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Top 10 Things Appraisers Wish Real Estate Agents Understood

McKissock Survey

Excerpts: Survey question: “What’s one thing you wish real estate agents knew about the appraisal process?”

Based on the answers we received, appraisers wish that agents knew the following:

The appraisal process is complex and takes time
Appraisers do not assign value
Appraisers are unbiased and must follow guidelines
Appraisers need their input and cooperation
How to select appropriate sales comps
The importance of providing accurate and detailed info in their listings
How to determine correct GLA (gross living area)
How renovations and upgrades affect value
How to prepare for the appraisal appointment
FHA/VA/USDA guidelines

Sample appraiser answers:

“How complex it really is. We don’t just pull numbers out of the air—they are market supported adjustments backed by ‘many angles“

Some brokers regard the appraiser as an adversary, who potentially can ruin their deal and end up without commission. They should learn that the appraiser is neutral and cooperating can be a benefit.”’ of research.”

“Entering an occupied home without agent or home owner present is a liability issue for appraisers—[we] need someone present to observe what we do.”

To read more, Click Here

My comments: Read the blog post and maybe get some good ideas for answering agent questions!

Many years ago a top local agent asked me why I was driving around taking photos. I explained they were similar homes (comps) I may be using in an appraisal. I realized she did not know much about what appraisers do.

When I started my appraisal business in 1986 I did presentations at all the local real estate offices, usually during their marketing meetings. I explained what appraisers do and how agents and appraisers can work together. They liked the information.

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Carmel’s Iconic and Artistic ‘Owl House’ $3,750,000

Excerpts: 3 bedroom, 3 bath, 1,700 sq.ft., 8,100 sq.ft. lot, built in 1976

This architecturally significant home known as The Owl House was the only house in Carmel-by-the-Sea designed by renowned architect, Mickey Muennig, offering a terrific downtown location with Muennig’s unmistakable Big Sur style. The nautilus-influenced redwood structure bears elements of his emergent style that can be seen in his work that followed, including Post Ranch Inn.

The circular windows, unique shaped doorways, and meticulous handmade detailing throughout the interior is an impressive work of art from every angle.

The Owl House was recently acquired by acclaimed landscape architect Bernard Trainor of Ground Studio Landscape Architects and has undergone an extensive restoration.

To see the listing with very interesting 37 photos and virtual tour plus a 3D tour, Click Here

My comments: I have been to Carmel By The Sea many times. A Very Special City, with no street numbers and many homes with names.

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Housing Market Update: August 2024

By Kevin Hecht

Excerpts:

Mortgage rate trends

Mortgage rates have been on a downward trend, with the 30-year fixed-rate mortgage averaging 6.35% as of late August 2024, the lowest level in 16 months (Realtor.com). This decline is largely attributed to the anticipated rate cuts by the Federal Reserve, which are expected to further reduce borrowing costs in the coming months. However, while lower rates are encouraging, many buyers are still waiting for more significant reductions before re-entering the market.

Summary and focus for real estate appraisers

As the real estate market navigates through these challenging times, real estate appraisers must stay informed about the latest trends in home sales, prices, and economic indicators. The fluctuations in the market underscore the importance of thorough and up-to-date appraisals.

Appraisers should focus on understanding regional market dynamics, the impact of employment trends on housing demand, and the potential influence of mortgage rate movements on buyer behavior. Additionally, it is crucial to keep a close watch on the Federal Reserve’s actions, as their decisions on interest rates will significantly influence the broader economic environment and the housing market.

By staying ahead of these trends, appraisers can provide valuable insights that help their clients make informed decisions in a volatile market.

To read more, Click Here

My comments: Short and worth reading. Written by a very knowledgeable appraiser who is also an economics instructor.

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How to use less gasoline and save money today!

In the 9-24 issue of Appraisal Today

Excerpts:

Summary of ways to decrease your fuel consumption

• First step: (and most important) step: Start recording your gas mileage. Easiest

way? Use your trip odometer. Calculate to check your your Miles per Gallon

(MPG).

• Second step: Do you drive aggressively and not know it?

• Third step: How long are you sitting still at red lights?

• Fourth step: Keeping moving in traffic congestion.

• Fifth step: Slowly accelerate after stops.

