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What is a “good” appraiser?

8 Characteristics of a Successful Real Estate Appraiser

Excerpt: Here are two:
Unbiased
The ability to form an unbiased, objective opinion of value is absolutely essential in this line of work. According to this survey, many appraisers agree that this is the single-most-important trait you need to have as a real estate appraiser. In order to provide trustworthy results and uphold the integrity of the appraisal profession, you must be unbiased. Otherwise, you risk losing your professional reputation.
Analytical
It’s important for appraisers to be analytical, as each appraisal assignment will require thorough analysis and critical thinking.
To read more, click here
My comments: I was hooked on science in my first science class: high school biology. I studied biology and chemistry in college. I learned to be objective and unbiased, analytical, and open to almost any possibility. I have used these skills in appraising. I have always been curious, which keeps me up on what is new and other ways of looking at appraising a property. As far as I know, relatively few appraisers have science degrees.

Humor for Appraisers

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To read more of this long blog post with many topics, click Read More Below!!

NOTE: Please scroll down to read the other topics in this long blog post on Real estate market changing?, appraisal  modernization, expert witness, desktop appraisals, cubicasa app, unusual homes, mortgage origination stats, etc.

 

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Posted in: desktop appraisals, Fannie, real estate market

Appraisers – The Past and The Future

Appraisers – The Past and The Future

The Path that Brought Us Here

by Richard Hagar, SRA

Excerpts: A wise man by the name of Jim Irish, former chief appraiser for the Federal Reserve Bank out of Topeka, Kansas, once told me something very profound: “The government is rarely proactive but always reactive.” Translation: laws, rules, and guidelines are usually developed after a problem smacks us upside the head. Since hearing this, I have found that it also applies to large enterprises.

Appraisers continued to tell lenders that they drove by each of the comparables used in the report. Years later, when lenders, Fannie Mae, Freddie Mac, FHA, and the VA spot-checked reports, they found out that the condition or location of many comparables didn’t match what was reported. So, the reactive response was to require the appraiser to affirm, under penalty of perjury (which stands to this day), and provide original photographs of each comparable.

Failure to inspect triggered client engagement letters stating the absolute requirement to personally inspect each of the comparables, provide original photographs, and create a system that inspects the photographs and can tell when a photograph is used twice or sourced from the MLS or county—clients know who’s lying to them and fees are lower because of it.

To read more, click here

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Prepare for Change

by Richard Hagar, SRA

Excerpts: In my career, I’ve been through four major changes in the market and our business, so what’s about to happen isn’t my first rodeo. I’m going to point out some things that will make a few people angry. However, I’m trying to help by pointing out how you can become better and profit from the change.

Waivers

Both Fannie Mae and Freddie Mac allow “appraisal waivers” (loans where no appraisal is required), and in the past, waivers were limited to fewer than 5% of the loans they purchased from lenders. However, their waivers have increased to 48% of their loan purchases over the past year. Imagine that 48% of the loans no longer require an inspection or appraisal.

Prior to 2022, Fannie Mae’s UAD system reviewed approximately 20,000 appraisals a day produced by approximately 40,000 appraisers. This indicates that appraisers were providing one appraisal every other day. Now, consider that waivers reduce the rate to an appraisal once every 4 days. Ouch.

To read more, click here

My comments: I have known Richard Hagar for a long time. He can sometimes be negative or even harsh but has good ideas

The future of residential appraising(Opens in a new browser tab)

Appraisal Business Tips 

Humor for Appraisers

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To read more of this long blog post with many topics, click Read More Below!!

NOTE: Please scroll down to read the other topics in this long blog post on unusual homes, bias, Old comps, investor purchases, mortgage origination stats, etc.

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Posted in: appraisal, appraisal how to, bias, Clubhouse, real estate market

PAVE Appraiser Bashing

PAVE Action Plan to Advance Property Appraisal and Valuation Equity

By McKissock, March 23, 2022
Two of the more controversial recommendations:
Excerpts:
Inform Federal Housing Administration (FHA) borrowers about the process to request a reconsideration of a valuation when the initial valuation is lower than expected.
Perhaps the most far-reaching recommendation for action is number 1.6, which states, “Develop a legislative proposal that modernizes the governance structure of the appraisal industry to improve transparency and public participation in the establishment of appraisal standards and appraiser qualification criteria, and to advance diversity in the profession.” Translation: Amend FIRREA to remove references to The Appraisal Foundation and transfer the Foundation’s authority to write appraisal standards and qualifications to the Appraisal Subcommittee or another federal government entity.
As of this writing, no proposed legislation related to the PAVE recommendations has been introduced. Because committees in both the Senate and the House are holding hearings, a bill (or, more likely, bills) can be expected very soon. Stay tuned.
Short and worth reading. To read more, including links to the full PAVE report and the summary, click here
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AEI’s Comments on PAVE Report
Excerpt: The Brookings and Freddie Mac studies are not based on rigorous data analysis. Most importantly, they conflate race with socio-economic status (SES), i.e. income, buying power, marriage rates, credit scores, etc. Race-based gaps found in the Brookings and Freddie Mac studies either entirely or substantially disappear when adjusting for differences in SES. Furthermore, our analyses show that similar gaps are present in majority White or White-only tracts across different SES levels, raising serious questions regarding a race-based explanation.
To read more, click here
My comment: American Enterprise Institute is a conservative “think tank” and has also supported the appraisers’ side on other issues.
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Congress Committee Meetings on Appraisal Bias

