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NOTE: Please scroll down to read the other topics in this long blog post on GSEs outsourcing AI for appraisal photos and Privacy issues, ROVs, mortgage rate forecast, current real estate market, unusual homes, mortgage origination stats, etc.

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$25M California Estate With a Private Mountain in Somis, CA

Excerpts: 8 bedrooms, 11.5+ baths, 19,660 sq.ft., 22 acre lot, built in 2008

Known as El Palacio Del Solano, the 22-acre property in Somis, CA, boasts a main residence, two-bedroom guesthouse, and an event space designed for grand-scale entertaining. The “ultra-private compound” in the hills of Southern California drew the most clicks on Realtor.com® this week.

Built in 2008, the luxury estate last traded hands in 2021 for $6,250,000. Dubbed “the holy grail of Somis,” the mansion’s lavish amenities include a home theater, massage room, wine cellar, sports court, an arcade room, a lazy-river pool, and a motor court for up to 20 vehicles.

The Spanish-style residence was designed for large-scale entertaining with a wine-tasting room, grand formal dining room, and an outdoor kitchen with multiple seating and entertainment areas. This home’s private massage room, primary suite with sauna, and lazy-river pool were all designed for relaxing.

A spacious four-car garage is attached to the facility equipped with volume ceilings ideal for parking event vans, trucks, and small to mid-size buses. An estimated range of fifteen to twenty cars could comfortably be parked in the driveway and motor court spaces.

To see the listing with 40 photos, Click Here

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Fannie, Freddie’s Offshore Gambit Imperils Privacy of Millions

By Jeremy Bagott, May 20, 2024

Excerpts: Mortgage giants Fannie Mae and Freddie Mac are reportedly “bench-testing” an arrangement with a foreign AI firm in which the offshore firm will data-mine millions of images showing the personal spaces of U.S. homeowners and tenants.

If your home was appraised for a refinance or new mortgage in recent years, the lender likely sent a “property data collector” to take photos of your kitchen, living room, and each of your bedrooms and bathrooms. (Pressured by the Biden administration, government-backed enterprises Freddie Mac and Fannie Mae are instructing lenders they no longer need to use state-licensed appraisers for the task.) The images of your home’s interior spaces, along with identifying information, were then likely uploaded to a server run by a vendor.

Now, according to a source, Fannie Mae and Freddie Mac have potentially caused millions of these images to be made available to an artificial-intelligence company headquartered in Barcelona, Spain, known as Restb.ai. The images are then harvested for information with the help of artificial intelligence.

To read the post plus appraiser comments, Click Here

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Comments from Denis Desaix, SRA, MAI

Editor’s Note: Originally posted on the National Appraisers Forum Google group, which I read regularly.

I think Bagott’s issue is a legitimate concern. I wouldn’t want the interior photos of my home being catalogued by some third-party vendor that were taken related to a mortgage finance transaction I was engaging in. Ditto the floor plan. The data won’t be limited to what is gathered by property inspectors; however, appraisers’ data will also be in that mix.

The fix sounds relatively simple: Require Fannie/Freddie (or any regulated lender, if you will) to process the image-data in-house and maintain it under their control. The counterargument is that if we are going that route, then let’s classify the image data as personal financial information and cover it under the same rules that other consumer financial information is covered by.

However, it seems to me that Bagott’s editorial strongly implies that the imagery data will be identified with a specific consumer/consumer address. I’m not sure that is the case nor would it be necessary to do the analysis Fannie describes.

Here is how Fannie describes the process (from the link Bagott provides):Let’s walk through a process that uses this technology to validate the quality/condition ratings of the subject’s interior compared to the comps and (if applicable) previous photos of the subject.

1. A File# or other tracking number can identify the subject. The address need not be identified.

2. The identity of the comp’s address is less problematic, assuming the photos used are those available for public use. If the photos come from Fannie’s comp database, they, too, can be assigned a tracking number.

3. The vendor works its magic (I would encourage anyone interested at this stage to visit the one identified vendor webpage (https://restb.ai/) and especially click the link to “Appraisals and Inspections” to see how the product can be used for the stated purpose). And, by the way, at least one prominent appraisal forms provider is listed as a customer of this vendor; there are other names that many will recognize as well.