• Sixth step: Your cruise control saves gas (but not by using it the way you might think).

Hang with the trucks

Ever notice how, in bad traffic jams cars seem to constantly speed up and

slow down while trucks tend to roll along at the same leisurely pace? A constant speed keeps shifting to a minimum – important to those who have to wrangle with those ten speed truck transmissions. But it also aids economy, as it takes much more fuel to get a vehicle moving than it does to keep it moving.

Rolling with the big rigs saves fuel (and aggravation) and is safer than going

in and out of lanes, speeding up and slowing down.

To read more about this topic, plus 2+ years of previous issues, subscribe to the paid Appraisal Today at www.appraisaltoday.com/order.

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If you are a paid subscriber and did not receive the September 2024 issue emailed on Tuesday, September 3, 2024, please email info@appraisaltoday.com, and we will send it to you. Be sure to include a comment requesting it.

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Please! Not Another Highest and Best Use Question?!

By Timothy Andersen, MAI, MSc., CDEI, MNAA

Excerpts: QUESTION: When it comes to the highest and best use of an existing single-family residence, how do I go about supporting my conclusion that it is financially feasible? It’s already built, so what difference does it make about the feasibility of its construction as if new!? Is not highest and best use a jaywalking-thing when state appraisal boards should be going after bank robbers!? This all seems silly to me!

You are right! It is silly to worry about the financial feasibility of new house when the subject improvements are already up and seasoned. And the reason such an analysis is silly is because, in the context of USPAP SR1-3, or financially feasible in the context of highest and best use in the 15th ed of The Appraisal of Real Estate, that is not what financial feasibility means in the context of an already-existing house.

To read more, Click Here

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Appraisal Regulation Compliance Council (ARCC) Exposes Disturbing AMC Violations

ARCC recently published a detailed breakdown to the Consumer Financial Protection Bureau, which showed the median average AMC fee being charged to borrowers amounted to a staggering 65% of the total appraisal fee, with one AMC extracting as much as 84% in pure profit.

Below is an excerpt from full list, available in full with larger font on Page 14 (last page) of the Document sent to CFBC. In the blog post.

$AMC $appraiser $AMC Profit %Profit Tech feeAppraisal Regulation Compliance Council (ARCC) Exposes Disturbing AMC Violationsisal Regulation Compliance Council (ARCC) Exposes Disturbing AMC Violations

Excerpts: Driven by a non-partisan mission, ARCC has spent the last two years diligently collecting, vetting, and organizing comprehensive data on lender appraisals conducted by Appraisal Management Companies (AMCs).

Their meticulous research has uncovered a disturbing pattern of violations of key regulations intended to protect consumers, including the Appraiser Independence Rules (AIR), the Uniform Standards of Professional Appraisal Practice (USPAP), the Truth in Lending Act (TILA), and Title XIV of the Dodd-Frank Act. Alarmingly, these violations are often disguised under the pretense of a so-called “firewall” that is meant to safeguard appraiser independence.

To substantiate these concerns, ARCC recently published a detailed breakdown to the Consumer Financial Protection Bureau, which showed the median average AMC fee being charged to borrowers amounted to a staggering 65% of the total appraisal fee, with one AMC extracting as much as 84% in pure profit.

The Appraisal Regulation Compliance Council (ARCC) is a crucial non-profit organization that specializes in providing fact-based research and expertise on the complex web of appraisal regulations and compliance issues. Driven by a non-partisan mission, ARCC has spent the last two years diligently collecting, vetting, and organizing comprehensive data on lender appraisals conducted by Appraisal Management Companies (AMCs).

To read more of this blog post and over 70 appraiser comments, Click Here

To read more about ARCC, Click Here

Note: There is limited info now on their website, but worth checking out.

My comments: If you work for AMCs or want more “insider” info, read/skim the the full 14-page document with many very interesting details and other documents sent to CFPB in the blog post, which includes a fascinating view of AMCs. Letters to and from appraisers and within the AMC, etc.

The table above has been online for a few weeks, thanks to Dave Towne. I did not know much about ARCC except a from a few people who knew the Chairman.

Why would a lenders care about AMCs and do all this research? Lenders are paying very high fees to AMCs shopping for the lowest appraisal fee, assuming all appraisers are equal.