Strengthening Oversight and Equity in the Appraisal Process
Thursday, March 24, 2022
Senate Committee on Banking, Housing, and Urban Affairs
Appraiser Witness: James Park, Executive Director Appraisal Subcommittee
To watch, click here
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Devalued, Denied, and Disrespected: How Home Appraisal Bias and Discrimination Are Hurting Homeowners and Communities of Color Tuesday, March 29, 2022

House Financial Services Committee

Appraiser speakers:
  • Pledger M. Bishop, III, President, Appraisal Institute
  • David S. Bunton, President, The Appraisal Foundation
  • Dean Kelker, Senior Vice President and Chief Risk Officer, SingleSource Property Solutions, on behalf of the Real Estate Valuation Advocacy Association
To watch, click here
My comments: I was not able to watch either of these meetings before writing this newsletter.
Jonathan Miller attended the virtual March 24 meeting and had comments on the March 24 and 29 hearings. To read his comments, click here Scroll down to “James Park”
His blog post for today (usually sent around 11 AM EST) may have comments on the March 29 meeting. To read his comments, click here. Search for “devalued” (Hopefully, this link works.)

Appraisal Business Tips 

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Posted in: ANSI, bias, desktop appraisals

Desktop appraisals – Lots of Info Available!

Desktop appraisals – Lots of Info Available
Fannie and Freddie started using Desktops on March 19, 2022

Both a floor plan and a building sketch with dimensions and GLA calculations are required. ANSI is not required.

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March 2022 Fannie Mae Appraiser Update: 

Link to March Appraiser Update, click here:

Link to “About Desktop Appraisals” PDF with 5 pages of information, click here Watch the Noble Appraiser explore the benefits of performing desktop appraisals:
The Desktop Appraisal Discovery Link to Noble Appraiser on desktops video, click here 

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McKissock: Fannie Mae and Freddie Mac Desktop Appraisals: Your Questions Answered

Excerpts: In January 2022, Fannie Mae and Freddie Mac announced a desktop appraisal option that goes live in mid-March 2022. In various articles and opinion pieces, some claim that desktop appraisals will solve the appraiser shortage and modernize the appraisal process, while others claim that they will cause the demise of the appraisal profession.

Here are a few of the 16 questions answered

  • What is a desktop appraisal?
  • Does USPAP require me to complete an inspection?
  • What data sources are used for identifying the subject’s relevant characteristics?
  • Are there any state restrictions?
  • Must I be competent in the subject’s market area?
  • Are extraordinary assumptions allowed?
  • Does the limited scope of work mitigate my liability?
  • Won’t these types of valuations be risky for the lender

To read more, click here

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Bradford Software Webinar Floor Plans for Desktops – Discover Your Options with 7 Floor Plan Providers March 24, 2022 (1 hour, 34 minutes), with comments from Scott Reuter of Freddie Mac.

It was recorded and is available at https://vimeo.com/692030955

I did not have time to watch it yesterday.

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My comments on the above resources: What’s the best resource(s) for you?

Noble appraiser video is short (3 min. 34 seconds) understandable and very informative. Fannie Mae is “the source” for desktops. McKissock’s Q and A post is well written, understandable with short answers.

Bradford’s video has demos of 7 app providers for floor plans and sketches.

If lenders will use them much is very uncertain. The Covid desktops were never widely adopted. No one knows now which cell phone apps will be used, who will use them, and their accuracy (tested by an independent company). Minimum of an IPhone 12 Pro, with LIDAR camera. Appraisers who have tested them say the floor plans are good, but sketches with dimensions and floor plans may not be accurate on complicated home designs.

Appraisal Business Tips 

Humor for Appraisers

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To read more of this long blog post with many topics, click Read More Below!!

NOTE: Please scroll down to read the other topics in this long blog post on unusual homes, lender bias, ANSI, FHA class, mortgage origination stats, etc.