4. The results come back: the subject’s identity isn’t disclosed and remains unknown.

5. Finally, the vendor’s use of the photos is limited by contract, with stiff penalties for violation. If that doesn’t satisfy legitimate security and personal information requirements, the system can be licensed to Fannie/Freddie, and they can run it in-house.

Since we don’t know what protections against potential abuse (if any) are being put into place, there is legitimacy in asking about that and having a concern. In this case, I happen to have those questions and share that concern. Kudos to Bagott for raising them publicly.

I do take issue with Bagott on a number of his opinion pieces (not all, but enough to say “many”). But that’s OK. His pieces are not what I would call news articles. They are editorials (as they present his view on a certain item) or press releases (announcing something for purposes of an advocacy agenda and not necessarily for information purposes so one can fairly evaluate the issue’s pros and cons).

Many of my posts on this forum could be called editorials, although I try to present a balanced picture. Then, I’ll advocate my position and give the reasons why. We’re all free to express our opinions (we do so here within the limits of the forum rules and usually with professional decorum) as we see fit. That’s healthy.

But if our posts appear one-sided or present what appears to be an incomplete description, that typically generates more questions. Those questions, left unanswered, chip away at the strength of the post’s point. So, should it be with Bagott’s editorials; in this case, he raises a valid point, but it seems to me that there is a practical way to eliminate the concerns he raises. Acknowledging that possibility adds additional strength to the argument that this process must be more transparent so we are satisfied it isn’t being abused.

But that’s my editorial opinion; each of us is free to have our own, and all of us are free to debate the other’s opinions.

My comments on Denis’ post: I have known Denis for a long time. He is very savvy and reviews residential appraisal reports for several lenders. He sees a lot of appraisal photos.

My comments: Bagott’s emails are sometimes a bit “over the top” for me, but this one is worth reading. To subscribe to Bagott’s emails, Click Here

When I appraise a house that needs work, the photos always seem to look better than reality. I always comment on this in my appraisal report.

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ROV, Part 2

By George Dell, SRA, MAI, ASA, CRE

Excerpts: ROV (Reconsideration of Value) is now in the boat. Is it safe?

We suspect this will be a long row to get to the chosen island. Just row!

It may be good to start where any good study starts. “What are the words?” The only two words here are “reconsider” and “value.” Let’s look at these. (Sometimes just looking at the words can sort things out.) Different words mean different things to different people!

Reconsider: “To consider again, especially for a possible change of decision” … “especially with a view to changing or reversing.”

Value: “The worth or usefulness something.”

The new Fannie Mae Selling Guide section discusses the process to changes to the appraiser opinion of value. One more word might be important here: “Appraisal.” Appraisal is defined as the act or process of developing an opinion of value, or the opinion of value itself. An opinion.

Ah. This simplifies things. An official ROV wants you to change your opinion. Usually, if not always, this means “You came in too low.” But you already knew that …

The official ROV process includes a procedure for when the value:

is unsupported;

is deficient (due to unacceptable appraisal practices); or

reflects prohibited discriminatory practices.

Whew! A lot to think about here.

To read the full post, Click Here

My comments: If you work for lenders, read this. Very well-written, short, and understandable.

The May 10 issue of this newsletter had a long section on ROVs. To read the issue, including George Dell’s ROV Part 1, Click Here

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Fannie Mae May Mortgage Rate Forecast

Excerpts: Longer-term interest rates, including mortgage rates, have been volatile the past two months – first rising in response to stronger than expected economic data, and then a more recent decline on weaker readings. Despite this, we view economic growth and inflation as being on the same track as our prior outlook, and we continue to anticipate moderation as the year progresses.

We also continue to expect the Federal Reserve to implement the first of two rate cuts this year in September as inflation measures moderate, gradually trending toward the Fed’s 2-percent target. However, we believe the Fed is likely to remain cautious as there are still signs that inflation may remain stickier than anticipated.

