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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

Tags: adjustments, non-lender appraisals, real estate market

Why Appraisal Workfiles Are Important

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

Why an Organized Workfile is Your Best Defense

By Craig Capilla

Excerpts: We all know that the Uniform Standards of Professional Appraisal Practice (USPAP) set the baseline for what must be included in a workfile. We’ve all also heard ad nauseum that USPAP is a minimum standard. Still, all too many appraisers seek only to meet that minimum standard and little more. That’s where the trouble begins. Particularly when speaking about the workfile, for my money, the most dangerous words in USPAP are “or references to the location(s) of such other data, information, and documentation.” There it is, right there in plain English: USPAP permits appraisers to maintain a reference to the data, information, and documentation considered as a part of the assignment, and the appraiser is NOT obligated to keep a contemporaneous copy of those items.

That minimum standard is all well and fine until one day many months later, when an enforcement agency demands that the appraiser produce that information, usually on a tight timeline, and the information is no longer available or the source now shows different information than what was available at the time of the assignment.

Believe me when I tell you that it is not a good feeling when a regulator asks you to explain why you didn’t consider a particular piece of information, and you cannot summon an answer. Similarly, there are few things more liberating than producing a document that shows the information you are being asked about was not available to you at the time you performed the assignment. I’ve seen this happen. Systems fail. MLS aggregators have software glitches. Public record updates at its own pace. And sometimes, that one crucial piece of information isn’t there anymore when you need it.

To read more, Click Here

My comments: The article also discusses bias. Capilla is an attorney who defends appraisers. Newer appraisers are lucky. Scanning work files is easy. I started appraising before the Internet and easy scanning and filing. My office and home garage are filled up with paper files! I have PDF copies of all the appraisals I have done as a fee appraiser on my main computer, except those done before PDFs were available.

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NOTE: Please scroll down to read the other topics in this long blog post on appraiser discrimination lawsuit, waivers, staying positive with slow business, appraiser’s economic forecast, unusual homes, mortgage origination stats, etc.

Functional Obsolescence for Appraisers

Posted in: appraisal business, bias, Economic analysis, USPAP, waivers

Tags: appraisal business, bias, Economic analysis

Functional Obsolescence in Appraisals

By Ann O'Rourke on March 29, 2024 / Leave a comment

Functional Obsolescence Can Be Challenging

By McKissock

Excerpts: For appraisers, functional obsolescence can be a challenging concept because the elements that influence property values may not be obvious or immediately apparent. To help you better understand what it means and how to pinpoint it, we’re exploring some examples, the different types of functional obsolescence, and how it can influence property values.

Additionally, we’re sharing insights from appraisers who answered our survey question, “When dealing with functional obsolescence in real property appraisal, what aspect do you find most challenging?”

Topics include:

Types of functional obsolescence
Curable obsolescence
Incurable obsolescence
Superadequacy

What aspects of functional obsolescence do appraisers find most challenging? We asked our appraisal community, “When dealing with functional obsolescence in real property appraisal, what aspect do you find most challenging?”

The top two answers were “supporting adjustments for it” and “finding comparable properties with similar obsolescence.” Here are the full survey results, followed by comments from appraisers who shared further insights into these two common challenges related to functional obsolescence:

Supporting adjustments: 46%

Finding comps: 33%

Sample appraiser comments:

“Functional obsolescence is not a searchable criterion in any MLS database I’ve found. The ability to find a credible impact on other homes repeatedly is an anomaly. So, I may be able to generate a factor or dollar difference but having only one comp to determine with leaves you deciding on credibility or making no deduction if you don’t feel it’s a credible adjustment.”

To read more, Click Here

My comments: We all encounter Functional Obsolescence when appraising. The blog post is well-written and understandable. It is worth reading the full blog post and the appraisers’ comments. Plus, the explanations about functional obsolescence are good reminders.

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NOTE: Please scroll down to read the other topics in this long blog post on home gets 147 offers, cutting costs, manufactured homes, appraisal analysis, unusual homes, mortgage origination stats, etc.

