser email newsletter and get the latest appraisal news!
——————————————————————————————-
————————————————————————————–
Q’s and A’s Now Available from Appraisal Review and ROV Industry Briefing Webinar
FHA INFO 2024-70
October 10, 2024
FHA Posts Appraisal Review and Reconsideration of Value Policy
Questions and Answers from Industry Briefing Webinar
Today, the Federal Housing Administration (FHA) posted a questions and answers document that addresses inquiries received from stakeholders regarding FHA’s Mortgagee Letter (ML) 2024-07, Appraisal Review and Reconsideration of Value (ROV), announced in FHA INFO 2024-24 on May 1, 2024.
To prepare mortgagees and other stakeholders for the implementation of the ROV policy, FHA hosted a live webinar on August 8, 2024. During this webinar, FHA subject matter experts briefed participants on the ROV policy and processes and addressed questions submitted prior to and during the webinar. Due to time constraints, not all questions were answered during the webinar; therefore, today’s FHA INFO includes a summary of the questions addressed during the webinar as well as those that were not.
Mortgagees are reminded that while the provisions outlined in ML 2024-07 may be implemented immediately, they must be implemented for FHA case numbers assigned on or after October 31, 2024, as announced in ML 2024-16. Additionally, the technology updates announced in FHA INFO 2024-43, will also be available in FHA Connection (FHAC) beginning October 31, 2024.
The questions and answers and recording of the ROV webinar are available for viewing on HUD’s Single Family Housing Archived Webinars web page.
To read the full Q&As (PDF), Click Here
———————————————————————————–
FHA Q and As on ROV Policy – Comments from Dave Towne
FHA INFO 2024-70
October 10, 2024
From Dave Towne:
Note …. FHA has basically adopted the same ROV process as the GSE’s have implemented.
These policies are a major improvement over what we used to experience, when there were no standardized ROV methods the multiple clients could use.
Frankly, I would have preferred the allowed number of sales to be considered to be less than five…..three is ‘my’ policy that I implemented prior to this new procedure. But at least the appraiser is somewhat protected by only being bothered with ONE ROV request per appraisal, and no more than five suggested ‘comps.’
Appraisers are encouraged to document those properties you evaluated as potential comps, but did not use in your current reports. That can help snuff out a borrower’s inclination to “throw stuff on the wall” for you to consider.
And this ‘considered, not used’ aspect is also included as an optional item the appraiser can use in the upcoming dynamic reporting process for the new UAD & URAR that’s coming to the appraisal world in late 2025.
To read the full Q and As (PDF), Click Here
My comments: Many thanks to Dave Towne for his excellent comments. He keeps up on the latest news with good contacts for more info. I have been reading his emails for many years. To subscribe to them, send an email to Dave Towne, at dtowne@fidalgo.net, and request to be added to his list.
—————————————————————————————-
One of America’s Biggest Homes Hits the Market for $195 Million
Excerpts: 16 bedrooms, 27 baths, approx. 50,000 sq.ft. (approx.), 6.03 Acres
The Pritzker estate in Los Angeles, one of the largest homes in the country, is hitting the market for $195 million. If it sells for that price, it would set a record for the city, where the priciest home sale on record was Jeff Bezos’ $165 million purchase of the Warner Estate in 2020.
The roughly 6-acre parcel is in the Beverly Hills Post Office area, just over a mile from Bezos’ home. Situated on a promontory overlooking the city, the home has 180-degree views of downtown L.A. and the ocean, according to Stephen Shapiro of Westside Estate Agency, who has the listing with colleague Kurt Rappaport.
The primary suite has his and hers bathrooms and closets, as well as an indoor and outdoor fireplaces, a hairdressing area, a custom pop-up TV and a balcony.
The lower level of the house has a flower-prep room and a soundproofed bowling alley with custom cabinetry for the bowling balls and shoes. A large theater has velvet curtains, stage lighting, stadium seating and a projector room. The kitchen has three Gaggenau ovens, two stainless-steel sinks and a dumbwaiter.
On the grounds, a detached two-bedroom guesthouse has a balcony, elevator and its own patio. The estate also has a lighted tennis court with a viewing pavilion. The 75-foot green marble infinity pool overlooks the city, and there is a nearby outdoor kitchen with two barbecues, a large pizza oven, and a custom swimsuit spinner.
In 2001, Tony and Jeanne paid $9.5 million for a circa-1938 house in the Beverly Hills Post Office area, according to property records. Then, through LLCs, they purchased several parcels on a ridge adjacent to their previous home. It is unclear how much they paid for the land, but one batch of parcels was purchased in 2005 for $14.7 million, records show.
To read more, Click Here
To see on Zillow: 27 photos and more details Click Here
—————————————————————————————-
UAD/URAR Threat, Opportunity, Confusion, Part 2
By George Dell, MAI, SRA
In this second part, we prepare to look at possible unintended consequences. (Part 1 link below.) In later continuing parts, we will look at how the URAR/UAD format “dynamic” may affect users: appraisers, lenders, AMCs, and others. Finally, we might look at how the new forms may affect the public good, “public trust.”
