Appraisal Neighborhood Analysis

What is so Important About the Damn Neighborhood Analysis that the Reviewer Nicked me for it?

By Tim Andersen, MAI

Excerpt: Question: in a recent review of one of my appraisal reports, the reviewer said my neighborhood analysis was poor. I asked what that meant and she indicated I should familiarize myself with Fannie Mae’s requirements for a NEIGHBORHOOD ANALYSIS. She also indicated what I had in my report was just a recitation of facts, but (a) lacked any analysis of neighborhood trends and (b) therefore I did not analyze the neighborhood sufficiently to reconcile my conclusions of the neighborhood trends and its effect on both my highest and best use conclusion and my final value opinion. I came in just over the contract price. What does the reviewer want from me? I did what I always do in an appraisal! Help me!

For the answer, click here

My comment: Tim always has great answers for appraiser questions! He is a regular contributor to the paid Appraisal Today, with articles on USPAP 2020-2021, state board problems, etc.

Appraisal Business Tips 

Humor for Appraisers

What to Do When Your Appraisal Is Under Review(Opens in a new browser tab)

Covid-19 Residential Appraisers Tips on Staying Safe

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Previous Career Before Appraising

What Was Your Previous Career Before You Got Into Appraisal?

Excerpts:

The Top 3

  • Real estate sales (14%)
  • Mortgage lending (8%)
  • Insurance (5%)
  • Assistant or admin work (5%)
  • Banking (1%)
  • Others: 63%

To read more, click here Check out the respondent comments and a list of some of the many previous careers

My comment: I was a chemist before I started appraising. Really liked learning about science in school, but 7 years of lab work was too boring. I felt trapped inside. Saw an ad for “appraiser assistant” at the local county offices. “Work in the field.” I had never heard of it, so read a book about it at the library (1974). I got the job and still love appraising!! I didn’t see many science careers on the “Other” list. But, I think it prepared me well for appraising as I was trained to be very objective and analytical.

Appraisal Business Tips 

Humor for Appraisers

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

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Bifurcated Appraisals and Inspections Yes or No

Bifurcated appraisals – Yes or No??

What Fannie Says: Yes, of course

Interview with Lyle Radke Lyle Radke, Director of Collateral Policy at Fannie Mae

Excerpt: Fannie has spent the first half of 2019 detailing its plans to roll out the 1004P, a new desktop appraisal that will be based on a Property Data Collection report that is prepared by a third party inspector; this is part one. Fannie has indicated that it is currently testing appraisers, appraiser trainees, insurance inspectors, real estate agents, property preservation service professionals, and smart home service professionals as potential Property Data Collectors to determine “which labor force can best collect data,” including a “robust and accurate set of data elements, photos, and floor plan.” Bifurcated Appraisals and Inspections Yes or No is a controversial topic.

The more impactful revelation is that Fannie aims to replace the appraisal requirement completely where it can. In these scenarios, a property data collector, not necessarily a licensed appraiser, will inspect a home and report back on the condition of the property. Then, based on that property inspection report, a desktop appraisal may be ordered or the appraisal requirement might be waived altogether.

Many issues are discussed: Value Verify, appraiser aging, who will do inspections, etc.

For more info, click here

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What Richard Hagar Says on Bifurcated:

No – A Train Wreck

Excerpt: We are hearing about the latest trend called bifurcated appraisals. Within the past year I’ve seen this term used more often in more diverse places than in the prior 20 years combined; it’s almost like some media company has decided that “bifurcated” is the “it” term for 2019. All sorts of people, AMCs, lenders, technology companies, and Fannie Mae are promoting this “spiffy” new process. They are hoping that the rest of us will “get on board” with their new “better” process.

I do not want to “get on board” because it’s headed for a train wreck.

Editor’s Note: Hagar’s bifurcated test in his office did not go well.

