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This blog has all my free weekly email newsletters since 2012. Plus other topics. Please note that the original email newsletter subject line has been significantly shortened. To see the original email newsletters, click here to go to the newsletter archives. The newsletter has been sent out weekly since June, 1994. To subscribe to the free email newsletters and receive them on the date they are first issued, go to www.appraisaltoday.com and sign up in the big Yellow Box!!

NOTE: All newsletters before 4/6/24 do not have the popular Liability Administrator ad in the top of the newsletter post.
Starting with the 4/6/24 newsletter it is added below the top topic.
The 30 most recent newsletters (with the LIA ad) are available in the newsletter archives at https://appraisaltoday.com/archives/
The most recent 30 appraiser newsletters start with Newz: the other emails on the list are ads.

Looking for a topic? Use Search box on the right side. There are hundreds of posts on this blog, starting in 2012. 

Every week I send out my FREE email newsletter with info on strange and weird homes and buildings, what Fannie, FHA, AMCs, UAPAP, etc. Hot topics important to appraisers. See info on the right column for topics.

I have also been publishing a paid Appraisal Today monthly newsletter since June, 1992 with in-depth articles on topics important to appraisers. This newsletter has detailed articles on appraisal topics such as Adjustments and Collateral Underwriter plus business topics such as fees, marketing tips, and productivity to get more appraisals done. Click below for more info!!

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Posted in: Uncategorized

Appraising Factory-Built Houses

Factory-Built Houses: Types, Benefits, and Tips for Appraisers

By Dan Bradley

Excerpts: Factory-built houses are an important, yet often overlooked, part of the American housing market. Approximately 10% to 12% of new housing starts in the United States are factory-built. There are several advantages to building a house in a factory. For example, certain houses can be constructed for 50% less than a similar-sized site-built home, making quality housing more affordable for thousands of Americans. As an appraiser, your knowledge of factory-built housing is key to a credible appraisal.

This article examines several different types of factory-built houses, their five main advantages, and tips for appraising them.

Factory-built house is a term that refers generally to a number of house types that are constructed or fabricated, at least in part, off site. The prefabricated components are transported to the site and finished or reassembled there. By contrast, site-built, or “stick-built,” homes are put together at the building site from thousands of individual pieces (e.g., studs, nails, sheets of drywall, shingles, wires, pipes, electrical outlet boxes).

For appraisers, understanding the specific type of factory-built house you’re dealing with is key. It tells you which building codes apply, gives you clues about the construction process, and impacts how you approach the valuation.

Factory-built homes include:

  •   Mobile homes
  •   Manufactured homes
  •   Modular homes
  •   Panelized homes
  •   Pre-cut or kit homes

To read more, Click Here

My comments: This is worth reading, especially if you appraise these types of homes. It provides very good, understandable explanations, including identifying the types. For example, GSEs will not purchase or securitize a mortgage on a mobile home manufactured before June 15, 1976. Likewise, HUD will not issue FHA mortgage insurance on a pre-1976 mobile home.

I work in an urban/suburban area, mostly built up, and have appraised very few of these homes. However, they are definitely more affordable housing, which is a very hot topic now.

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I Can’t Believe I Just Bought a $5M Mobile Home’: A Look Inside 5 of America’s Most Lavish Trailer Parks

Just for Fun!

Excerpts: Multimillion-dollar price tags usually come attached to massive mansions or luxury condos—but now, it’s becoming more common to find them in mobile home parks in enviable locations.

But these aren’t just any trailer parks, as they’re more commonly known. For one, they usually sit on prime real estate. And the neighbors? They’re traditionally billionaires or A-list celebrities.

Prices in some of these parks can generally range from $1.5 million to more than $6 million, but that hasn’t put off buyers with that type of cash to spare.

Arguably, the most famous trailer park in America is Paradise Cove in Malibu. Here, celebrities “slum it” in mobile homes to be close to some of the most expensive real estate in the world.

In 2019, fashion maven Betsey Johnson sold her small pink house here for $1.9 million; in 2018, former “Baywatch” babe Pamela Anderson unloaded her trailer for $1.75 million; and in 2016, songbird Stevie Nicks sold hers for $5.3 million.

To read more and see the photos, Click Here

My comment: I had to include this fun article related to the article above

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Appraisers Riding the Waves of Up and Down Mortgage Rates

Appraisal Business Tips 

Humor for Appraisers

Click here to subscribe to our FREE weekly appraiser email newsletter and get the latest appraisal news!!

NOTE: Please scroll down to read the other topics in this long blog post seller concessions, all cash sales, liability, new fee survey, unusual homes, mortgage origination stats, etc

 

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European-Inspired $115M Bel-Air CA Mansion Dubbed ‘Villa Del Amor’

Excerpts: 9 bedrooms, 13 baths, 14,941 sq.ft., 1.65 acre lot, Built in 2015

$115 million mega mansion said to be owned by investors Paul Kessler and Diana Derycz-Kessler, known for their luxury candy company Sugarfina, is far and away this week’s most expensive listing on Realtor.com®.

Dubbed “Villa Del Amor,” the $115 million European-inspired villa in Los Angeles was custom built by the couple in 2015. Over-the-top details include imported finishes, nine fireplaces, a wine cellar, media room, fitness center, and maid’s quarters. The stunning 1.65-acre lot offers breathtaking views of the Bel-Air Country Club Golf Course.

To see the listing with 33 photos, Click Here

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10% Discount for Paying Cash on Home Sale– Research

Excerpts: Homebuyers who pay cash for a property can spend 10% less on average than those who take out a mortgage, new research from UC San Diego’s Rady School of Management suggests.

State of play: About one-third of home purchases are paid in cash — the highest share in nearly a decade.

The fine print: The researchers analyzed county and Redfin data from millions of home sales and offers nationwide from 1980 to 2021.

They also conducted an experimental survey asking homeowners to consider competing offers from all-cash and mortgage buyers.