Consistent with the slower sales outlook, our forecast for total mortgage originations was downgraded modestly to $1.73 trillion for 2024 ($1.81 trillion previously) and $2.08 trillion in 2025 ($2.26 trillion previously).

To read about more Fannie economic forecasts and see the graphs, Click Here

My comment: Reading Fannie’s forecasts are helpful. They have been doing them for a long time and have expert economists and other analysts.

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$2M Home Built From 11 Shipping Containers in Vancouver, WA

Excerpts: 4 bedroom, 3.5 baths, 4,074 sq.ft., 0.4 acre lot, built in 2015

A man with a one-of-a-kind idea created a beautiful residence near the border between the states of Washington and Oregon.

The house on S.E. 164th Avenue in Vancouver, WA, is built from 11 shipping containers of different colors.

“The owner actually built it himself, and he did not miss a beat when he built this,” explains the listing agent, Louise James.

She notes that the owner, who works in the import and export business, decided to build a container house.

“His friends all laughed at him,” she adds, “and said, ‘Oh, you can’t do that.’ So he drew it out on a piece of paper and said, ‘This is how I want it to be’—and it turns out to be this amazing masterpiece.”

Construction began on the 4,074-square-foot house in 2015, and finished two years later. HGTV featured the residence during its construction, on the first season of “Container Homes.”

James tells us she’s never seen anything like this home, with influences from all over the world.

Bridging the gap between East and West, the house features an array of Asian influences.

“It has a Japanese garden outside, and it has Tibetan prayer wheels on the entry,” James says, noting that the Japanese tearoom doubles as a meditation room. In a courtyard, a koi pond is outfitted with aquarium glass, which makes it possible to see the fish from inside the house, in the sunken conversation pit.

To read more and watch the video on the top of the page, Click Here

Note: video may be slow to load, but worth the wait!

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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.

Mortgage applications increased 1.9 percent from one week earlier

WASHINGTON, D.C. (May 22, 2024) — Mortgage applications increased 1.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 17, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 1.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 1.1 percent compared with the previous week. The Refinance Index increased 7 percent from the previous week and was 21 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 11 percent lower than the same week one year ago.

“The 30-year fixed mortgage rate declined for the third straight week, dropping to 7.01 percent – the lowest level in seven weeks,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Rates coming down from recent highs spurred some borrowers to act, with increases across both conventional and government refinance applications. VA refinances had a double-digit increase for the third consecutive week, although the current level of refinancing is still well below its historical average. Purchase activity continues to lag despite this recent decline in rates, down 11 percent from a year ago, as potential buyers still face limited for-sale inventory and high list prices.”

The refinance share of mortgage activity increased to 34.0 percent of total applications from 32.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.6 percent of total applications.

The FHA share of total applications increased to 12.8 percent from 12.4 percent the week prior. The VA share of total applications increased to 13.7 percent from 12.7 percent the week prior. The USDA share of total applications decreased to 0.3 percent from 0.4 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 7.01 percent from 7.08 percent, with points decreasing to 0.60 from 0.63 (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 7.18 percent from 7.22 percent, with points decreasing to 0.44 from 0.58 (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 6.77 percent from 6.86 percent, with points decreasing to 0.88 from 0.94 (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 decreased to 6.42 percent from 6.61 percent, with points decreasing to 0.54 from 0.65 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs decreased to 6.48 percent from 6.56 percent, with points decreasing to 0.55 from 0.66 (including the origination fee) for 80 percent LTV loans. The effective rate decreased 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: AI, Freddie, ROVs

Tags: Economic analysis, liability, mortgage interest rates, ROVs

Tools To Support Appraisal Adjustments

By Ann O'Rourke on May 17, 2024 / Leave a comment

What Tools Do You Use to Support Your Appraisal Adjustments?

By McKissock

As part of our monthly survey series, we asked our community of real estate appraisers, “What tool(s) do you use to support your appraisal adjustments?” Respondents were allowed to make multiple selections and write in their own answers as well.

