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ANSI Z765-2021 Resources for Appraisers

Posted in: ANSI, AVMS, bias, Clubhouse, desktop appraisals, Fannie

Tags: ANSI, AVM, bias, CLUBHOUSE, desktop appraisals, Fannie

1004MC or 1004 ANSI

By Ann O'Rourke on February 25, 2022 / Leave a comment

1004MC or 1004 ANSI

By George Dell, MAI

Excerpt: The 1004MC “market conditions” appraisal addendum was created by Fannie Mae and Freddie Mac to require a form-based market analysis. This added to the traditional practice to collect a handful of ‘comps’ to opine and foretell market price. There are problems and unintended consequences.

The ANSI requirement is that residential appraisers measure houses according to the ANSI (American National Standards Institute) method. This constraint can have good long-term results for consistency, if it is adopted by the full universe of participants. The requirement would have to include tax assessors, building permit agencies, real estate agents, investors, insurance companies, architects, contractors, and unlicensed appraisers. This part might take years, if ever.

We can take a quick look at some similarities, some differences, and where things may go…

To read more, click here

My comments: George and I talked about this and agreed to disagree. He is not the only one with doubts about ANSI. Most are appraisers, like George, who have never used it. I finally found a somewhat negative post about ANSI, instead of social media rants ;>

My opinion: This Standard is better than no standard. Appraisers have been using ANSI since 1996. I did not hear about problems with using it or with lender clients. Change is hard.

See the end of this newsletter for info on Appraisal Institute’s New 4 hour online ANSI class and an excellent ANSI webinar this Monday with Lyle Radke from Fannie being grilled by three appraisers! Two of them had negative comments.

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Desktop appraisals okay for some Fannie Loans March 2022

Posted in: ANSI, appraisal forms, liability, real estate market

Tags: ANSI, Fannie, liability, real estate market

Fannie Wants Desktop Appraisals

By Ann O'Rourke on February 18, 2022 / Leave a comment

Desktop Appraisal to Become the New Norm

by Isaac Peck, Editor

Excerpts: Sketch vs. Floor Plan

One notable requirement that is expected of the Desktop assignments is that they will require a floor plan instead of just a sketch. A floor plan takes the sketch a step further by including interior walls and room labeling, in most cases.

The obvious question is how are appraisers going to get these floor plans?

…the requirement for a floor plan in the desktop appraisal strongly suggests that appraisers will be required to work with real estate agents and/or the home seller and have them use a third-party tool to walk through the house, take pictures, and use advanced mobile app to generate a floor plan based on the agent or seller walking through the house.

… There is also the question of whether the introduction of desktop appraisals will potentially lead to a broader range of alternative appraisal products into the mix. Given that some senior executives at Fannie Mae were predicting that hybrid appraisals would become mainstream by 2022, it is actually a little surprising that desktop appraisal assignments are the first alternative product to get a permanent place on the GSE’s valuation roster. Appraisers will just have to wait to see what the future holds!

To read more, click here

My comments: Who will do the floor plans? They take much time for appraisers to measure and use appraisal sketching software. Many years ago, Fannie required them for a year or so, but quit due to appraiser complaints. I still do rough sketches for myself, so I don’t miss a bathroom or small bedroom!

Fannie met with Cubicasa and Inside Maps, who agreed to make their software conform to ANSI. Cubicasa is $34.90 per use. I have no idea how a homeowner will be expected to have an expensive smartphone (iPhone 12 Pro +) and learn how to use this software. In my market, many real estate agents are having these done or doing it themselves.

Some AMCs are recruiting appraisers to do these desktops with someone else using the floor plan apps. I don’t think many fee appraisers will want to hassle with finding someone to do them and pay for using the app.

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Appraisal Obsolete? Now or in the Future?

Posted in: ANSI, Appraisal Foundation, bias, desktop appraisals

Appraisal Comps in Lopsided Markets

By Ann O'Rourke on February 11, 2022 / Leave a comment

Different colorful shapes wooden blocks on beige background, flat lay. Geometric shapes in different colors, top view. Concept of creative, logical thinking or problem solving.

Choosing comps in a lopsided market

By Ryan Lundquist

Excerpt: QUESTION: With so many listings receiving offers above list, and people having to pay the shortfall between the appraised value and the contract price, how do appraisers look at comps? If a property sold at $580,000, but it actually appraised for $547,000, and the buyer paid the difference, which number do you use? $580,000 or $547,000?

ANSWER: Here are a few things on my mind.

1) Weigh the comps:

In any market (not just today), we have to weigh the comps. Or another way to say it is, we have to appraise the comps so to speak. What I mean is if something clearly sells for too much, it’s reasonable to give that property less weight in our analysis. Likewise, if a property sells for too little, we might also give less weight to that sale. Granted, selling for too little isn’t as common lately, but in past markets we regularly considered whether short sales or bank-owned sales sold below market value.