Abstract of research report, The Mortgage-Cash Premium Puzzle

All-cash homebuyers account for one-third of U.S. home purchases over 1980-2017. We use multiple datasets and research designs to robustly estimate that mortgaged buyers must pay an 11% premium over all-cash buyers to compensate home sellers for mortgage transaction frictions.

A dynamic, representative-seller model implies only a 3% premium, which would suggest an 8% puzzle. Accounting for heterogeneity in selling conditions explains half of this difference, but there is still a puzzle in conditions with high transaction risk.

An experimental survey of U.S. homeowners replicates these patterns and suggests that belief distortions can explain the puzzle in these high-risk states.

To read more, Click Here

To download the 132 page research report, Click Here

My comments: I never thought about an adjustment for cash sales. I have done appraisals for refis soon after a home was purchased for cash since the 1980s, but they were not very common. Cash sales have increased significantly due to the recent lack of homes available for sale. Most sellers always preferred all-cash offers in my decades of appraising. Adjustments are easier now, with more all cash sales.Are you getting too many ad-only emails?

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4 ways to get only the FREE email newsletters and NOT the ad-only emails.

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Click here

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2024 Annual E and O Insurance Update – Claims, Payment Options, Lawsuits, etc.

Excerpts:

Discrimination claims

To date, no real estate appraiser has lost a case or been found “guilty” in

court relating to appraisal discrimination. The only appraisal discrimination cases resolved thus far have been quietly settled – with the settlement amounts undisclosed to the public.

Discrimination claims are very difficult to prove. Instead, attorneys focus on

errors in the appraisal and appraisal reports, which is much easier to prove.

What if you can’t afford your E&O policy now? Check with your E&O

insurance broker for options

See what you can work out financially, such as monthly payments.

Retirees are eligible for “tail coverage” which covers claims from appraisals

done before they retired.

Appraisers who are not doing appraisals now and drop their insurance for

financial reasons may be able to get a more limited “tail coverage” for a period of time, for example 1, 2 or 5 years. You may be able to start your insurance again and not lose prior acts

coverage.

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If you are a paid subscriber and did not receive the June 2024 issue emailed on Tuesday, June 3, 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.

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Please hit the reply button if you have any comments or info on any topics. I’m always looking for something new

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Seller Concessions Adjustments Revisited

By Brent Bowen

Excerpts: There seems to be continued debate among appraisers, reviewers, and underwriters regarding seller concessions. A particular point of contention in this debate is whether or not it is appropriate to adjust seller concessions on a dollar-for-dollar basis.

To their credit, in the December 2023 Appraiser Update newsletter, Fannie Mae clarified the issue nicely. The newsletter pointed out that the problem is not dollar-for-dollar adjustments, but no adjustments at all. The “great concern” they cite is appraisals where 4.4 million comparable sales with concessions had no adjustment at all. For appraisers who did adjust, their data indicated dollar-for-dollar adjustments in 86% of cases, which they report as a “brighter side” of their findings. The article clarified why they consider these dollar-for-dollar adjustments a good thing.

But what about possible scenarios when the concession might have resulted in a lesser impact than the concession amount? Consider a market where the vast majority of transactions have the seller pay the title fee. What if there is a contract which stipulates that the buyer will pay the title fee, but that the seller will contribute an amount equal to the title fee as a seller concession? In that case, the concession results in a transaction that mirrors the fee structure customary to transactions in the market. A solid argument could be made in that scenario for no adjustment at all.

To read the article, plus appraiser comments, Click Here

My comments: Read this article! This is the best discussion on seller concessions I have read. Brent Bowen is one of my favorite appraiser writers on topics important to residential appraisers, especially those who work for lenders.

I remember back in the late 1970’s at a California Assessor’s office when we were updating all the records in preparation for switching to computers, including sales history. I was amazed at the many concessions included in the sales, such as a boat or RV. Also there were many “Contract for Deed”, a contract for the sale of land which provides that the buyer will acquire possession of the land immediately and pay the purchase price in installments over a period of time, but the seller will retain legal title until all payments are made.

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What’s Happening With Appraisal Fees? New Survey Seeks Answers

Excerpts: To try to gauge where “customary and reasonable” fees are landing and help appraisers strategically adjust pricing within the markets they serve, OREP/Working RE is launching a nationwide survey to collect data straight from the source. The 2024 Appraiser Fee Survey is the fourth such exercise the company has conducted in the last 14 years, offering appraisers across the country the opportunity to anonymously share what they’re experiencing in their markets and then mine the data collected to adjust accordingly.

Knowing what’s occurring on a national scale provides some context and a baseline by way of comparison, but when it comes to actually setting fees, reality rests within the dynamics of every local market. For example, tracking the prevailing appraisal fees in Bend, Oregon, follows the path of expectation through the first three surveys. In 2010/2011, appraisers in Bend were earning a typical fee of $401-$450 for a standard 1004 (single-family detached) order. By 2017, the typical fee in Bend ballooned to $651-$700, and in 2021, the benchmark had pushed past the $751 mark.

By comparison, appraisal fees in the Miami metropolitan market followed a similar path over the same time frame, though not as positively pronounced or well-defined. In 2010/11, the typical fee for a standard 1004 was slotted evenly between $301-$350 and $351-$400. In 2017, it was an even split between $351-$400 and $401-$450, suggesting some modest improvement. In 2021, the typical fee had settled in the $451-$500 range.

This type of comparative data is available to all appraisers and industry stakeholders for free at WorkingRE.com. The fourth installment of the fee survey should give appraisers a snapshot of how colleagues and competitors are adjusting to present conditions occurring within the markets they serve, but the value of the data will be dependent on the level of participation.

To read more, Click Here

My comments: The article discusses fees n the past, including Customary and Reasonable. If you do lender appraisals, please take this new survey! The long article has many details and comments from previous surveys and today’s AMC appraisal market.

The worst time I experienced was 1980-1985, when rates were 18%+. Most appraisers were staff appraisers at lenders and almost all were laid off. I purchased my dupex for 15% interest rate in late 1985 and thought it was a bargain. Of course, the price was $120,000 with a low mortgage payment. Worth well over $1,000,000 now.