Posted in: adjustments, appraisal business, FHA, real estate market

Tags: adjustments, appraisal business, FHA, real estate market

How to select appraisal comps

By Ann O'Rourke on March 22, 2024 / Leave a comment

Dos and Don’ts of Selecting Appraisal Comps

Excerpts: Follow these dos and don’ts to help ensure that relevant comparable sales are established:

Here are a few topics

Do welcome relevant comparable sales from real estate agents
Don’t limit the number of comparable sales to three
Do consider objective characteristics when selecting competing neighborhoods

Don’t use appraisal comps based on price

As an appraiser, you must provide an unbiased opinion of value. Selecting comparable properties based on price may inadvertently favor properties within a predetermined price range, rather than those genuinely similar to the subject property in terms of location, size, condition, and other relevant characteristics. To maintain objectivity and credibility, you should evaluate sales based on criteria that most accurately reflect comparability, rather than focusing on price.

Do focus on characteristics of the property

Identify properties with comparable square footage (including finished basements), number of bedrooms and bathrooms, lot size, view (e.g., waterfront), and amenities. Prioritize features that are highly sought-after in the property type and market. For instance, in the subject’s market, a mountain view could significantly impact the demand and marketability of a vacation condominium home.

To read more, Click Here

My comments: Worth reading. Good analysis of factors in comp selection.

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NOTE: Please scroll down to read the other topics in this long blog post on Fannie March Update, Bias and not using time adjustments, Climate change effects on risk and values, answer your phone if you want more appraisal business, unusual homes, mortgage origination stats, etc.

Urban, Suburban, Rural in Appraisals

Posted in: appraisal business, bias, climate change

Tags: appraisal business, bias, climate change, Fannie

How To Appraise Rural Properties

By Ann O'Rourke on March 15, 2024 / Leave a comment

How To Appraise Rural Properties

Excerpts: Appraising residential properties in rural areas can be both challenging and rewarding. Unlike the standardized expectations of urban and suburban properties, rural properties often present unique characteristics that require a nuanced approach to valuation. Whether you’re a seasoned appraiser or new to the field, having a better understanding of rural properties is essential for providing credible appraisals. In this guide, we’ll explore what defines a rural property, the challenges appraisers face, reasons for conducting rural appraisals, strategies for finding comparables, and tips for writing a compliant appraisal report.

Defining rural properties – USDA and GSEs
Challenges of appraising rural properties
Appraising rural properties presents unique challenges due to their diverse characteristics and market dynamics.

Topics include:

Diverse property types and uses
Unique property characteristics
Limited market activity and more
Writing your rural property appraisal report – good ideas

To read more, click here

My comments: Worth reading, if only to find out about rural appraising. Well written. There are relatively few residential lender appraisals available now. This is an excellent diversification opportunity, with little competition from other appraisers or the GSEs use of other ways to get a value without human appraisers.

What if there are few rural areas near you?

You can expand your area to include rural appraisals to get more business.

When I worked for a northern California assessor’s office with rural areas I learned a lot about almond growing (the main crop) and other ag topics. It is not hard to learn the valuation factors. I had niece who had several horses for many years where she lived. There are equestrian facilities within 5 miles from my house in Oakland hills and in farther out Bay Area cities with larger lots. You may have some similar rural experience now!

The American Society of Farm Managers and Rural Appraisers www.asfmra.org has a specialty in Rural Appraising, but it requires a Certified General. There may be seminars available. Another reason for upgrading!

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NOTE: Please scroll down to read the other topics in this long blog post on USPAP and Personal Inspection, GSE Appraisal Modernization, Transaction costs and values including real estate commissions, unusual homes, mortgage origination stats, etc.

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Posted in: appraisal business, appraisal how to, modernization, Uncategorized, USPAP

Tags: appraisal business, appraisal how to, modernization by GSEs, USPAP

Remove all bathtubs from home?

By Ann O'Rourke on March 8, 2024 / Leave a comment

Is it a problem to remove all bathtubs in a house?

By Ryan Lundquist

Excerpts: I’ve been asked this question twice this week. Is it a problem to remove the tubs from each bathroom? People planning a remodel asked if it was a big deal or not to only have a walk-in shower in each bathroom. Here are my thoughts, and I really want to hear from you too. Anything to add?

It’s not a black and white answer: There’s not one black-and-white answer that applies to every house, price range, location, or market. Bottom line. But backing up, part of the fun of working in real estate is figuring out how to answer questions like this in a way that is balanced and hopefully reflective of the sentiment in the marketplace.