2) One sale doesn’t make or break the market:

It’s important to note one sale doesn’t make or break the market. This means one lofty “lone ranger” sale doesn’t all of a sudden mean the rest of the market will go to that level. This would be like saying that record-breaking $7M sale in Shingle Springs from August will pull the rest of the market up. Nah, I don’t think so. Or Zillow buying a house for $40,000 more than the comps will cause the rest of the market to rise. Nope. If one sale closes at $580,000, but the rest of the market is below $550,000, we won’t arbitrarily accept $580,000 as the new neighborhood price threshold. The same would hold true if a different house sold at $450,000. This one “low ranger” (sorry) won’t automatically drag the rest of the market down.

To read more plus lots of comments, click here

My comment: Some good comments and tips for this crazee market!!

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Appraisal Obsolete? Now or in the Future?

Posted in: ANSI, appraisal, liability, USPAP

Tags: ANSI, appraisal how to, liability, USPAP

AMC Mergers and Acquisition for Appraisers

By Ann O'Rourke on February 4, 2022 / Leave a comment

AMC Mergers and Acquisition – Someone has a positive view of residential lender appraising!

Nationwide Property & Appraisal Services purchased by investment firm Arcapita Group Holdings

Excerpts: The deal gives Arcapita an AMC that serves mortgage lenders in all 50 states, has a network of over 15,000 licensed appraisers, and grossed $144 million in revenue in 2021.

“We were attracted by Nationwide’s highly cash generative business, experienced management team, and strong base of clients across the country,” Arcapita CEO Atif Abdulmalik said in a statement. “Close to 50% of Nationwide’s customers have maintained their relationship with the company for over six years, highlighting the longevity of its customer relationships, and the company benefits from a free cash flow conversion rate of over 99%.”

The AMC has acquired five other companies since Corridor bought a stake in Nationwide in 2016. In June, Nationwide acquired Portland, Oregon-based First Choice Appraisal Management, expanding its reach into the Pacific Northwest.

Other large financial firms are also putting money into the appraisal management space, which is highly fractured.

In October, private holding group StoicLane acquired control of the appraisal management company Lender’s Valuation Services (LVS).

To read more, click here

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Class Valuation purchases Metro-West

Excerpt: In a press statement, Class Valuation said Metro-West, founded in 1987, is the largest independent residential appraisal firm in the country, with staff appraisers in over 80 U.S. metros.

Class Valuation, which itself is owned by private equity firm Gridiron Capital, said the acquisition of Metro-West would fit into its larger strategy of fusing tech tools such as automation and 3D measurements to help clear the well-documented capacity issues in appraisal.

“One area of focus for us has been the growth of a staff appraiser network and building out a nation-wide trainee program,” John Fraas, CEO of Class Valuation, said in a statement.

This is the fifth acquisition Class Valuation has made in the last 12 months, and the seventh in recent years. In September, Class Valuation acquired Kansas City, Missouri-based Pendo Management for an undisclosed sum.

There’s been a surge in private equity investment in the U.S. appraisal space over the last two years.

To read more, click here

My comments: The investors see money to be made in appraisals. What will they think when it inevitably crashes again, like it always does. I wish I had an AMC I could sell to investors ;>

If you work for any of these AMCs, keep close track of your billings, so they don’t get lost in any accounting mergers. No one knows, of course, if their appraisal management will change.

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Posted in: AMCs, ANSI, appraisal business, appraisal management company, waivers

Tags: AMC, ANSI, appraisal business, waivers

Neighborhood Boundaries for Appraisals

By Ann O'Rourke on January 28, 2022 / Leave a comment

Gentrification, neighborhood boundaries, and bias

By Ryan Lundquist

Excerpts: Photo used with permission (thanks, Vicky).

Sometimes, crossing the street can make all the difference for value. In short, if we don’t understand where a neighborhood starts and ends, we might choose the wrong comps.

Q&A #3 How do we know neighborhood boundaries?

Okay, this is a big question, and it could easily be a dissertation. For starters, let’s consider what Fannie Mae says about neighborhoods:

Fannie Mae: “The appraiser should provide an outline of the neighborhood boundaries, which should be clearly delineated using ‘North,’ ‘South’, ‘East,’ and ‘West’. These boundaries may include but are not limited to streets, legally recognized neighborhood boundaries, waterways, or other natural boundaries that define the separation of one neighborhood from another. Appraisers should not reference a map or other addendum as the only example of the neighborhood boundaries.”

Other thoughts (mine): I think sometimes we focus only on major streets, but let’s also consider school boundaries and even how neighborhood associations or city websites define areas. But also, where would residents themselves draw the lines? And where would buyers be hunting for a home before shopping somewhere else? All these things could be clues.