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Posted in: bias, desktop appraisals, Fannie, FHA

Fannie ANSI Update – 19 New FAQs

Fannie ANSI FAQs Update

Updated Standardized Property Measurement Guidelines – 19 new FAQs, 5 Pages

Excerpt from the short Fannie email sent 3-15-22 at 8 AM (Pacific time): “…Are you ready? We’ve updated the Standardized Property Measuring Guidelines fact sheet to include more answers to your frequently asked questions. Thanks to all the appraisers, AMCs, and lenders who submitted questions.”
My comment: There are no changes to the first page, including comps measured differently and the exception process. Links are included for references in Fannie’s Selling Guide in the Guidelines.
FAQ topics include:
Q5. When common practice in the local market differs from the ANSI standard, can the appraiser modify the subject’s GLA to conform to local custom?
Q8. The ANSI standard specifically notes that the definition of above and below grade could cause some houses to have no above-grade finished square footage.
How should appraisers report GLA in this scenario?
Q9. How will lenders know that appraisers used the ANSI standard?
Q15. Will appraiser adherence to the ANSI standard cause confusion when the subject GLA differs from other sources such as MLS or public record?
Q16. How should appraisers account for rooms located in above-grade finished areas that do not qualify as GLA under the ANSI standard?
Q18. The GLA of comparables available to appraisers may not be based on the ANSI standard. How should appraisers manage this issue?
Q19. How should appraisers value finished areas that the ANSI standard does not include in GLA, such as where the ceiling height is less than 7 feet?
To download the PDF to read the answers and other FAQs,  click here
My comments: Read This Document! I have been waiting for an update to the one-page original Fannie document since it was first released about 3 months ago. There are many, many issues when using ANSI for lenders and AMCs. Appraisers sent many questions to Fannie and made comments during webinars with Fannie.
If you’re looking for a class, webinar, or other ANSI info, go to www.appraisaltoday.com/ANSI

Appraisal Business Tips 

Humor for Appraisers

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NOTE: Please scroll down to read the other topics in this long blog post on unusual homes, new Fannie Form, stress, price per sq.ft., reviewer appraisal problems, mortgage origination stats, etc.

 

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Posted in: ANSI, appraisal business, Fannie Forms, Reviews

Fannie’s New Desktop Appraisal FAQs

Fannie’s New Desktop FAQs

Timeline and 19 FAQs From an email received 3-8-22
“Desktop appraisals will be offered in Desktop Underwriter® (DU®) for eligible transactions starting March 19. Are you ready?
We’ve updated the About desktop appraisals fact sheet with an expanded frequently asked questions section.
Thanks to all the appraisers, AMCs, and lenders who submitted questions, and please continue to Contact us with your appraisal related comments and questions.”
To read the FAQs, click here
My comment: Reading the original Fannie document is good, such as a timeline list, additional verifications, inspections, CU, etc.
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McKissock has an excellent blog post answering many practical questions, including some in the Fannie FAQs and many other questions.
Topics include:
  • What data sources are used for identifying the subject’s relevant characteristics?
  • Are there any state restrictions?
  • Must I be competent in the subject’s market area?
  • Are extraordinary assumptions allowed?
  • Does the limited scope of work mitigate my liability?
  • What is the difference between a sketch and a floor plan?
  • How do I get a floor plan?
  • Does the floor plan need to be verified?
  • Does the property need to be measured per ANSI measurement standards per Fannie Mae’s requirements?
To read more, click here
My comment: Read both the Fannie FAQs and McKissock blog post. How often will desktops be used? It will take a while before they may be widely adopted. See last week’s newsletter. When are we going to get some ANSI FAQs????

Appraisal Business Tips 

Humor for Appraisers

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Posted in: ANSI, appraisal how to, bias, Clubhouse, desktop appraisals, Fannie

Fannie Wants Desktop Appraisals with Floor Plans

Fannie Mae and Freddie Mac to launch remote desktop appraisals in 2022

Desktop appraisals with floor plans

Excerpt:
Beginning March 19, 2022, Fannie Mae and Freddie Mac will accept remote desktop appraisals nationwide on eligible transactions without the appraiser ever stepping foot on the subject property, the Federal Housing Finance Agency (FHFA) announced.
To read more, click here
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Link to FHFA announcement 10/18/21 with more information,click here
My comments: When they submit loan applications, lenders receive a list of appraisal types available for their loans, including waivers. Lenders did not widely choose the desktop Covid appraisals. They preferred full appraisals.
I ran an ad for Cubicasa (floor plan app) on Tuesday this week and got some appraiser complaints. I will be testing it soon and hopefully will be able to use it in my appraisals.
Many anticipate that lender adoption will be slow, including Lyle Radke from Fannie and a group email posting from an appraiser who recently attended a state Mortgage Bankers’ meeting. He said:
“I was on a 4 appraiser panel with +/-60 LO’s representing 20 different lenders. I asked for a show of hands-on how many would be offering Desktop or Hybrid appraisals on March 19… There was not a single hand raised. “
“When we discussed the Desktop and Hybrids, most had no idea about the differences in the two products… All 4 of us thought that the turn time “might” be reduced by 1-2 business days. So, based on a small sample, this may not be as much of a problem as some appraisers think. “

Appraisal Business Tips 

Humor for Appraisers

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

1004MC or 1004 ANSI

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.

ANSI Z765-2021 Resources for Appraisers

Appraisal Business Tips 

Humor for Appraisers

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

Fannie Wants Desktop Appraisals

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

Appraisal Comps in Lopsided Markets

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!!

Appraisal Business Tips 

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Posted in: ANSI, appraisal, liability, USPAP