In my almost 50 years of appraising, lenders never significantly lowered their appraisal fees when business was slow. Then AMCs took over and the race to the bottom started, where we are there now.

Last Friday’s newsletter had the topic “Low Appraisal Fees”, including that CFPB is looking for comments on high lender fees, including appraisal fees. Plus, where and how to submit your comments. Also included was “Appraisal Fees & Value: Lessons from Picasso & Steinmetz” with comments from Cyndi Chance, Appraisal Institute new CEO about AMC low fees.

To read last Friday’s newsletter, Click Here

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A Silo, A Container, or a Wine Barrel? Which One Would You Live In?

Just For Fun.

Take a break and check out this fun blog post.

By Jamie Owen

Excerpts: I’ve seen a fair number of silos while driving through rural areas in Northeast Ohio. I never thought about them being repurposed into a home. But that’s what some clever folks in Idaho are doing! Check out the videos in the blog post. You’ll never look at silos the same.

Other cool buildings are made out of repurposed items. For instance, shipping containers are another way to build homes. This is not a new idea anymore. See the video of one made into a swimming pool.

However, the progress being made in the styles of homes is remarkable! Wine Barrel Home, Swimming pool

By the way, if you’re not ready to buy a shipping container to live in, how about one to swim in? Our friends purchased a shipping container and converted it into an amazing pool! (Scroll down the page to the bottom comments section.

To read more and see many fun videos, Click Here

My comments: I can always count on Cleveland Appraisal Blog to have something I have never thought of before ;> It is very creative and interesting. He also includes local stats as he should. You do a blog to get more non-lender business, especially from real estate agents.

I sometimes put silo homes in this newsletter, mostly rentals from Airbnb.

Few, if any, grain silos are in Northern California, where I live, but there are some interesting converted shipping containers!

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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.

Mortgage applications increased 15.6 percent from one week earlier

WASHINGTON, D.C. (June 12, 2024) — Mortgage applications increased 15.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending June 7, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 15.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 26 percent compared with the previous week. The Refinance Index increased 28 percent from the previous week and was 28 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 9 percent from one week earlier. The unadjusted Purchase Index increased 19 percent compared with the previous week and was 12 percent lower than the same week one year ago.

“Mortgage rates were trending lower over the course of last week until a stronger than anticipated employment report resulted in a bounce back, with the weekly average for the 30- year fixed mortgage rate decreasing to 7.02 percent,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Lower rates earlier in the week meant a strong increase in refinance activity, particularly for VA borrowers, who jumped on the chance to lower their rates. Overall refinance activity was more than 27 percent above one year ago.”

Added Fratantoni, “On a seasonally adjusted basis and compared to the holiday-adjusted level from the prior week, purchase activity also increased. Multiple data sources are now indicating that home inventory levels, while still historically low, are up significantly from last year at this time. This is good news for many prospective homebuyers who have been frustrated by the lack of homes on the market.”

The refinance share of mortgage activity increased to 35.2 percent of total applications from 31.1 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.3 percent of total applications.

The FHA share of total applications decreased to 13.1 percent from 13.2 percent the week prior. The VA share of total applications increased to 14.7 percent from 12.1 percent the week prior. The USDA share of total applications increased to 0.4 percent from 0.3 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 7.02 percent from 7.07 percent, with points unchanged at 0.65 (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) decreased to 7.18 percent from 7.21 percent, with points increasing to 0.54 from 0.41 (including the origination fee) for 80 percent LTV loans. The effective rate remained unchanged from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remaining unchanged at 6.87 percent, with points decreasing to 0.92 from 0.96 (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 6.60 percent from 6.75 percent, with points decreasing to 0.55 from 0.63 (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 increased to 6.45 percent from 6.37 percent, with points increasing to 0.81 from 0.63 (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

Posted in: adjustments, Appraisal fees

Low Appraisal Fees in 2024

CFPB Crackdown: Unfair Practices Hurting Consumers

This includes Appraisal payments to appraisers by AMCs

by Josh Tucker, June 5, 2024

Comments must be received on or before August 2, 2024

Excerpts: As we all know many AMCs are not paying Customary & Reasonable fee as required by TILA. They have consistently pushed down the pay of Appraisers while making undisclosed profit off consumers and prioritizing cheapest and fastest over quality and competency. The CFPB has been in communication with individuals behind the scenes and are concerned with what has been shown enough to include AMCs in their data collection process.

Now is the time to send them everything we have. To drive legitimate change, we must encourage as many appraisers as possible to submit all relevant information to the contact details provided below.

CONSUMER FINANCIAL PROTECTION BUREAU

[Docket No. CFPB-2024-0021] NOTE: USE THIS LINK TO READ THE DOCUMENT AND THIS NAME TO USE THE COMMENTS PORTAL BELOW.

Request for Information Regarding Fees Imposed in Residential Mortgage Transactions AGENCY: Consumer Financial Protection Bureau.

ADDRESSES: You may submit comments identified by Docket No. CFPB-2024-0021, by any of the following methods:

Federal eRulemaking Portal: http://www.regulations.gov . Follow the instructions for submitting comments. NOTE: THE SEARCH WAS NOT WORKING ON JUNE 6. MAY WORK LATER. CAN USE EMAIL.

Email: 2024-RFI-ResidentialMortgageFees@CFPB.gov. Include Docket No. CFPB-2024-0021 in the subject line of the message.

Mail / Hand Delivery / Courier: Comment Intake —Residential Mortgage Fees Assessment, Consumer Financial Protection Bureau, 1700 G Street NW, Washington, DC 20552.

To read more, Click Here

My comments: DO SOMETHING. YOUR VOICE MATTERS. Let CFPB know about the amount of AMC fees for appraisers, plus other problems. In my opinion, AMCs are ruining residential lender appraising. I have never worked for an AMC, but I’ve been appraising for almost 50 years and understand the problems.

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Appraisal Fees & Value: Lessons from Picasso & Steinmetz

By “Apex Appraiser” June 3, 2024

The Appraisal Institute has been a source of frustration and criticism within the appraisal profession for quite some time. I must admit that I have also expressed my dissatisfaction with them. Nevertheless, I must acknowledge that the new CEO, Cindy Chance, appears to be a positive change and is making some valuable points about our profession from her new position. In particular, she recently discussed appraisal fees in a piece she wrote.