The UAD is a much-expanded set of fixed words, fields, and quantities designed to make data and its analysis more uniform. It serves to eliminate much subjective wording, such as “good” “superior”, “nearby” and “desirable.” There are benefits. But the UAD also removes some of the benefit of appraisers’ reactions — which may mirror the behavior, thinking, and psychology of “typical” buyers!
And the URAR is truly a “uniform” form. It replaces the various forms for different property types.
On the other hand, you could also look at the URAR as truly, completely non-form report delivery. The technology method is a “dashboard.”
The form is not a form!
Perhaps in getting mentally prepared for the change, it may be best to emphasize what we need to forget! What to unlearn! Drop some useless outdated habits.
To evaluate this new dashboard concept, it is good to get an understanding of what is a dashboard, why it faces us, how it works, and how to approach this visual technology.
To read more, Click Here
My comments: Part 1 of a 3 part series. Worth reading. Interesting analysis from the author.
To read Part 1, Click Here
—————————————————————————————-
Are you getting too many ad-only emails?
4 ways to get only the FREE email newsletters and NOT the ad-only emails.
1. Twitter: https://twitter.com/appraisaltoday Posted by noon Friday
2. Read on blog www.appraisaltoday.com/blog Posted by noon Friday. You can subscribe to the blog in the upper right of each blog page. NOTE: the popular ads with liability tips are below the first topic on my blog posts.
3. Email Archives: https://appraisaltoday.com/archives
(posted by noon Friday) The link is above and to the left of the big yellow email signup form. Newsletters start with “Newz.” Contains all recent emails sent.
4. Link to the 10 most recent newsletters (no ads) at www.appraisaltoday.com. Scroll down past the big yellow signup block. The newsletters have abbreviated titles, taken from their blog posts.
To read more about the 4 ways, plus information on why I take ads, etc. Click here
———————————————————————————————
How much insurance do you need?
Insurance is financial risk management. You shift the risk from yourself to
your insurance company.
In the August, 2024 issue of Appraisal Today
Excerpts: How much personal insurance should you have?
Most experts agree that life, health, long-term disability, and auto insurance
are the four types of insurance you must have. Most appraisers have homeowners and health insurance. Auto, health, and life insurance are discussed in this article.
I do not not discuss long term disability insurance in detail in this article. I
wrote an article: Disability – your greatest risk, in the September, 2024 issue of Appraisal today.
I’m always surprised how some appraisers don’t have good health
insurance. One of your greatest financial risks is a major health problem requiring surgery. Cancer can be very expensive with surgery and treatments such as chemo. Also, the number of people with medical debt is very high now, even for those with health insurance.
Many appraisers have life insurance to protect their survivors. Risk of death
is much lower than for other types of insurance. Don’t overpay or over-insure.
You need enough life insurance to replace your income as for long as your
family would depend on it, pay off debts, cover funeral costs, etc.
Income replacement. Experts recommend you have at least five times your
salary in life insurance. If you make $100,000 a year, start with at least $500,000 of life insurance.
To read more about this topic, plus 2+ years of previous issues, subscribe to the paid Appraisal Today at www.appraisaltoday.com/order .
Not sure if you want to subscribe?
Sign up for monthly auto renewal for $8.25!
Cancel at any time for any reason! You will receive a prorated refund.
$8.25 per month, $24.75 per quarter, and $89 per year (Best Buy)
or $99 per year or $169 for two years
Subscribers get FREE: past 18+ months of past newsletters
What’s the difference between the Appraisal Today free Weekly email newsletter and the paid Monthly newsletter? Click here for more info. If you are a paid subscriber and did not receive the October 2024 issue emailed on Tuesday, October 1, 2024, please email info@appraisaltoday.com, and we will send it to you. You can also hit the reply button. Be sure to include a comment requesting it.
———————————————————————————–
Why didn’t the appraiser add the ADU in the square footage?
By Ryan Lundquist
Excerpts: I get this question quite a bit. Why didn’t the appraiser add the square footage of the ADU to the main house? The idea is the accessory dwelling in the backyard should be lumped into the total square footage, and since it wasn’t, maybe the appraiser undervalued the property. Let’s talk about it.
To be considered as gross living area (square footage), the area needs to be connected to the house and accessible through the house. If you have to go outside the main living area to enter a separate structure, it is not proper to include as part of the living space of the house according to ANSI standards (“ANSI” stands for “American National Standards Institute”). This means an appraiser should not lump a detached accessory dwelling or other detached areas with the square footage of the main house. Here’s a real example from years ago. I did not include this ADU in the square footage because it was not connected and accessible to the living area of the main house.