Popular tools include Synapse by Spark, Solomon Adjustment Calculator, and Redstone by Bradford Technologies. The majority of respondents said they use a combination of various tools and methods, such as paired sales analysis.

We’ve included “paired sales/matched pair analysis” in the list as well, even though it’s a method rather than a digital or appraisal software tool, because it was mentioned by so many appraisers.

A few sample appraiser comments:

“I am capable of determining the adjustments without any software. I look at the MLS data and am able to determine appropriate adjustments. I would need to know all of the assumptions the software takes into consideration before I would trust the adjustment with my signature.”

“I use Synapse by Spark for typical property adjustments and Solomon for more complex properties.”

In addition to the top answers, we received many other write-in responses. Sample responses:

Allocation method

Depreciation

Cost to build

Sample appraiser comments

“Due to rural location, there are no algorithmic tools to be utilized for adjustment data. I utilize paired and grouped data analysis and experience and knowledge.”

To read more, Click Here

My comments: Short, well written, and Very Interesting, especially the appraiser’s comments! I quit doing adjustments a while ago. I always do market conditions adjustments (or explain why not) and for views and other factors that significantly add to value.

I have never used any of the appraisal software listed above. I use Excel and MLS data. I often go back in time for comps with views, etc. I also interview agents to see what they say. Not for a number, but about marketability.

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

NOTE: Please scroll down to read the other topics in this long blog post on Geographic Data and Comps, effect of renovation on value, very low foreclosures now, current real estate market, unusual homes, mortgage origination stats, etc.

Reconsideration of Value and Appraisers

Posted in: data, liability, real estate market, state appraiser regulators

Tags: adjustments, appraisal how to, non-lender appraisals, real estate market

ROV (Reconsideration of Value) Changes – FHA and GSEs

By Ann O'Rourke on May 10, 2024 / Leave a comment

ROV (Reconsideration of Value) Changes – FHA and GSEs

GSE Effective date is August 29, 2024
HUD Effective date is September 2, 2024

Editor’s note: This long section includes, In order:

McKissock/Dave Bradley post with a good summary including links to HUD and GSE documents.
Appraisersblogs with Dave Towne’s opinions plus many appraiser comments.
George Dell – his usual very interesting comments.
VA’s Tidewater Initiative written in 2021 by McKissock (Similar idea as current ROV changes), effective in 2003.

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Changes to ROVs: GSEs and HUD Announce New Reconsideration of Value Policies

By Dave Bradley, McKissock May 2, 2024

Excerpts: On May 1, 2024, Fannie Mae, Freddie Mac, and HUD announced new policies for appraisal reconsiderations of value (ROV). These policies were the result of a collaborative effort between the GSEs, the Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA).

These policies are intended to create a consistent framework for lenders to respond to a borrower-initiated reconsideration of value. Within this framework, the lender must include steps for the borrower to appeal an appraisal when they believe the value opinion:

is unsupported;
is deficient due to unacceptable appraisal practices; or
reflects discriminatory practices.

Freddie Mac’s Bulletin, announcing the new policy, states:

“Freddie Mac, in collaboration with Fannie Mae and HUD, is implementing requirements related to reconsideration of value (ROV) that promote consistency when a perceived appraisal issue and/or appraisal deficiency exists. These requirements also recognize the importance of the Borrower having the knowledge and opportunity to request an ROV.”

Several sections of HUD Handbook 4000.1 have been amended to reflect HUD’s new ROV policy.

For appraisers, Section II.D.2. of the Handbook creates new general requirements for appraisers. This section states, in part:

“In the event that the underwriter requests a Reconsideration of Value (ROV) and provides additional information material to the value of the Property, the Appraiser must: review all information and market data received from the underwriter;

and summarize the analysis of all information provided by the underwriter within a revised version of the appraisal report regardless of whether the Appraiser determines that changes are not needed to address the issues identified in the ROV.”

To read more plus get links to FHA/GSE documents, Click Here

My comments: If you do GSE or FHA appraisals, read this post, plus the links to the documents. Many appraisers will probably not like it, but will like to have a standardized ROV method. I have never done an “official” ROV for a lender, but I did not like any lender clients objecting to my values.