In this excerpt, she shares two stories that provide valuable insights. These stories, one involving art and the other science, highlight the fact that appraising is a combination of both.

First is the story about a young woman who encountered Pablo Picasso one spring day, in a park, sketching. She begged him to sketch her. He graciously agreed, and following a few moments of study and drawing, handed her a sketch of herself. When she asked what she owed him, Picasso answered “$5,000 madam.” “But it only took you five minutes.” “No, madam, it took me my whole life.”

To read more, plus many appraiser comments, Click Here

My comments: Worth reading, plus the appraisers comments. I have been following CEO Cyndi Chance since she started working for AI. It’s definitely a “breath of fresh air” for the AI!

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Appraisers Riding the Waves of Up and Down Mortgage Rates

Appraisal Business Tips 

Humor for Appraisers

Click here to subscribe to our FREE weekly appraiser email newsletter and get the latest appraisal news!!

NOTE: Please scroll down to read the other topics in this long blog post on state appraisal boards, liability, appraiser insurance, price per sq.ft. up 50%, sea level rise, unusual homes, mortgage origination stats, etc

Read more!!

Posted in: appraisal business, liability, real estate market, state appraiser regulators

Paperless Appraisal Office?

10 Steps to a Paperless Office

By Mike Fletcher

Excerpts: If you’ve talked to appraisers who have gone digital, you know they love not having boxes of old reports and workfiles cluttering their offices, homes, and garages and not spending money on paper, toner, and other equipment. Even better, appraisers who run a paperless office often enjoy increased productivity and efficiency.

If you’re ready to enjoy the benefits of getting rid of paper, I’m sharing 10 steps to switch to a completely paperless office. While you may need to tailor this blueprint to your preferred methods and workflows, this will help you get started.

Summary

Switching to digital files and a paperless office saves you time and offers better protection for your files. Making the shift to get rid of printed documents and handwritten notes isn’t easy at first, but by going one step at a time and relying on your appraisal software’s tools, you’ll be paperless in no time.

Topics with detailed and practical advice:

1. Why do you want a paperless office?

2. Commit to change – Be aware of wanting to stay in the familiar

3. Identify your paper and how to go paperless

4. Obtain needed equipment for your paperless office

5. Determine your storage needs in a paperless office

6. Establish a new workflow in your paperless office

7. Going paperless starts small

8. Add another paperless item

9. Get trained

10. Seek out your peers

To read more, Click Here

My comments: What appraiser does not want to go paperless? No one. Read this article with lots of good advice!

Business is slow for many appraisers. Going paperless is an excellent option to consider.

This is by far the best article I have read on going paperless. It is written for appraisers, is understandable, and is not too long. The author is a veteran residential appraiser and self-proclaimed “Data Nerd.” He is currently a Senior Data Steward at Corelogic.

I have a home garage and business office full of appraisal files, plus my business records for taxes. I keep hoping someone will come in and steal all the paper and the filing cabinets

Appraisal Business Tips 

Humor for Appraisers

Click here to subscribe to our FREE weekly appraiser email newsletter and get the latest appraisal news!!

NOTE: Please scroll down to read the other topics in this long blog post on HUD bias Complaints, E&O insurance, home fire insurance, unusual homes, mortgage origination stats, etc

Read more!!

Posted in: appraisal how to, bias, HOME INSURANCE, liability

Common USPAP Appraiser Violations

8 Common Violations Made by Appraisers

By Dan Bradley

When it comes to appraisal non-compliance with USPAP, certain violations are, unfortunately, somewhat common… I have compiled this list based on many years of personal experience as a reviewer and a state regulator, as well as feedback I have received from other states’ enforcement agencies. Once you’re aware of these common missteps, you should be able to avoid them more easily.

Excerpts:

1. Use of inappropriate sales

One of the most serious issues is the use of inappropriate sales in a sales comparison approach. Sometimes the sales used by the appraiser are dissimilar in physical characteristics, e.g., they are all larger, better quality, or in better condition than the subject, and are not properly adjusted.

In some cases, the appraiser goes some distance away to find sales, but other sales are available in close proximity to the subject. An appraiser should always explain the search parameters and why the comparable sales were chosen. Generic, boilerplate statements such as, “The best and most similar sales were selected and utilized,” should not be used.

3. Failure to analyze sales history

Most appraisers include information about prior sales and transfers of the subject property in their reports. Omitting this information is never a good idea; after all, it is easy for an underwriter or reviewer to check this information right from their desk. However, merely disclosing the date and sale price of a prior sale or transfer is not sufficient to meet USPAP requirements. The appraiser must also analyze the prior sale or transfer and provide a summary of their analysis in the report.

7. Mischaracterization of the subject property

Another (unfortunately) common violation is mischaracterization or misrepresentation of the subject property. During my term as an appraisal board member in my state, I encountered several cases in which a mixed-use property or commercial property was appraised as a residential property so a borrower could obtain a residential mortgage.

To read more, including all the violations, Click Here

My comments: The blog post is well written, relatively short, and worth reading, if only for reminders. In last week’s newsletter, Dan Bradley’s first name was misspelled as Dave, his brother. My apologies. I don’t like anyone misspelling my first name as Anne, not Ann, my correct name!

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FHA appraisal problems

Appraisal Business Tips 

Humor for Appraisers

Click here to subscribe to our FREE weekly appraiser email newsletter and get the latest appraisal news!!

NOTE: Please scroll down to read the other topics in this long blog post on GSEs outsourcing AI for appraisal photos and Privacy issues,  ROVs, mortgage rate forecast, current real estate market, unusual homes, mortgage origination stats, etc.

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$25M California Estate With a Private Mountain in Somis, CA

Excerpts: 8 bedrooms, 11.5+ baths, 19,660 sq.ft., 22 acre lot, built in 2008

Known as El Palacio Del Solano, the 22-acre property in Somis, CA, boasts a main residence, two-bedroom guesthouse, and an event space designed for grand-scale entertaining. The “ultra-private compound” in the hills of Southern California drew the most clicks on Realtor.com® this week.