Using Logic
I know some might say, “Hey, I don’t really care what some national organization says about lumping square footage together or not.” I get it. On one hand this rule seems arbitrary, and it’s always possible we could think differently about this in the future, but let’s step back and use logic. If a homeowner has a 1,500 sq ft house and adds a 1,200 sq ft ADU in the backyard, has it really become a 2,700 sq ft house? I think logic tells us the answer is NO. This is still 1,500 sq ft, but it clearly now has something else that needs to be considered in the value. Maybe it will sell for the same price as other 2,700 sq ft homes, but what if it sold for more or less?…
Doesn’t mean it’s worth nothing
A huge concern is that an ADU cannot count in the value if it is not counted in the square footage, but that’s completely false. Who made that rule anyway? There are many things that are not square footage that can count in the value such as a pool, covered patio, detached garage, driveway, landscaping, hardscape, etc… An appraiser can definitely recognize value for the ADU in the appraisal report by making an adjustment for it…
More topics:
Cost & Value aren’t always the same thing
Finding accessory dwellings in MLS
To read more, Click Here
My comments: The best blog practical blog posts I have read on ADUs and square footage. Read it if you have ever appraised an ADU or you are doing one for the first time! Save the link, or printout the relevant parts.
—————————————————————————————-
Choosing the Right Appraisal Management Companies – A Guide for Appraisers
Excerpts: How appraisal management companies work, how to get started with AMCs, the pros and cons, and, perhaps most importantly, how to choose the right AMCs to partner with.
Additionally, we’re sharing insights from appraisers who answered our survey question, “What’s your best tip for working with AMCs?”
Best tips for working with AMCs
How can you navigate potential challenges and work smarter with your AMC partners? We asked our community of real estate appraisers, “What’s your best tip for working with AMCs?” In a nutshell, our survey respondents recommended that you should:
Prioritize communication
Ensure timely delivery
Be friendly and polite
Get to know the AMCs and their practices
Don’t sell yourself short
Here are several helpful comments we received from appraisers regarding the best tips for working with appraisal management companies:
“Communication. Timely delivery.”
“Communication! Knowing the full requirements of each of their lenders. Keeping them up to date on the status of the assignment.”
“Have clear communication with the AMC about the client’s requirements and expectations for the report.”
To read more, Click Here
My comments: This article is written for both new and experienced appraisers. The bottom section, Best tips for working with AMCs, has some good tips for experienced AMC appraisers.
In early 2025, business will finally pick up due to mortgage rate drops. 80% of residential lender appraisers are ordered by AMCs. Now is the time to plan your strategies.
The November issue of Appraisal Today will have an article on the history of AMCs starting in 1967. They changed substantially after 2008. Future articles will include how to rate AMCs you have worked for to decide who to target.
———————————————————————————–
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. I don’t think it will get much better until early 2025 as the holidays are coming soon. I hope I am wrong!
Mortgage applications decreased 17.0 percent from one week earlier
WASHINGTON, D.C. (October 16, 2024) — Mortgage applications decreased 17.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending October 11, 2024.
The Market Composite Index, a measure of mortgage loan application volume, decreased 17.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 17 percent compared with the previous week. The Refinance Index decreased 26 percent from the previous week and was 111 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 7 percent from one week earlier. The unadjusted Purchase Index decreased 7 percent compared with the previous week and was 7 percent higher than the same week one year ago.
“Mortgage rates moved higher for the third consecutive week, with the 30-year fixed rate increasing to 6.52 percent, its highest level since August,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The recent uptick in rates has put a damper on applications. Refinance applications fell 26 percent to their lowest level since August, with comparable drops in both conventional and government refinances. This pushed the refinance share of applications back below 50 percent for the first time in over a month. Furthermore, purchase applications also decreased but notably remain 7 percent higher than a year ago.”
Added Kan, “Demand is holding up to an extent for prospective first-time buyers. FHA purchase applications were little changed despite the increase in rates, as some first-time homebuyers remain in the market because of improving housing inventory conditions.”
The refinance share of mortgage activity decreased to 46.5 percent of total applications from 52.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.9 percent of total applications.
The FHA share of total applications decreased to 15.9 percent from 16.2 percent the week prior. The VA share of total applications decreased to 16.2 percent from 16.9 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 6.52 percent from 6.36 percent, with points increasing to 0.65 from 0.62 (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 6.76 percent from 6.64 percent, with points increasing to 0.66 from 0.50 (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 6.42 percent from 6.22 percent, with points increasing to 0.95 from 0.85 (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 5.94 percent from 5.71 percent, with points decreasing to 0.67 from 0.67 (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 6.14 percent from 6.06 percent, with points decreasing to 0.53 from 0.61 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The survey covers U.S. closed-end residential mortgage applications originated through retail and consumer direct channels. The survey has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, thrifts, and credit unions. 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
We want to know what you think!! Please leave a comment.