Of course, AMCs do not always have so much profit on an appraisal. Sometimes they lose money.

My opinion: AMCs are destroying residential lender appraising.

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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.

WE ARE ALL WATING FOR MORTGAGE RATES TO DROP AND REFIS GO WAY UP!

Mortgage applications increased 1.6 percent from one week earlier

WASHINGTON, D.C. (September 4, 2024) — Mortgage applications increased 1.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending August 30, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 1.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 0.2 percent compared with the previous week. The Refinance Index decreased 0.3 percent from the previous week and was 94 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 4 percent lower than the same week one year ago.

“Most mortgage rates moved lower last week, with the 30-year fixed rate edging down slightly to 6.43 percent. Purchase applications increased more than 3 percent over the week and are inching closer to last year’s levels, with government purchase applications leading the increase,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Refinance applications were slightly down but continued to show strong annual gains as borrowers with higher rates have been refinancing to lower their monthly payments. Similar to purchase activity, refinance activity has picked up across the various loan types.”

Added Kan, “The refinance share of applications averaged almost 46 percent in August, the highest monthly average since March 2022.”

The refinance share of mortgage activity decreased to 46.4 percent of total applications from 46.6 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.5 percent of total applications.

The FHA share of total applications decreased to 14.6 percent from 15.3 percent the week prior. The VA share of total applications increased to 16.7 percent from 15.9 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) decreased to 6.43 percent from 6.44 percent, with points increasing to 0.56 from 0.54 (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 6.73 percent from 6.75 percent, with points decreasing to 0.35 from 0.39 (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 6.30 percent from 6.36 percent, with points remaining unchanged at 0.80 (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 increased to 5.98 percent from 5.88 percent, with points decreasing to 0.64 from 0.68 (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 remained unchanged at 5.98 percent, with points increasing to 0.76 from 0.65 (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: AMCs, appraisal, Appraisal fees, Economic analysis, non-lender appraisals

Tags: AMC, appraisal, non-lender appraisals, real estate market

AI and Appraisers

By Ann O'Rourke on August 30, 2024 / Leave a comment

August 30, 2024

What’s in This Newsletter (In Order, Scroll Down)

New AMC client. They’ve asked me to provide a list of other AMCs I work with and how long I’ve been working with them before they accept me. Is this a common requirement?
AI Appraisals: Embracing the Future Appraisal
5 Enormous Mansions, With Wildly Different Architectural Styles—Priced at Under a Million Bucks
Is appraisal accuracy measured by contract price?
Redfin Reports 6 of Every 7 People With Mortgages Have an Interest Rate Below 6%
110 Nightmarish Home Inspector Scenarios
Mortgage applications increased 0.5 percent from one week earlier

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AI Appraisals: Embracing the Future Appraisal

By Jim Amorin

Excerpts:

Image Recognition

AI can analyze property images to identify features and property conditions, and even estimate dimensions with remarkable accuracy. This technology accelerates the inspection process, allowing appraisers to focus their expertise on more nuanced aspects of the valuation where their experience and judgement are most critical.

While some may worry about image recognition taking away from the appraisers’ skills, it is more useful to see it as a supplement to your own eyes. The visioning capabilities (image recognition) of AI can reinforce your own observations. Using the generative capabilities of a large language model such as ChatGPT coupled with the visioning tools, some of the narrative description of the property can be streamlined for the appraiser.

Enhanced Reports

Another appraiser leveraged AI tools to generate detailed market analysis reports. These reports included data visualizations and trend analysis that provided clients with a deeper understanding of the market, ultimately enhancing the appraiser’s service quality and client satisfaction.

Summary

AI is not a threat to appraisers but a powerful ally. By leveraging AI’s capabilities, appraisers can enhance their efficiency, accuracy, and overall service quality. The unique judgment, expertise, and contextual understanding that appraisers bring to their work are irreplaceable. Embracing AI as a tool will ensure that appraisers continue to play a vital role in the real estate industry, delivering unparalleled value to clients and shaping the future of real estate appraising.

To read more, Click Here

My comments: Amorin’s new book is very well written and understandable. Craig Gilbert wrote an extensive review of the book “The Generative Shift: A Thorough Examination of AI” and interviewed Amorin, in the July, 2024 issue of Appraisal Today.