Built in 2008, the luxury estate last traded hands in 2021 for $6,250,000. Dubbed “the holy grail of Somis,” the mansion’s lavish amenities include a home theater, massage room, wine cellar, sports court, an arcade room, a lazy-river pool, and a motor court for up to 20 vehicles.

The Spanish-style residence was designed for large-scale entertaining with a wine-tasting room, grand formal dining room, and an outdoor kitchen with multiple seating and entertainment areas. This home’s private massage room, primary suite with sauna, and lazy-river pool were all designed for relaxing.

A spacious four-car garage is attached to the facility equipped with volume ceilings ideal for parking event vans, trucks, and small to mid-size buses. An estimated range of fifteen to twenty cars could comfortably be parked in the driveway and motor court spaces.

To see the listing with 40 photos, Click Here

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Fannie, Freddie’s Offshore Gambit Imperils Privacy of Millions

By Jeremy Bagott, May 20, 2024

Excerpts: Mortgage giants Fannie Mae and Freddie Mac are reportedly “bench-testing” an arrangement with a foreign AI firm in which the offshore firm will data-mine millions of images showing the personal spaces of U.S. homeowners and tenants.

If your home was appraised for a refinance or new mortgage in recent years, the lender likely sent a “property data collector” to take photos of your kitchen, living room, and each of your bedrooms and bathrooms. (Pressured by the Biden administration, government-backed enterprises Freddie Mac and Fannie Mae are instructing lenders they no longer need to use state-licensed appraisers for the task.) The images of your home’s interior spaces, along with identifying information, were then likely uploaded to a server run by a vendor.

Now, according to a source, Fannie Mae and Freddie Mac have potentially caused millions of these images to be made available to an artificial-intelligence company headquartered in Barcelona, Spain, known as Restb.ai. The images are then harvested for information with the help of artificial intelligence.

To read the post plus appraiser comments, Click Here

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Comments from Denis Desaix, SRA, MAI

Editor’s Note: Originally posted on the National Appraisers Forum Google group, which I read regularly.

I think Bagott’s issue is a legitimate concern. I wouldn’t want the interior photos of my home being catalogued by some third-party vendor that were taken related to a mortgage finance transaction I was engaging in. Ditto the floor plan. The data won’t be limited to what is gathered by property inspectors; however, appraisers’ data will also be in that mix.

The fix sounds relatively simple: Require Fannie/Freddie (or any regulated lender, if you will) to process the image-data in-house and maintain it under their control. The counterargument is that if we are going that route, then let’s classify the image data as personal financial information and cover it under the same rules that other consumer financial information is covered by.

However, it seems to me that Bagott’s editorial strongly implies that the imagery data will be identified with a specific consumer/consumer address. I’m not sure that is the case nor would it be necessary to do the analysis Fannie describes.

Here is how Fannie describes the process (from the link Bagott provides):Let’s walk through a process that uses this technology to validate the quality/condition ratings of the subject’s interior compared to the comps and (if applicable) previous photos of the subject.

1. A File# or other tracking number can identify the subject. The address need not be identified.

2. The identity of the comp’s address is less problematic, assuming the photos used are those available for public use. If the photos come from Fannie’s comp database, they, too, can be assigned a tracking number.

3. The vendor works its magic (I would encourage anyone interested at this stage to visit the one identified vendor webpage (https://restb.ai/) and especially click the link to “Appraisals and Inspections” to see how the product can be used for the stated purpose). And, by the way, at least one prominent appraisal forms provider is listed as a customer of this vendor; there are other names that many will recognize as well.

4. The results come back: the subject’s identity isn’t disclosed and remains unknown.

5. Finally, the vendor’s use of the photos is limited by contract, with stiff penalties for violation. If that doesn’t satisfy legitimate security and personal information requirements, the system can be licensed to Fannie/Freddie, and they can run it in-house.

Since we don’t know what protections against potential abuse (if any) are being put into place, there is legitimacy in asking about that and having a concern. In this case, I happen to have those questions and share that concern. Kudos to Bagott for raising them publicly.

I do take issue with Bagott on a number of his opinion pieces (not all, but enough to say “many”). But that’s OK. His pieces are not what I would call news articles. They are editorials (as they present his view on a certain item) or press releases (announcing something for purposes of an advocacy agenda and not necessarily for information purposes so one can fairly evaluate the issue’s pros and cons).

Many of my posts on this forum could be called editorials, although I try to present a balanced picture. Then, I’ll advocate my position and give the reasons why. We’re all free to express our opinions (we do so here within the limits of the forum rules and usually with professional decorum) as we see fit. That’s healthy.

But if our posts appear one-sided or present what appears to be an incomplete description, that typically generates more questions. Those questions, left unanswered, chip away at the strength of the post’s point. So, should it be with Bagott’s editorials; in this case, he raises a valid point, but it seems to me that there is a practical way to eliminate the concerns he raises. Acknowledging that possibility adds additional strength to the argument that this process must be more transparent so we are satisfied it isn’t being abused.

But that’s my editorial opinion; each of us is free to have our own, and all of us are free to debate the other’s opinions.

My comments on Denis’ post: I have known Denis for a long time. He is very savvy and reviews residential appraisal reports for several lenders. He sees a lot of appraisal photos.

My comments: Bagott’s emails are sometimes a bit “over the top” for me, but this one is worth reading. To subscribe to Bagott’s emails, Click Here

When I appraise a house that needs work, the photos always seem to look better than reality. I always comment on this in my appraisal report.

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ROV, Part 2

By George Dell, SRA, MAI, ASA, CRE

Excerpts: ROV (Reconsideration of Value) is now in the boat. Is it safe?

We suspect this will be a long row to get to the chosen island. Just row!

It may be good to start where any good study starts. “What are the words?” The only two words here are “reconsider” and “value.” Let’s look at these. (Sometimes just looking at the words can sort things out.) Different words mean different things to different people!