To read more and see lots of maps and graphs, click here

My comments: Excellent analysis of specific neighborhood boundaries with maps and graphs, of course. Worth reading. The Jan. and Feb issues of the monthly Appraisal Today has this article: Does my neighborhood really need to be analyzed? Parts I II By Tim Andersen, MAI. The best neighborhood explanations I have ever read!!

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Appraisal Completion Certifications – be careful

Posted in: adjustments, ANSI, appraisal classes, appraisal how to, bias

Tags: adjustments, ANSI, appraisal how to, bias, Fannie, mortgage lending

Desktop appraisals okay for some Fannie Loans March 2022

By Ann O'Rourke on January 21, 2022 / Leave a comment

Desktop appraisals okay for some Fannie Loans March 2022

Fannie announcement – About Desktop Appraisals

Beginning in March 2022, desktop appraisals will be an option for some loan transactions. This fact sheet provides high-level information on Fannie Mae’s requirements for desktop appraisals and answers some frequently asked questions. We’ll be adding information to the fact sheet, such as additional FAQs as needed.

Excerpts:

Use Form 1004 Desktop
Must include floor plan with interior walls.
The appraiser must have sufficient information to develop a credible report.

To read the fact sheet, click here

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Desktop Appraisal to Become the New Norm

by Isaac Peck, Editor, WorkingRe

Note: This article was written before the Fannie announcement above.

Excerpts: A number of questions remain regarding how the GSEs will establish the eligibility criteria for what types of loans, transactions, and loan-to-value (LTV) ratios will qualify for these desktop valuations. For example, Thompson’s comments that such a move will provide relief on rural appraisals runs contrary to most conventional appraisal experience in the industry where appraisal waivers, hybrid appraisals, and other “alternative” valuation products have primarily been used in cookie-cutter, tract home neighborhoods where model-match comps are more readily available.

In fact, over the years many senior executives at the GSEs and at major lending institutions have acknowledged the need for traditional appraisals on rural properties—which are much more likely to have unique features and require more complex analysis.

There is also the question of whether the introduction of desktop appraisals will potentially lead to a broader range of alternative appraisal products into the mix. Given that some senior executives at Fannie Mae were predicting that hybrid appraisals would become mainstream by 2022, it is actually a little surprising that desktop appraisal assignments are the first alternative product to get a permanent place on the GSE’s valuation roster. Appraisers will just have to wait to see what the future holds!

To read more, click here

My comment: Interesting and worth reading about the background of Fannie’s change

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Posted in: ANSI, appraisal business, appraisal forms, appraisal how to, bias, desktop appraisals, Fannie, liability, square footage

Tags: ANSI, appraisal business, appraisal how to, bias, desktop appraisals, Fannie, square footage

Appraisal Obsolete? Now or in the Future?

By Ann O'Rourke on January 14, 2022 / 1 Comment

Is Appraisal Obsolete?

By George Dell

Excerpts: You’d think client/user expectation would follow wise professional leadership. Hah!

Innovation and leadership in knowledge and education has declined. The profession and its key organizations have long lost their default position. Pride in designations are diminished. Replaced by licensing, outdated appraisal processes, echoed education, and octopus-like regulation. These are built upon subjective, belief-based ‘credibility’ standards. Each of these re-reinforce what clients want and expect. Why?

USPAP (Uniform Standards of Professional Appraisal Practice) is edited every two or three years. New updates may simply undo prior updates. Chugga chugga.

Appraisers are required to repeat the same education and repurchase the USPAP book every two years, even when changes take place over a three-year period. And pay fees for the privilege. “Automated valuations,” “evaluations,” and “waivered” ways do not have such taxes and ‘regulatory guidance.’ This creates a market advantage for the lesser-quality product!

To read more, click here

My comment: I agree, unfortunately. I love the use of “octopus”: very descriptive

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Posted in: ANSI, appraisal business, Fannie

Tags: ANSI, appraisal business, Fannie

Three 2022 Residential Appraisal Forecasts

By Ann O'Rourke on January 7, 2022 / Leave a comment

Three 2022 Residential Appraisal Forecasts

The 20 appraisal events that will surface, occur or continue on into 2022

By Tim Andersen, MAI

Excerpt of three of the Events:

6. So far, appraisers have not organized themselves to fight the bogus bias and discrimination charges against them. Despite the need for such pugilistic organization, however, the status quo won’t change.

9. More and more state appraisal and taxing authorities will recognize Fannie Mae’s move to use the ANSI measurement standards by adopting those standards themselves. While this is likely a positive step, it will result in another level of regulation and standards imposed on appraisers.

10. State appraisal boards will continue their migration toward becoming consumer advocacy agencies; thus, their migration away from their original purpose, the credentialing, educating, and disciplining of real estate appraisers.

Warning: some are very controversial!

To read all 20, click here. I posted this on my blog, so you can make comments!