I have not used AI for my appraisals but follow its use in other applications, such as medical. For example, I have had many mammograms over the years. A recent study found that an artificial intelligence system has an accuracy rate of about 90 percent, compared to an overall average of 80 percent by radiologists. “Notably, when radiologists used this tool as a second reader, their performance improved,” says Dr. Moy. “So we want to reach that sweet spot where we use both.”

A friend had dense breasts. Her mammograms never detected the small tumors scattered through both breasts before her breast removal surgery, where they found them. Bad News

What to Do When Your Appraisal Is Under Review(Opens in a new browser tab)

Posted in: AI, appraisal, appraisal management company, liability, Mortgage interest rates

Tags: AMC, appraisal

Appraisal Reviews – Who and What

By Ann O'Rourke on August 23, 2024 / Leave a comment

August 23, 2024

What’s in This Newsletter (in Order, Scroll Down)

Construction Progress Reports: ADUs & Remodels
What Is an Appraisal Review and Who Can Be a Reviewer?
Billionaire Getty Heir Puts Extraordinary Greek Temple (Temple of Wings) on the Market for $5 Million
Redfin Reports Investor Home Purchases Post Biggest Increase in Two Years
The Biggest Home in Each State
Objectionable Valuations Become Hate Speech, Inflating Home Prices
Mortgage applications decreased 10.1 percent from one week earlier

Appraisal Reviews – The Good and The Bad(Opens in a new browser tab)

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

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What Is an Appraisal Review and Who Can Be a Reviewer?

Excerpts:

Topics:

What is an appraisal review?
Fact-checking vs appraisal review
Types of appraisal review reports
Why are appraisal reviews needed?
Who requests a property appraisal review?
Who can review a property appraisal?

The client base for appraisal reviews is vast and diverse, encompassing a wide range of sectors and needs.

Lenders rely on reviews to ensure the accuracy and reliability of appraisals before making lending decisions.
Investors use them to evaluate the value and risk of potential investments.
Attorneys order reviews to support legal matters involving property valuation, including disputes and condemnation cases.
Insurance companies use them for verifying property values in underwriting and claims.
Government agencies may request reviews for regulatory purposes, tax purposes, or right-of-way acquisitions.

To read more, Click Here

My comments: Comprehensive info on reviews. Short and well written. The best I have read, whether you are a reviewer or an appraiser being reviewed. Reviewing is an excellent option for fee appraisers and staff appraisers.

Personally, I quit doing lender reviews many years ago. I preferred to do the appraisal rather than reviewing an appraisal where I have to also appraise the property. Back in the “old days” I reviewed competent local appraisers I knew.

The final blow later for me was a 4 unit property where the appraiser appraised it as a home. There were 4 electrical meters and lots of cars. When I called my client, they just wanted to know if the value was the same as a house or 4 units. I did not reply. It was my last review for lending purposes. I verified with the city that it was a 4 unit property. There was no information that it had been converted to a single family home. Mortgage rates and requirements are lower for SFRs.

On the other side, many appraisers who do lender reviews say they learned a lot about how appraisers appraise.

Posted in: appraisal, appraisal reviews, real estate market

Tags: bias, real estate market

Types of Appraisal Values

By Ann O'Rourke on August 9, 2024 / Leave a comment

Market Value and Appraised Value: Exploring Various Appraisal Values

By Jo Traut

Excerpts: You’ve probably been asked about the difference between “market value and appraised value” by clients seeking a mortgage. However, from the perspective of the valuation profession, this isn’t an accurate question. We don’t provide an appraised value of a property. Instead, we provide an informed, objective opinion of the value of the property based on several factors and criteria as well as the type of value we’re asked to provide. Learn more about the different appraisal values and the factors that go into each.

Summary

Value in real estate is an opinion on a property’s worth influenced by market conditions and perceptions, distinct from price and cost. It includes various types, such as market value and intangible value, each serving different appraisal and financial purposes.

While most appraisals aim to determine an opinion on market value, not all appraisals are centered on this. Depending on the specific appraisal assignment, different types of value may be considered. Let’s examine eight different types of value and provide a high-level overview of each.