CubiCasa – Home Measurement From Inside A House

Posted in: adjustments, appraisal business, BATHROOMS, Economic analysis, forecast, modernization, real estate market

Tags: adjustments, appraisal business, BATHROOMS, desktop appraisals, Economic analysis, forecast

Appraising Luxury Homes

By Ann O'Rourke on March 1, 2024 / Leave a comment

What Are the Top Luxury Markets in North America Right Now?

Excerpts: Where are the hottest high-end real estate markets? Whether you’re looking to specialize in luxury home appraisals or you’re simply reading up on the latest market trends, you may want to pay attention to areas where luxury homes are in high demand.

According to the Institute for Luxury Home Marketing’s February 2024 report¹, the single-family luxury home segment is showing promising signs of growth. Both inventory levels and new listings increased significantly in recent months, leading to an 18 percent increase in sales and a 1.6 percent increase in the median sold price. Even more telling, contract signings for homes priced at $1 million or more have increased by 11 percent over last year, and demand remains high among affluent buyers.

Top list of luxury home markets in 2024. You may be surprised!

To read more, Click Here

My comments: In this newsletter, I always know what are hot topics. Constant Contact gives me the number of clicks. Most popular is usually Claudia’s advice at the top of every email. Also popular are large luxury homes with a photo.

I have been thinking for a while about including appraising luxury homes, since my subscribers like to read about them. Maybe a possible specialization? There were not many where I worked, so I did not specialized in them But, I see my area, East Bay California is listed now! The median home price in the Bay Area is around $1,300,000.

Check out the list of areas in the article to see if any are close to you.

Lenders have always had special, very small lists of appraisers who can appraise these homes. I assume the AMCs have these types of lists. Some may not have them. You definitely must get a higher fee for them.

I know several appraisers who have been doing them in my area for a long time. To do them, it is best to work in an area with many luxury homes. You need to network with the brokers that sell them.

The post above is also a promo for McKissock’s Certified Luxury Home Appraiser Program. 14 hours of CE for $650. I have not taken it, but I don’t know of many other types of diversification with a certificate. Might be interesting even if you don’t know if you want to do them.

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NOTE: Please scroll down to read the other topics in this long blog post on residential fee appraiser testifies at bias hearing, boom and bust markets, unusual homes, mortgage origination stats, etc.

Posted in: appraisal, appraisal business, bias, real estate market

Tags: appraisal business, bias, real estate market

How to Find Comps With Few Sales

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

The challenge of pulling comps in 2024

By Ryan Lundquist

February 14, 2024

Excerpts: Pulling comps in 2024 is tough. Think about it this way. If we have 40% fewer sales happening, that means there are 40% fewer comps. Yikes. Let’s talk about this. I also have some market recap visuals to unpack what’s been happening in 2024 so far.

GO BACK FURTHER IN TIME:

One of the things I’m doing more often today is looking at older comps in the immediate neighborhood. I find myself scouring 2021 onward especially. The truth is there are portions of 2021 and 2022 where prices are exactly the same as today too, so if I use an older comp, I don’t always need to adjust for the way the market has changed. But backing up, I can look at older stuff for the sake of research, but this doesn’t mean I’ll use a super old comp in a report. In short, it’s not enough today to go back 90-180 days because there just aren’t enough data points in so many cases…

WATCH THE MEDIAN TREND

The median price for the region doesn’t translate rigidly to neighborhoods, so be careful about saying stuff like, “The median is up 3% this year, so neighborhood prices are up 3%.” Maybe. Maybe not. Look to the comps most of all. In my experience, some people get really upset when I share median trends because the sentiment is the median isn’t a perfect metric (true)…

EXPAND TO OTHER NEIGHBORHOODS:

Looking up other nearby neighborhoods is something I’ve done much more of lately since sales volume has plummeted. The ideal is to compare areas with similar prices, but even if the price point is a bit different, it can be valuable to see what is happening in a different nearby neighborhood. I may or may not use comps from a different neighborhood. I’m just trying to understand what the market is doing…

To read more and see the graphs with excellent illustrations, Click Here

My comments: Very good tips from Ryan. Market conditions is the easiest adjustment to make. This is my first choice for any unusual homes without current data in any market. I quit making dollar adjustments on form appraisals many years ago, but I always do market conditions adjustments when needed. I appraise a lot of 2-4 units and regularly go to other neighborhoods for comps.

I have been doing this for many years. I do a lot of estate appraisals, which are not current value.