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Low Value = Material Deficiencies? New FHA ROV Policy

By Dave Towne, May 3, 2024

Excerpts: Up until recently, there has never been a standardized policy for mortgage loan related Reconsideration of Value (ROV) requests after an appraisal has been submitted. Now there is, per the attached PDF HUD/FHA mortgage letter. The GSE’s have similar policies.

I’m not opposed to having a standardized ROV policy. However, these policies are in keeping with the new initiatives surrounding alleged and often unproved appraisal bias and discrimination claims.

But when one reads deeper into the reason for implementing these procedures, it is quickly evident that actually it’s focused on the perception that the appraised VALUE is wrong.

This is the statement in the HUD/FHA ML-2024-07: “This included guidance to improve the established process by which FHA program participants may request an ROV if the initial valuation is lower than expected.”

OK, so who exactly decided the value should be HIGHER than what the appraiser reported, before an appraisal was ordered? Was it the borrower? The mortgage loan officer handling the loan? A Zillow Zestimate? Maybe the underwriter at the lender?

The document also mentions many times the words “material deficiencies” in the appraisal report, which can trigger an ROV request.

My comments: I find this post’s appraiser comments most interesting, especially those from VA appraisers who have been required to use the VA’s Tidewater Initiative, which started in 2003. It was and is controversial. See the last article in this list for more info on Tidewater.

To read more, Click Here

Row, Row, Row, Part 1

By George Dell May 8, 2024

Excerpts: A better ROV! Please reconsider the direction of your boat. Try this this bigger oar. And use it only on the right side of the boat.

Appraisers have long been asked to “reconsider” their opinion. Now we have a more official “standardized process” which affects appraisers, lenders, AMCs, GSEs, and of course, the borrower.

On quick review, I see some unintended consequences, as well as some which have been anticipated. The anticipation includes the additional burden on lenders as well as appraisers. There is administrative time involved, as well as legal factors. Also, the burden on borrowers appears greater than before, including detail and reason.

First, the burden on borrowers. They start the row. Borrowers must believe the opinion of value is:

And regardless of the impact on borrowers and appraisers, the Fannie Mae Selling Guide is almost entirely focused on the responsibilities of the lender.

To read more, Click Here

My comments: Short and worth reading.

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The first “official” ROVs – VA’s Tidewater Initiative in 2003: What VA Appraisers Need to Know

By McKissock, January 8, 2021

Excerpts: The VA has a unique set of protocols, known as the Tidewater Initiative, that a VA appraiser must follow when he or she expects the appraised value of a property is going to be lower than its contract price.

This program, often known simply as “Tidewater,” initiated in—you guessed it—the Tidewater area of Virginia (i.e., the Norfolk, Chesapeake, Portsmouth, and Virginia Beach areas). It initially began as a test program in the early 2000s and was expanded to all areas of the country in 2003, as a result of VA Circular 26-03-11. This initiative was subsequently reaffirmed in the issuance of VA Circular 26-17-18 in July 2017.

If it appears to a VA appraiser that the appraised value of a property is going to come in below the pending sales price, the appraiser must contact the designated point of contact (POC) party that is specified in the appraisal order.

The appraiser is not supposed to discuss the contents of the appraisal with the POC at this point, except to explain they are asking for whatever additional information the POC may be able to provide…

To read more, Click Here

My comments: Read this Tidewater post to see why the current changes are not new. There was a precedent. I never did VA appraisals, so can’t speak from Tidewater experience. But, I remember it was very controversial when it started. Many appraisers complained about it. I was contacted many years ago by the VA to get on their panel, but I declined as the property values were way above VA limits where I lived.

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Reconsideration of Appraised Value

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NOTE: Please scroll down to read the other topics in this long blog post on staying positive with slow business, economic analysis for appraisers, current real estate market, unusual homes, mortgage origination stats, etc.