Reconsider: “To consider again, especially for a possible change of decision” … “especially with a view to changing or reversing.”

Value: “The worth or usefulness something.”

The new Fannie Mae Selling Guide section discusses the process to changes to the appraiser opinion of value. One more word might be important here: “Appraisal.” Appraisal is defined as the act or process of developing an opinion of value, or the opinion of value itself. An opinion.

Ah. This simplifies things. An official ROV wants you to change your opinion. Usually, if not always, this means “You came in too low.” But you already knew that …

The official ROV process includes a procedure for when the value:

is unsupported;

is deficient (due to unacceptable appraisal practices); or

reflects prohibited discriminatory practices.

Whew! A lot to think about here.

To read the full post, Click Here

My comments: If you work for lenders, read this. Very well-written, short, and understandable.

The May 10 issue of this newsletter had a long section on ROVs. To read the issue, including George Dell’s ROV Part 1, Click Here

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Fannie Mae May Mortgage Rate Forecast

Excerpts: Longer-term interest rates, including mortgage rates, have been volatile the past two months – first rising in response to stronger than expected economic data, and then a more recent decline on weaker readings. Despite this, we view economic growth and inflation as being on the same track as our prior outlook, and we continue to anticipate moderation as the year progresses.

We also continue to expect the Federal Reserve to implement the first of two rate cuts this year in September as inflation measures moderate, gradually trending toward the Fed’s 2-percent target. However, we believe the Fed is likely to remain cautious as there are still signs that inflation may remain stickier than anticipated.

Consistent with the slower sales outlook, our forecast for total mortgage originations was downgraded modestly to $1.73 trillion for 2024 ($1.81 trillion previously) and $2.08 trillion in 2025 ($2.26 trillion previously).

To read about more Fannie economic forecasts and see the graphs, Click Here

My comment: Reading Fannie’s forecasts are helpful. They have been doing them for a long time and have expert economists and other analysts.

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$2M Home Built From 11 Shipping Containers in Vancouver, WA

Excerpts: 4 bedroom, 3.5 baths, 4,074 sq.ft., 0.4 acre lot, built in 2015

A man with a one-of-a-kind idea created a beautiful residence near the border between the states of Washington and Oregon.

The house on S.E. 164th Avenue in Vancouver, WA, is built from 11 shipping containers of different colors.

“The owner actually built it himself, and he did not miss a beat when he built this,” explains the listing agent, Louise James.

She notes that the owner, who works in the import and export business, decided to build a container house.

“His friends all laughed at him,” she adds, “and said, ‘Oh, you can’t do that.’ So he drew it out on a piece of paper and said, ‘This is how I want it to be’—and it turns out to be this amazing masterpiece.”

Construction began on the 4,074-square-foot house in 2015, and finished two years later. HGTV featured the residence during its construction, on the first season of “Container Homes.”

James tells us she’s never seen anything like this home, with influences from all over the world.

Bridging the gap between East and West, the house features an array of Asian influences.

“It has a Japanese garden outside, and it has Tibetan prayer wheels on the entry,” James says, noting that the Japanese tearoom doubles as a meditation room. In a courtyard, a koi pond is outfitted with aquarium glass, which makes it possible to see the fish from inside the house, in the sunken conversation pit.

To read more and watch the video on the top of the page, Click Here

Note: video may be slow to load, but worth the wait!

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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.

Mortgage applications increased 1.9 percent from one week earlier

WASHINGTON, D.C. (May 22, 2024) — Mortgage applications increased 1.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 17, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 1.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 1.1 percent compared with the previous week. The Refinance Index increased 7 percent from the previous week and was 21 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 11 percent lower than the same week one year ago.

“The 30-year fixed mortgage rate declined for the third straight week, dropping to 7.01 percent – the lowest level in seven weeks,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Rates coming down from recent highs spurred some borrowers to act, with increases across both conventional and government refinance applications. VA refinances had a double-digit increase for the third consecutive week, although the current level of refinancing is still well below its historical average. Purchase activity continues to lag despite this recent decline in rates, down 11 percent from a year ago, as potential buyers still face limited for-sale inventory and high list prices.”

The refinance share of mortgage activity increased to 34.0 percent of total applications from 32.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.6 percent of total applications.

The FHA share of total applications increased to 12.8 percent from 12.4 percent the week prior. The VA share of total applications increased to 13.7 percent from 12.7 percent the week prior. The USDA share of total applications decreased to 0.3 percent from 0.4 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 7.01 percent from 7.08 percent, with points decreasing to 0.60 from 0.63 (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) decreased to 7.18 percent from 7.22 percent, with points decreasing to 0.44 from 0.58 (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 6.77 percent from 6.86 percent, with points decreasing to 0.88 from 0.94 (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 6.42 percent from 6.61 percent, with points decreasing to 0.54 from 0.65 (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 6.48 percent from 6.56 percent, with points decreasing to 0.55 from 0.66 (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.

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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

Posted in: AI, Freddie, ROVs

Tools To Support Appraisal Adjustments

What Tools Do You Use to Support Your Appraisal Adjustments?

By McKissock

As part of our monthly survey series, we asked our community of real estate appraisers, “What tool(s) do you use to support your appraisal adjustments?” Respondents were allowed to make multiple selections and write in their own answers as well.

Popular tools include Synapse by Spark, Solomon Adjustment Calculator, and Redstone by Bradford Technologies. The majority of respondents said they use a combination of various tools and methods, such as paired sales analysis.

We’ve included “paired sales/matched pair analysis” in the list as well, even though it’s a method rather than a digital or appraisal software tool, because it was mentioned by so many appraisers.

A few sample appraiser comments:

“I am capable of determining the adjustments without any software. I look at the MLS data and am able to determine appropriate adjustments. I would need to know all of the assumptions the software takes into consideration before I would trust the adjustment with my signature.”

“I use Synapse by Spark for typical property adjustments and Solomon for more complex properties.”

