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Appraisal Comps in Lopsided Markets

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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 

Humor for Appraisers

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NOTE: Please scroll down to read the other topics in this long blog post on unusual homes, surplus vs. excess land, ANSI, USPAP, Liability, mortgage origination stats, etc.

 

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Posted in: ANSI, appraisal, liability, USPAP

AMC Mergers and Acquisition for Appraisers

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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Appraisal Obsolete? Now or in the Future?

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, ANSI, Waivers, Cell phone full, mortgage origination stats, etc.

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

Neighborhood Boundaries for Appraisals

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!!

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, ANSI, bias, smells, mortgage origination stats, etc.

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

Desktop appraisals okay for some Fannie Loans March 2022

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

Appraisal Completion Certifications – be careful

Appraisal Business Tips 

Humor for Appraisers

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

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, ANSI, Liability, appraisal business, Fannie, How to, mortgage origination stats, etc.

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

Appraisal Obsolete? Now or in the Future?

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

Appraisal Business Tips 

Humor for Appraisers

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

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 ANSI, Fannie, Appraisal Business, unusual homes, mortgage origination stats, etc.

Read more!!

Posted in: ANSI, appraisal business, Fannie

Three 2022 Residential Appraisal Forecasts

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!

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Posted in: ANSI, appraisal, Fannie, forecast, UAD

2022 Residential Appraisal Forecast – 20 Events

The 20 appraisal events that will surface, occur, or continue on into 2022 By Tim Andersen, MAI

Editor’s note: some of these are controversial! Please leave your comments, and read other appraisers’ comments, below. 

Mortgage forecast – loans predicted to drop 30% in 2014

Appraisers' forecast for biz in 2014

Appraisal Business Tips 

Humor for Appraisers

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Read more!!

Posted in: forecast

Appraisal Completion Certifications – be careful!

Appraisal Business Tips 

Humor for Appraisers

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

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, Fannie ANSI requirements, mortgage rate forecast, mortgage origination stats, etc.

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ANSI Z765-2021 Information Resources – CLICK LINK BELOW FOR MORE

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Posted in: Fannie, future, lender appraisals, liability

Fannie requiring ANSI for appraisals starting 4/1/22

ANSI Update

I have been getting questions from appraisers but did not have time to research this Very Hot Topic. Below is a link to purchase the new 2021 Standards.
There are lots of comments online. The first link below by Appraisersblogs allows comments which you can read and make your own comments. The second link is a short blog post by McKissock.
Purchasing the Standards document for $25 is a good idea—link at the end of this section. I purchased a copy, so I knew what it said. Hopefully, most appraisers who do GSE appraisals will get a copy. Disclaimers coming soon regarding ANSI, assessor’s offices, etc. Disclosure of what you use is an excellent idea.
For many years, I did relocation appraisals, where 2-3 appraisers appraised the same house before the sale. Sq.ft. by the appraisers was very seldom the same. We did future values, typically 90-120 days in the future. My most favorite appraisals. Every appraisal was a test of how close I came to the sales price.
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ANSI Measuring Standard Required on April 1, 2022 – Comments allowed
By Appraisersblogs
Excerpts: includes Fannie’s 1-page “Standardized Property Measuring Guidelines” with good information.
Does following ANSI even reflect the market? Perhaps, adopting the ANSI standard will make the description of the subject property more precise. However, how is this going to help if Realtors, assessors, builders, and architects are not measuring by the same standard? Will this create a false sense of accuracy? Will there be a lot more discrepancies once the ANSI measuring standard is used by appraisers for the subject property while different measuring standards measure the comparable sales. And how do we apply the ANSI measuring standard on exterior-only appraisals, desktops, hybrids, and 2055s?
This blog post is a good place to read comments and leave your own. Over 35 comments. Click here to read.
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Fannie Mae to Adopt ANSI Measurement Standard in 2022
Short blog post with good info
By: Dan Bradley (McKissock)
Excerpt: ANSI Z765 is a copyrighted document. A downloadable PDF is available for purchase from Home Innovation Research Labs for $25.00. The website can be accessed here: https://www.homeinnovation.com/z765.
To read more, click here

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Posted in: Fannie, FUN, humor, square footage

Appraisal Errors from Reviewers and State Boards

25 Common Errors in Appraisal Reports

Excerpts: As a real estate appraiser, much of your success relies on your reputation as a competent professional. Unfortunately, certain appraisal violations are quite common—including errors in appraisal reports. Make sure you’re aware of these mistakes so that you can avoid them. Here’s a compilation of the most common errors and deficiencies found in appraisal reports by reviewers, regulators, and appraisal boards.
  • Not stating the report option utilized.
  • Not providing enough analysis for the intended user or reader to understand the report properly.
  • Inconsistencies between the description of the subject property in the improvements section and the photographs, sketch, sales comparison grid, and other areas in the report.
  • Inappropriate use of boilerplate commentary in the appraisal report to describe the neighborhood or to explain the reconciliation of the sales comparison approach.
  • Failure to summarize the support and rationale that supports the highest and best use opinion.
  • Not complying with the most current USPAP.
  • Failure to explain the exclusion of the cost and or income approaches.
To read more, click here
My comments: This was originally published by McKissock in 2019 and updated in 2020. We can always use these reminders. We know them, but sometimes forget to do them, update templates, boilerplate, etc.

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Posted in: appraisal, bias, Fannie