Understanding Market Value

Market value is the most frequently sought value in real property appraisals and can have various definitions. Most often, it is defined as the most probable price a property should sell for under typical conditions. This price assumes a reasonable exposure time on the market, with both buyer and seller acting prudently and without duress.

Types of Value (Partial List)

Assessed Value
Investment Value
Insurable Value
Value in Use
Book Value
Intangible Value

To read more, Click Here

My Comments: Read this article! It is the best article I have read on different types of values, plus other comments. Most appraisers use the “Fannie Mae” definition of market value. For non-lender appraisals, I have made up my own definitions, depending on what the client wants to know about their property.

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8-9-24 What’s in This Newsletter (in Order, Scroll Down)

Market Value and Appraised Value: Exploring Various Appraisal Values
Tappable Equity Reaches Record High
5 Move-In Ready Homes Priced Under $100K
Lack of Fee Transparency: Exposing the AMC Exploitation
Implementation date for Reconsideration of Value updated to October 31 by GSEs and FHA
Home Appraisal Price-Gap Analysis Shows That Home Appraisals Were Higher Than Sale Prices 51% of the Time
Mortgage Applications increased 6.9% from one week earlier

How to Identify a Single-Family with ADU vs. Two-Family Property 9-29-23-

Posted in: AMCs, appraisal business, ROVs

Tags: AMC, appraisal business, ROVs

SFR or 2 units with an ADU?

By Ann O'Rourke on August 2, 2024 / Leave a comment

What’s in This Newsletter (in Order, Scroll Down) August 2, 2024

Avoiding Court: A Common Sentiment Among Appraisers
When Is Single-Family a Multi-Family Appraisal?
What Is a Superhome? 10 Must-See Mansions That Define the High-End Trend
Accurate Appraisal Underreporting
How Confidential is Your Appraisal?
Agencies Issue Final Rule to Help Ensure Credibility and Integrity of Automated Valuation Models
Mortgage applications decreased 3.9 percent from one week earlier

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When Is Single-Family a Multi-Family Appraisal?
SFR or 2 units with an ADU?

by Richard Hagar, SRA

Excerpts: Once upon a time, it was easy to classify single-family homes, duplexes, triplexes and multi-family buildings. Though there have always been exceptions, if a property was zoned single-family residential (SFR) and there was a single home on the site, you’d use a 1004 form for bank appraisals.

If a property was zoned multi-family and there were two to four units on the site, an appraiser would use the 1025 form. And, if there were five or more units on the site, it would be something a commercial appraiser would handle via a narrative format.

Ah, the good old days. Then, along came accessory dwelling units (ADU), which in some states and cities are messing with established appraisal and lending systems.

Things Get Twisted – ADUs

Many counties and cities that allow ADUs do not “change” the official zoning; SFR 5000 still means one single-family home per 5,000-square-foot lot (and allow an ADU). What a few politically and emotionally driven cities have done is bypass the normal requirements for changing zoning (public hearings, notifications, etc.) and passed laws that overlay additional uses and requirements on to existing zoning codes. It’s their “clever” way of changing things without following the historic path to … well, changing things without informed consent by the citizens.

So, here we are: appraisers looking at zoning codes trying to determine the highest and best use for the subject’s site (as if vacant) and the structure as improved. We see SF7500 and say, “great, single family.” But did you look to see if there are overlay additions to the code? If so, did you read them? Did you look at regulations related to accessory dwelling units? If you didn’t, you’d better start looking because these things are popping up in numerous counties and cities across the United States, and they have a massive impact on unit density, the highest and best use, land values and depreciation rates.

Conflict With Lending

The Federal National Mortgage Association (FNMA) will buy a loan where the single-family home has a single ADU. Look at the below form (Figure 1) and note the two options: Units “One” and “One with Accessory Unit.” There is no space on the 1004 form to identify a second ADU.

Now we have a conflict between cities allowing two or more ADUs and the lending world of FNMA, the Federal Home Loan Mortgage Corp. (FHLMC), the VA and FHA. These entities will not buy loans with two or more ADUs. And when FNMA won’t buy (or VA and FHA insure) a loan from a lender it results in fewer lenders offering loans, higher interest rates and possibly larger down payments. In a city’s zeal to lower the cost of housing, they’ve increased the cost of housing.