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Posted in: appraisal business, Economic analysis, real estate market

Tags: appraisal business, Economic analysis, real estate market

Basement Issues and Values

By Ann O'Rourke on May 3, 2024 / Leave a comment

Understanding Basement Contributory Value

By Jo Traut

Excerpts: Determining how a basement contributes to a residential property’s value requires an appraiser to determine what type of basement the home has, its level of finishing, and take into account common concerns, like evidence of mold or signs of structural concern.

By following best practices, including separating the basement from the above-grade finished area, understanding the intended use of the space, and completing comprehensive research, you can evaluate the basement’s contributory value more accurately.

Topics

Know your basic basement types
How is the basement finished? Determining levels
Best practices when appraising a basement
Know the intended use and client requirements
Common problems in basements
Environmental hazards: One of the most significant issues appraisers run into is mold.

To read more, Click Here

My comments: This is one of the best discussions of basements I have read. It is worth reading. In my area, there are few fully underground basements, as we have a mild climate. Most homes were built prior to 1930, and there are many types of “basements.” They are not easy to determine added value, if any. I research, check with agents, check permit histories, try to get comps with the same type of basement, etc. The type and level of finish are critical.

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

NOTE: Please scroll down to read the other topics in this long blog post on non-lender appraisals and diversification of your appraisal business, home insurance problems affecting values, unusual homes, mortgage origination stats, etc.

What should appraisers look for in a sales contract?

Posted in: adjustments, appraisal how to, non-lender appraisals, real estate market

Tags: adjustments, appraisal how to, non-lender appraisals, real estate market

Non-Arms Length Sales for Appraisers

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

What Does Arm’s Length Mean in Real Estate?

The 7 Sale Types Explained

Excerpts: An arm’s length sale – a sale in which the buyers and sellers act independently and in their own self-interest is the most common type of real estate transaction. However, there are six other types of real estate transactions that you need to know about so you can specify these sale types in your appraisal report as they can affect the market value of the property.

A non-arm’s length sale in real estate is a transaction between a seller and buyer who have a connection by marriage, family, work, etc. Because of their relationship, each party may not be acting in their own best interests. Therefore, the final price may not reflect the market value of the property.

The type of sale can provide some clarity into whether the transaction was (or currently is) an arm’s length transaction, whether a comparable sale should be used, or whether an adjustment is warranted for the terms of sale for a comparable. By knowing the type of sale, you are better able to reconcile a current opinion of market value that falls above or below a current or recent transaction for the subject property.

For appraisals required to be Uniform Appraisal Dataset (UAD) compliant, you must indicate the type of sale for the transaction. You may report any other relevant information regarding the sale type in the appraisal report, including whether more than one sale type applies.

Non-arms length sales include: REO, Foreclosure, short sale, court ordered sale, estate sale and relocation sale.

To read more, Click Here

My comments: We all see comps that seem to sell below market. This post’s information can be very helpful in explaining why. It’s a good discussion of this topic.

I have done a lot of estate appraisals. Some estate sales occur when the beneficiaries just want to get rid of the property and don’t want to fix it up for sale. I always tell them that the sales price will be reduced.

I have also done many relocation appraisals, done before the home is listed. You are “graded” on how close you come to the sales price. I sometimes see low sales for various reasons.

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

NOTE: Please scroll down to read the other topics in this long blog post on agent concessions, History of appraisal bias back to 1930s, “one mile” rule and bias, unusual homes, mortgage origination stats, etc.

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Posted in: appraisal business, bias, GSEs, lender appraisals

Tags: appraisal business, appraisal how to, bias, Fannie, real estate market

Appraisal Institute Counters Flawed Appraiser Bias Narrative

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

Appraisal Institute Counters Flawed Appraiser Bias Narrative

Excerpts: In reality, appraisers have a great story to tell, but we have a long way to go to refocus the terribly flawed “appraiser bias” narrative onto facts and science.

Last week’s email from Cindy Chance, the CEO of the Appraisal Institute, marks an important and long overdue shift in the organization’s approach to addressing accusations of bias in the appraisal profession. For too long, appraisers have faced sweeping claims that their valuations are biased against certain groups, despite appraisers’ ethical standards, rigorous training, and lack of financial stake in transactions.