In addition to the top answers, we received many other write-in responses. Sample responses:

Allocation method

Depreciation

Cost to build

Sample appraiser comments

“Due to rural location, there are no algorithmic tools to be utilized for adjustment data. I utilize paired and grouped data analysis and experience and knowledge.”

To read more, Click Here

My comments: Short, well written, and Very Interesting, especially the appraiser’s comments! I quit doing adjustments a while ago. I always do market conditions adjustments (or explain why not) and for views and other factors that significantly add to value.

I have never used any of the appraisal software listed above. I use Excel and MLS data. I often go back in time for comps with views, etc. I also interview agents to see what they say. Not for a number, but about marketability.

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NOTE: Please scroll down to read the other topics in this long blog post on Geographic Data and Comps, effect of renovation on value, very low foreclosures now, current real estate market, unusual homes, mortgage origination stats, etc.

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Posted in: data, liability, real estate market, state appraiser regulators

ROV (Reconsideration of Value) Changes – FHA and GSEs

ROV (Reconsideration of Value) Changes – FHA and GSEs

GSE Effective date is August 29, 2024
HUD Effective date is September 2, 2024

Editor’s note: This long section includes, In order:

  • McKissock/Dave Bradley post with a good summary including links to HUD and GSE documents.
  • Appraisersblogs with Dave Towne’s opinions plus many appraiser comments.
  • George Dell – his usual very interesting comments.
  • VA’s Tidewater Initiative written in 2021 by McKissock (Similar idea as current ROV changes), effective in 2003.

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Changes to ROVs: GSEs and HUD Announce New Reconsideration of Value Policies

By Dave Bradley, McKissock May 2, 2024

Excerpts: On May 1, 2024, Fannie Mae, Freddie Mac, and HUD announced new policies for appraisal reconsiderations of value (ROV). These policies were the result of a collaborative effort between the GSEs, the Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA).

These policies are intended to create a consistent framework for lenders to respond to a borrower-initiated reconsideration of value. Within this framework, the lender must include steps for the borrower to appeal an appraisal when they believe the value opinion:

  • is unsupported;
  • is deficient due to unacceptable appraisal practices; or
  • reflects discriminatory practices.

Freddie Mac’s Bulletin, announcing the new policy, states:

“Freddie Mac, in collaboration with Fannie Mae and HUD, is implementing requirements related to reconsideration of value (ROV) that promote consistency when a perceived appraisal issue and/or appraisal deficiency exists. These requirements also recognize the importance of the Borrower having the knowledge and opportunity to request an ROV.”

Several sections of HUD Handbook 4000.1 have been amended to reflect HUD’s new ROV policy.

For appraisers, Section II.D.2. of the Handbook creates new general requirements for appraisers. This section states, in part:

“In the event that the underwriter requests a Reconsideration of Value (ROV) and provides additional information material to the value of the Property, the Appraiser must: review all information and market data received from the underwriter;

and summarize the analysis of all information provided by the underwriter within a revised version of the appraisal report regardless of whether the Appraiser determines that changes are not needed to address the issues identified in the ROV.”

To read more plus get links to FHA/GSE documents, Click Here

My comments: If you do GSE or FHA appraisals, read this post, plus the links to the documents. Many appraisers will probably not like it, but will like to have a standardized ROV method. I have never done an “official” ROV for a lender, but I did not like any lender clients objecting to my values.

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Low Value = Material Deficiencies? New FHA ROV Policy

By Dave Towne, May 3, 2024

Excerpts: Up until recently, there has never been a standardized policy for mortgage loan related Reconsideration of Value (ROV) requests after an appraisal has been submitted. Now there is, per the attached PDF HUD/FHA mortgage letter. The GSE’s have similar policies.

I’m not opposed to having a standardized ROV policy. However, these policies are in keeping with the new initiatives surrounding alleged and often unproved appraisal bias and discrimination claims.

But when one reads deeper into the reason for implementing these procedures, it is quickly evident that actually it’s focused on the perception that the appraised VALUE is wrong.

This is the statement in the HUD/FHA ML-2024-07: “This included guidance to improve the established process by which FHA program participants may request an ROV if the initial valuation is lower than expected.”

OK, so who exactly decided the value should be HIGHER than what the appraiser reported, before an appraisal was ordered? Was it the borrower? The mortgage loan officer handling the loan? A Zillow Zestimate? Maybe the underwriter at the lender?

The document also mentions many times the words “material deficiencies” in the appraisal report, which can trigger an ROV request.

My comments: I find this post’s appraiser comments most interesting, especially those from VA appraisers who have been required to use the VA’s Tidewater Initiative, which started in 2003. It was and is controversial. See the last article in this list for more info on Tidewater.

To read more, Click Here


Row, Row, Row, Part 1

By George Dell May 8, 2024

Excerpts: A better ROV! Please reconsider the direction of your boat. Try this this bigger oar. And use it only on the right side of the boat.

Appraisers have long been asked to “reconsider” their opinion. Now we have a more official “standardized process” which affects appraisers, lenders, AMCs, GSEs, and of course, the borrower.

On quick review, I see some unintended consequences, as well as some which have been anticipated. The anticipation includes the additional burden on lenders as well as appraisers. There is administrative time involved, as well as legal factors. Also, the burden on borrowers appears greater than before, including detail and reason.

First, the burden on borrowers. They start the row. Borrowers must believe the opinion of value is:

And regardless of the impact on borrowers and appraisers, the Fannie Mae Selling Guide is almost entirely focused on the responsibilities of the lender.

To read more, Click Here

My comments: Short and worth reading.

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The first “official” ROVs – VA’s Tidewater Initiative in 2003: What VA Appraisers Need to Know

By McKissock, January 8, 2021

Excerpts: The VA has a unique set of protocols, known as the Tidewater Initiative, that a VA appraiser must follow when he or she expects the appraised value of a property is going to be lower than its contract price.

This program, often known simply as “Tidewater,” initiated in—you guessed it—the Tidewater area of Virginia (i.e., the Norfolk, Chesapeake, Portsmouth, and Virginia Beach areas). It initially began as a test program in the early 2000s and was expanded to all areas of the country in 2003, as a result of VA Circular 26-03-11. This initiative was subsequently reaffirmed in the issuance of VA Circular 26-17-18 in July 2017.