Required Information

When you run across properties with ADUs, all sorts of additional information is required in the appraisal. ANSI requires the square footage to be separately indicated. Fannie Mae needs additional information specific to the ADU, and just wait until you see FNMA’s new appraisal “form,” along with its 20-plus new information fields in the special ADU section. If you want an example of how we provide square-footage information, email me (See author bio) and I’ll provide you with a copy of the form we use.

The appraisal will also require fully supported adjustments, explanations on how you determined the adjustments, and the ADUs impact on value measured by the cost, income and sales comparison approaches.

To read more, Click Here

My comments: Read this detailed article if you appraise any properties with ADUs. It is a comprehensive analysis of all the new issues. Richard Hagar is one of my favorite appraisal instructors.

Posted in: ADUs, appraisal, AVMS, liability

Tags: appraisal, AVM, liability

Freddie Mac Appraisal Advice

By Ann O'Rourke on July 26, 2024 / Leave a comment

Newz: Freddie Mac Insights, HUD Bias charges against Appraiser, Lender and AMC, ROV Guidance

July 26, 2024

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What’s in This Newsletter (in Order, Scroll Down)

Judicial Appraiser Panels
Appraisal Insights With Freddie Mac
HUD Charges Appraiser, Appraisal Management Company, and Lender with Race Discrimination
Agencies Finalize Interagency Guidance on Reconsiderations of Value for Residential Real Estate Valuations
‘Twisters’ Begs the Question: Can You Truly Tornado-Proof a Home? A Reality Check
Southernmost House in Continental U.S. Is for Sale in Key West (It’s Next to the Buoy) for $18.5 million
Mortgage applications decreased 2.2 percent from one week earlier

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Thanks to our Sponsor!!

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Appraisal Insights With Freddie Mac

by Scott Reuter, Freddie Mac

One of the goals at Freddie Mac is to help lead the way toward a more transparent and equitable housing finance process. Across our many priorities, we’re committed to offering trends, best practices and insight to the industry. As strategies continue to develop and evolve, we believe it’s important to engage and communicate with stakeholders, so here are three key items we believe appraisers should keep top of mind in 2024.

1. More Objective Appraisals

An important component to transparency is ensuring that appraisal reports for loans sold to Freddie Mac are free of subjective or potentially biased language…

2. Market Conditions Analysis

Market conditions analysis is the backbone of an appraisal. It’s a necessary step in developing credible reports. This analysis is the study of market area conditions and the changes in price levels over time…

It’s important to note from a development perspective that market conditions must be analyzed on every appraisal assignment. Market adjustments should not be viewed as a filler adjustment. Market conditions adjustments are technically among the first modifications that should be made, before accounting for physical differences. Taking shortcuts here diminishes the reliability of the adjustments that follow and the overall credibility of the appraisal report.

3. Quality vs. Condition

While most appraisers demonstrate a solid understanding of the quality and condition ratings, Freddie Mac still sees inconsistencies in the way these are reported. As might be expected, most of the issues for reported condition fall between the definitional lines of C3 to C4 and C4 to C5.

Also, there seems to be a notion by some appraisers that a C3 condition is equal to “average.” Please be mindful that a C3 home is described as generally well-maintained and showing minimal physical depreciation from regular wear and tear. In contrast, a C4 condition applies to a home that’s adequately maintained, has slight deferred maintenance and minor physical wear and tear, and may need cosmetic or minor repairs.

The author, Scott Reuter is single-family chief appraisal officer for Freddie Mac. He is a certified general appraiser with more than 30 years of experience in valuation, appraisal and collateral risk management concerns.

To read more, Click Here

My comments: Well written and practical. Worth reading, with good tips and links for all the topics. If you do residential lender appraisals, read this article.