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NOTE: Please scroll down to read the other topics in this long blog post on residential fee appraiser testifies at bias hearing, what happens to Fannie complaints, Why I love real estate appraising, unusual homes, mortgage origination stats, etc.

Posted in: appraisal, bias, Fannie

Tags: appraisal, bias, Fannie

Appraising Historical Homes

By Ann O'Rourke on February 16, 2024 / Leave a comment

Historical Properties and Their Unique Appraisal Approaches

Excerpts: Appraising historical properties involves a complex interplay of factors, making it a specialized field within real estate valuation. This article provides an insight into the appraisal process of historical properties, emphasizing the role of market data, potential buyers, specialized databases, appraisal methods, and the significant impact of preservation restrictions.

The appraisal process begins with a thorough analysis of market data, focusing on sales of properties that share historical or antique characteristics. This comparative market analysis extends beyond standard parameters like size and location to include age, architectural style, and historical significance. The scarcity of historical properties often requires appraisers to expand their search to find comparable sales, both geographically and over longer time frames.

The distinction between a historic property with preservation restrictions and an old house without them is crucial in the appraisal process. Preservation restrictions, often governed by the National Register or local historical commissions, can add value by ensuring the property’s integrity. However, these restrictions may also limit modifications, potentially affecting the property’s market appeal.

To read more, Click Here

My comments: If you don’t want to appraise a historic property, be sure to check it out before accepting the assignment!

Worth reading. A good summary. I suspect that a company based in Boston, MA sees lots of historic homes!

For many years I appraised in the nearby city of Berkeley, CA. There were definitely adjustments for homes built by famous, widely known, architects. Fortunately, their names were listed in the MLS.

In my small city, there are a few homes by famous architects. One was sold about 20 years ago by a famous architect, Julia Morgan. She designed more than 700 buildings in California during a long and prolific career. She is best known for her work on Hearst Castle in San Simeon, California. No effect on value. I was surprised. If it was in Berkeley, there would be a substantial adjustment.

Some cities have large historic buildings, such as the City Hall in my city, built in 1895, twenty years after the city charter in 1872. The Gold Rush in California started in 1848, which brought many people to Northern California.

But, in my city, there are many restrictions on what can be done with older homes, such as Victorians. For example, window replacements must replicate the original windows, plus some other restrictions on exterior modifications. Restrictions are from the city, the county, and the state. In my city of 78,000 population, there are over 10,000 buildings constructed prior to 1930, including many classic Victorians.

Many downtown mixed-use buildings (retail and apartments) are in my city. I appraised many of them, but never noticed any effect, plus or minus, for historic designation.

Knowing what modifications are allowed is very important for the appraiser. Many people don’t like them. You need to know the market. Sometimes buyers like them and sometimes not.

See how many historic homes and buildings are where you do appraisals and where you live. You may be surprised!

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NOTE: Please scroll down to read the other topics in this long blog post on appraiser fights back against bias accusation, ok behavior when taking Zoom CE classes, estate appraisal liability issues, unusual homes, mortgage origination stats, etc.

Appraisers Riding the Waves of Up and Down Mortgage Rates

Posted in: adjustments, appraisal classes, bias, non-lender appraisals

Tags: adjustments, appraisal business, bias, non-lender appraisals

Appliances for FHA appraisals

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

How does the FHA define appliances?

By Daniel A. Bradley, SRA, CDEI

In September of 2015, FHA revised Handbook 4000.1 to provide a specific definition, which includes:

Refrigerators

Ranges/ovens

Dishwashers

Garbage disposals

Microwaves

Washers and dryers

It’s important to note this does not include garage door openers, swimming pool pumps, intercoms, sound systems, and security systems.

How do appraisers consider appliances?

FHA Handbook 4000.1 also clarifies when appliances are required to be operational by stating, “Appliances that are to remain and that contribute to the market value opinion must be operational,” and, “The Appraiser must note all appliances that remain and contribute to the Market Value.”

FHA requirements for appliances: Is a house required to have a stove?

To read more, Click Here

My comments: Worth reading if you do FHA appraisals. Short and understandable. I did FHA appraisals for a few years in the mid-80s. Too many requirements so I quit doing them, but they helped me get started in my appraisal business.

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NOTE: Please scroll down to read the other topics in this long blog post on E&O and state boards, bias, 32% sales are new homes, unusual homes, mortgage origination stats, etc.