As Chance acknowledges, the Institute should have done more to advocate for appraisers and make the public aware of their professionalism. This public acknowledgement of an obligation to counter the flawed “appraiser bias” narrative is an encouraging first step. Appraisal organizations like the Appraisal Institute should advocate for appraisers, as advocacy is a key membership benefit. Industry groups should also step up to support appraisers.

Importantly, Chance points out that claims of appraiser bias contradict what appraisers actually do. Their role is to provide impartial, data-driven opinions of value. She explains how pioneering research in psychology revealed that all humans have cognitive biases, but professionals like appraisers are trained to minimize bias through rigorous methodology. In fact, appraisers’ discipline protects homebuyers and the industry from irrational biases.

Chance suggests the Institute will undertake communications grounded in facts and science to reframe the false narrative around appraiser bias. With their scientific expertise and ethical standards, appraisers have a strong basis to counter the accusations. Chance’s leadership in publicly addressing the issue and committing to advocate for appraisers represents an encouraging change of direction for the Institute.

To read more, including the full document, Click Here

My comments: Read it. Note: it can be “dense” with very long paragraphs. This is, by far, the best writing I have seen on bias related to appraisals. I have been saying for a while that all humans are biased in some way. It is human nature.

When I read it last week, I was going to put a link to it in this newsletter. Now that appraisersblogs has published the full document, you can read and make comments.

For a long time, since AI dropped out of the Appraisal Foundation, I have said, “I am a 35-year member of AI. I stay because my MAI is very, very valuable (similar to CPA).” Plus, I have an excellent local chapter.

I have been reading Cyndi Chance’s emails to members and following her activities to reach out to local chapters since she started last fall.

I am so glad that AI is now taking on the bias issue. I recently took USPAP plus two California bias classes in a two week period. After I finished them, I thought of giving up my license (CA is not a mandatory state) and maybe quitting appraisal. After a rough weekend, I decided not to leave. Finally, I now see there is hope!

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NOTE: Please scroll down to read the other topics in this long blog post on non-lender appraisals, forms to reports modernization, AMCs, earthquake risk, unusual homes, mortgage origination stats, etc.

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Desktop appraisals okay for some Fannie Loans March 2022

Posted in: AMCs, appraisal modernization, modernization, non-lender appraisals

Tags: AMC, appraisal modernization, non-lender appraisals

Desktop Appraisals: Who, When, and Why

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

Desktop Appraisals: Who, When, and Why

Excerpts: The ability to identify property characteristics without a personal inspection is not a new concept. Retrospective appraisals, drive-by (exterior inspection) appraisals, and valuations from plans and specifications, are all valuation assignments where an appraiser develops an appraisal opinion without personally inspecting the property.

Similarly, while not identical, appraisers generally use the cited sources above to identify the physical characteristics of comparable sales in their appraisals. Thus, it’s fair to say that identifying the physical characteristics of the subject property in a desktop appraisal is a similar process to verifying comparable sales.

While they won’t replace a full appraisal for a majority of property transactions, desktop appraisals can offer a more efficient and cost-saving alternative for all involved parties and are often used in low-risk scenarios and non-GSE appraisal assignments, such as:

Helping sellers determine a price: A desktop appraisal provides sellers with valuable insights into their property’s market value, helping them make informed decisions when determining an appropriate listing price.
Home equity lines of credit (HELOCs): When homeowners apply for HELOCs, lenders may request desktop appraisals to ascertain the property’s value and determine the credit limit without requiring a full appraisal.
Tax Appeal Support: When there is a challenge to a tax assessment, a desktop appraisal may be used to provide a current market value.
Insurance purposes: Lenders or other clients may order desktop appraisals for insurance purposes to determine the property’s replacement cost or insurable value.
Managing Investments: For investors who own multiple properties, desktop appraisals provide rapid updates on property values.

To read more, Click Here

My comments: Although the web page title includes “for new appraisers,” this post has ideas for all appraisers. The list of non-lender uses is very good. I have done drivebys for estate appraisals when the home had been sold and I had no access.

Fannie Wants Desktop Appraisals

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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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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.