UAD and Forms Redesign Update for Appraisers (from 12-15-23)

Posted in: bias, climate change, liability, ROVs

Tags: bias, climate change, liability, ROVs

GSE Appraisal Reports Online

By Ann O'Rourke on July 19, 2024 / Leave a comment

What’s in This Newsletter (in Order)

Confirming Construction Progress
The New UAD: “Don’t Borrow Trouble.”
Nicolas Cage’s Former New Orleans Mansion Lost to Foreclosure listed for $10,250,000
When will interest rates drop?
Who will refi when rates are lower?
Uncovering Flaws in FHA Appraisal & Loan Review Process
Home Insurance: It’s Not The Hurricanes In High-Cost Areas, But The Tornados In Low-Cost Areas That’ll Get You By Jonathan Miller
Iconic ‘Constellation 167’ House in Los Angeles for $10.9M
Mortgage applications increased 3.9 percent from one week earlier
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The New UAD: “Don’t Borrow Trouble.”

By Ernie Durbin, July 15, 2024

Excerpts: Reflecting on one of my father’s favorites, “don’t borrow trouble,” I find his advice particularly relevant today. It reminds me to focus on the present and not jump to conclusions about future uncertainties. What he was trying to convey was to trust in my abilities to handle challenges if and when they arise, rather than assuming the worst.

Many in our industry are “borrowing trouble” when they prematurely conclude that the new UAD and GSE report writing requirements will be detrimental.

The problem is… it’s not a form. The new Uniform Residential Appraisal Report (URAR) is an appraisal report expressed as a form. This may seem like semantics, but it is a very important distinction. Although the UAD data set is all-inclusive of property types, only the data points necessary for a specific property need to be reported.

The dynamic nature of the new report will result in “form” outputs that are remarkably shorter than the early examples provided by the GSEs. As an example, if the income and cost approaches are not necessary for credible results, these elements will not be included in the appraiser’s workflow or the final URAR.

To read more, Click Here

My comments: Worth reading. Current forms date back to 2005. A lot has changed since then, but somehow, we have to put it into our appraisal reports. I much prefer the “Turbo Tax” model where you only see what is relevant for what you are appraising. Changes to the software can be made at any time.

I am looking forward to online software for appraisal reports. Since 2006, I have used Constant Contact for this newsletter, which is completely online. Changes, when needed, such as additional features, can be done easily. With Office 360, Word and Excel software is online. I can work on any computer, anywhere. Of course, I have other software on my computers, including Excel and Word, if my Internet goes out ;>

Posted in: app, appraisal business, appraisal forms, FHA, HOME INSURANCE, UAD

Tags: appraisal business, Fannie, FHA, forecast, liability

Are Appraisers Professionals?

By Ann O'Rourke on July 12, 2024 / Leave a comment

Valuing Appraiser Professionalism: A Blueprint for Survival

By Jo Traut, McKissock Learning

Excerpts: Having spent nearly three decades in the field of real estate appraisal, I’ve witnessed firsthand the evolution of our profession, particularly with respect to technological advancements. However, alongside these positive changes, I’ve also observed a troubling trend toward increased unprofessionalism. This phenomenon isn’t unique to our discipline. It’s permeated other careers, from medical professionals to teachers to business managers.

What professionalism means in the appraisal profession and how we can all work toward achieving it.

Integrity

Remain steadfast in your commitments, stay true to your word, and uphold your principles, even if this requires declining an appraisal assignment or future work with a client or their agent. By staying honest and true to your values, others are more likely to trust and collaborate with you or recommend you and your business.

Expertise

Professionals strive for proficiency in their field, continually enhancing their knowledge through education, webinars and personal development efforts. It’s not just about acquiring designations but staying informed about market dynamics, industry changes and emerging trends.

Commitment to Excellence

True professionals are prepared, which entails advance planning, dedicating sufficient time and giving proper attention to tasks. Before delivering work to clients, conduct a thorough review to mitigate potential errors. Acknowledge and address any skill gaps or lack of competency promptly and transparently, ensuring a commitment to excellence in every endeavor.

To read more, Click Here

My comments: I have always done “Remain steadfast in your commitments, stay true to your word, and uphold your principles.” I was first trained as a scientist, starting with my high school biology class. After graduation, I worked in labs for 7 years.

I have always been a professional appraiser since I started in 1975, trained at an assessor’s office to do what is in this article. I hate the word “industry” when applied to appraisers. I try to avoid using the word “industry”. Since licensing, residential appraising has become more of a “trade” than a professional career. I quit residential lender appraising in 2005. I know about the conflicts, which have been getting worse.