If it appears to a VA appraiser that the appraised value of a property is going to come in below the pending sales price, the appraiser must contact the designated point of contact (POC) party that is specified in the appraisal order.

The appraiser is not supposed to discuss the contents of the appraisal with the POC at this point, except to explain they are asking for whatever additional information the POC may be able to provide…

To read more, Click Here

My comments: Read this Tidewater post to see why the current changes are not new. There was a precedent. I never did VA appraisals, so can’t speak from Tidewater experience. But, I remember it was very controversial when it started. Many appraisers complained about it. I was contacted many years ago by the VA to get on their panel, but I declined as the property values were way above VA limits where I lived.

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NOTE: Please scroll down to read the other topics in this long blog post on staying positive with slow business,  economic analysis for appraisers, current real estate market, unusual homes, mortgage origination stats, etc.

 

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Posted in: appraisal business, Economic analysis, real estate market

Basement Issues and Values

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.

Topics

  • 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.

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Posted in: adjustments, appraisal how to, non-lender appraisals, real estate market

Non-Arms Length Sales for Appraisers

What Does Arm’s Length Mean in Real Estate?

The 7 Sale Types Explained

Excerpts: An arm’s length sale – a sale in which the buyers and sellers act independently and in their own self-interest is the most common type of real estate transaction. However, there are six other types of real estate transactions that you need to know about so you can specify these sale types in your appraisal report as they can affect the market value of the property.

A non-arm’s length sale in real estate is a transaction between a seller and buyer who have a connection by marriage, family, work, etc. Because of their relationship, each party may not be acting in their own best interests. Therefore, the final price may not reflect the market value of the property.

The type of sale can provide some clarity into whether the transaction was (or currently is) an arm’s length transaction, whether a comparable sale should be used, or whether an adjustment is warranted for the terms of sale for a comparable. By knowing the type of sale, you are better able to reconcile a current opinion of market value that falls above or below a current or recent transaction for the subject property.

For appraisals required to be Uniform Appraisal Dataset (UAD) compliant, you must indicate the type of sale for the transaction. You may report any other relevant information regarding the sale type in the appraisal report, including whether more than one sale type applies.

Non-arms length sales include: REO, Foreclosure, short sale, court ordered sale, estate sale and relocation sale.

To read more, Click Here

My comments: We all see comps that seem to sell below market. This post’s information can be very helpful in explaining why. It’s a good discussion of this topic.

I have done a lot of estate appraisals. Some estate sales occur when the beneficiaries just want to get rid of the property and don’t want to fix it up for sale. I always tell them that the sales price will be reduced.

I have also done many relocation appraisals, done before the home is listed. You are “graded” on how close you come to the sales price. I sometimes see low sales for various reasons.

What should appraisers look for in a sales contract?

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NOTE: Please scroll down to read the other topics in this long blog post on agent concessions, History of appraisal bias back to 1930s, “one mile” rule and bias, unusual homes, mortgage origination stats, etc.

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Posted in: appraisal business, bias, GSEs, lender appraisals

Appraisal Institute Counters Flawed Appraiser Bias Narrative

Appraisal Institute Counters Flawed Appraiser Bias Narrative

Excerpts: In reality, appraisers have a great story to tell, but we have a long way to go to refocus the terribly flawed “appraiser bias” narrative onto facts and science.

Last week’s email from Cindy Chance, the CEO of the Appraisal Institute, marks an important and long overdue shift in the organization’s approach to addressing accusations of bias in the appraisal profession. For too long, appraisers have faced sweeping claims that their valuations are biased against certain groups, despite appraisers’ ethical standards, rigorous training, and lack of financial stake in transactions.

As Chance acknowledges, the Institute should have done more to advocate for appraisers and make the public aware of their professionalism. This public acknowledgement of an obligation to counter the flawed “appraiser bias” narrative is an encouraging first step. Appraisal organizations like the Appraisal Institute should advocate for appraisers, as advocacy is a key membership benefit. Industry groups should also step up to support appraisers.

Importantly, Chance points out that claims of appraiser bias contradict what appraisers actually do. Their role is to provide impartial, data-driven opinions of value. She explains how pioneering research in psychology revealed that all humans have cognitive biases, but professionals like appraisers are trained to minimize bias through rigorous methodology. In fact, appraisers’ discipline protects homebuyers and the industry from irrational biases.

Chance suggests the Institute will undertake communications grounded in facts and science to reframe the false narrative around appraiser bias. With their scientific expertise and ethical standards, appraisers have a strong basis to counter the accusations. Chance’s leadership in publicly addressing the issue and committing to advocate for appraisers represents an encouraging change of direction for the Institute.

To read more, including the full document, Click Here

My comments: Read it. Note: it can be “dense” with very long paragraphs. This is, by far, the best writing I have seen on bias related to appraisals. I have been saying for a while that all humans are biased in some way. It is human nature.

When I read it last week, I was going to put a link to it in this newsletter. Now that appraisersblogs has published the full document, you can read and make comments.

For a long time, since AI dropped out of the Appraisal Foundation, I have said, “I am a 35-year member of AI. I stay because my MAI is very, very valuable (similar to CPA).” Plus, I have an excellent local chapter.

I have been reading Cyndi Chance’s emails to members and following her activities to reach out to local chapters since she started last fall.

I am so glad that AI is now taking on the bias issue. I recently took USPAP plus two California bias classes in a two week period. After I finished them, I thought of giving up my license (CA is not a mandatory state) and maybe quitting appraisal. After a rough weekend, I decided not to leave. Finally, I now see there is hope!

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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, forms to reports modernization, AMCs, earthquake risk, unusual homes, mortgage origination stats, etc.

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Posted in: AMCs, appraisal modernization, modernization, non-lender appraisals

Desktop Appraisals: Who, When, and Why

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.

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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

Click here to subscribe to our FREE weekly appraiser email newsletter and get the latest appraisal news!!

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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Posted in: adjustments, non-lender appraisals, real estate market