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Posted in: ADUs, Appraisal Qualifications Board, liability

Tags: appraisal how to, Appraisal Qualifications Board, Fannie, liability

Value of a Pool

By Ann O'Rourke on July 5, 2024 / Leave a comment

What is a pool worth? It depends.

By Ryan Lundquist June 26, 2024

Excerpts: With and Without Pools (Big Difference)

There’s a huge difference in the stats when we compare homes with and without pools. The properties with pools are larger in square footage and lot size, higher in price, and they’ve taken slightly less time to sell too.

In short, the higher the price, the greater chance there is a pool. This likely has to do with the cost of building a pool, cost of maintaining a pool, and even larger parcels at higher ranges – not to mention buyers at higher price points expecting a pool more often.

The rhythm of pool sales basically follows the pattern we see in the entire market. More sales as the year unfolds, and they typically peak around June. Some smaller areas could be slightly different.

Seriously though, What is a pool worth?

It depends. Different price points and locations come with different expectations. There isn’t a one-size-fits-all answer for the value of a pool. In other words, we can’t just apply one figure to a property because that number isn’t going to make sense everywhere. This is where we have to study the comps. With that said, my observation is pool adjustments have generally gone up since the pandemic as buyers are more in tune with the importance of a backyard. Have you seen that also?

To read more, Click Here

My comments: Check out Ryan’s tables to see his data analysis, which is not difficult to set up.

When I first started appraising in suburban Bay Area cities in the mid-1980s, homes with pools sold for more in some neighborhoods with higher-priced homes. MLS always said a pool was there, which is a good way to check it out. At that time, MLS data analysis was much more limited than it is today. I saw this in a particular neighborhood with very hot summers. This is still the same now.

In contrast, where I live, about 15 miles west, on an island on San Francisco Bay, pools have never been a plus or a minus. Weather is “Mediterranean” weather without hot summers. Often sellers said they would remove the pool, but the buyers never requested it.

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Posted in: adjustments, appraisal, appraisal business, appraisal how to, forecast, real estate market, zillow

Tags: adjustments, appraisal business, appraisal how to, forecast, real estate market

AVM Accuracy?

By Ann O'Rourke on June 28, 2024 / Leave a comment

Bank AVMs Are As Wildly Inaccurate As A Zestimate – But Will Be Regulated As Legitimate Values

By Jonathan Miller

June 24, 2024

Excerpts:

AVMs are incredibly inaccurate and are being misused in property valuation
AVMs don’t consider the condition of a home
The mortgage industry’s push toward automation has reduced valuation accuracy

AVM or Automated Valuation Models have been incorrectly seen as the human-less way to value property. The technology has been drifting into mortgage lending reliance for more than a decade because it has been marketed as having the ease of “pushing a button.”

The Zestimate product by Zillow introduced the consumer to the concept nearly twenty years ago…

The recent ruling to regulate the credibility of AVMs by the OCC and FDIC essentially legitimized the use of AVMs in lending. The driver behind this final rule was to eliminate potential bias in valuations by replacing appraisers with AVMS. Yet the Urban Institute study Revisiting Automated Valuation Model Disparities in Majority-Black Neighborhoods said: But even with data improvement and artificial intelligence, we still find evidence that the percentage magnitude of AVM error is greater in majority-Black neighborhoods. This finding indicates that we cannot reject the role historic discrimination has played in the evaluation of home values.

AVM software is built by humans who have inherent biases. The void in representation by the appraisal industry over the past decade on the AVM issue, to talk about those 200 feral cats living in the house being valued, has enabled AVMs to be legitimized by the federal government.

During my career, I have observed that valuation accuracy has become weaker as technology has expanded in the mortgage process. The wiz-bang concept that the appraisal of a property can be completed at the push of a button is missing the realities of valuation.

To read more, Click Here

My comments: Worth reading. Miller was involved in AVM history and, as usual, has some very interesting stories plus lots of Zillow comments.

For pro-AVM information from AV Metrics and to see how they test AVM accuracy, Click Here I have been following them for many years.

Miller used to send out a very long post once a week. I often just scrolled fast through most of it to get to the appraisal section, but I missed a lot that was worth reading. Now, he has divided it into daily posts.

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