For more info, click here

My opinion: It is a business decision whether or not to do bifurcated appraisals. This month’s issue of Appraisal Today has an article on the topic, written by Julie Friess, SRA

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Appraising the White House

18 Historic Homes that Would Be Fascinating to Appraise

Excerpt: Historic homes make for complex and interesting appraisal subjects. As one appraiser said, “I love unusual properties, and the challenge they present to appraise. I have always loved appraising large, older properties. They take us back to another world back in time.” We recently asked our appraisal community, “What famous historic home would you want to appraise?” Here’s what they said.
A few of the homes:
Frank Lloyd Wright’s Fallingwater
The White House
Norman Bates “Psycho” House
Graceland
To read the full list plus many comments click here
My comment: For me, none of the above ;> Too difficult!

Appraising Weird Stuff is Challenging!

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Practical real estate appraisal writing tips for AMC questions

Write Like A Professional – Very Practical Writing Tips for AMC/underwriter questions

By Tim Andersen

Excerpt: QUESTION: I like to use the term, “in my professional opinion” as part of my reports. After all, I am a professional paid to express opinions. Recently, the reviewer for an AMC requested I remove that term from my report since, in her words, “…it has nothing to do with value”. Is the reviewer overreaching on this? The reviewer has the right to tell me if there is an error in my report, but not to criticize the language I use in my report. What should I do?

ANSWER: As Gertrude Stein was supposed to have said upon seeing Oakland, California for the first time: “There’s no there there!” For good or ill, the same may be said about many real estate appraisal reports and the convoluted language they insist on using…..

Excellent and practical. To read more click here

My comment: this is the best article I have ever seen for practical tips on how to reply to AMC/underwriter questions with lots of examples.

Appraisal Business Tips 

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Residential Appraisal Errors

25 Common Errors in Appraisal Reports

A compilation of the most common errors and deficiencies found in appraisal reports by reviewers, regulators, and appraisal boards. Residential Appraisal Errors

Here are a few:
– 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 analysis and rational that supports the Highest and Best Use opinion.
– Not complying with the most current USPAP.
Read the full list here:

My comments: Reminders are always good. For unknown reasons, I don’t see much CE or writing on these problems. These apply to all appraisals because we are licensed, not just lender appraisals.
It was soooo nice in the “old days” before licensing ;> Two Rules: Tell the  truth and disclose what is bad. No USPAP changing every two years, overzealous appraisal boards, renewal fees, etc.. Of course, the reason we have licensing is the lender mess in 1989, resulting in FIRREA,  regarding bad commercial property development loans by S&Ls
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Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

For Covid Updates, go to my Covid Science blog at covidscienceblog.com

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Appraising Hobbit Houses

Hobbit Houses in Charlevoix, Michigan

Just For Fun!!

Excerpts: Growing up in northern Michigan in the early 1900s, Earl Young was obsessed with boulders. Glacial boulders, to be exact-ones moored in fields, forests, and on lake coastlines across the state thanks to the slow march and retreat of glacial ice during the Precambrian age. Appraising Hobbit Houses in Michigan is a challenge.
The homes he designed will stop you in your tracks, as one did the last time I was there, passing by on a bike. Call them “mushroom houses,” “hobbit houses,” “boulder houses”; everyone has a different name for them. They’re often described concisely, if vaguely, as “organic.” Though some see Frank Lloyd Wright’s influence, they’re distinctly Young.

Fascinating! Lots of fotos and info at:
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Lord of the Rings – Hobbit houses from the movie(Opens in a new browser tab)

Hobbit House of Montana(Opens in a new browser tab)

Appraisal Business Tips 

Humor for Appraisers

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Appraisal Adjustments Yes, No, Maybe

 

In Search of “Perfect” Adjustment Factors

By Richard Price

Excerpt: Although a “perfect” adjustment may not exist, the search for perfect adjustments in appraisal reports is becoming a hot topic with many interesting articles, continuing education courses, and webinars addressing the subject. The message is clear. If an appraiser can’t support the adjustments, the results of the appraisal are subject to question, leading to several possible outcomes; none of them good. So, we will define the “perfect” adjustment factor as the best and most appropriate adjustment that should be made to the comparables.

https://www.appraisalbuzz.com/in-search-of-perfect-adjustmment-factors/

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Adjustments, now what?

By George Dell
Excerpt: We’re told to “support” our adjustments.  We hear words like “prove” your adjustments. . . as if there were some magic formula which can give an exact, correct, and absolutely true number.

It used to be so easy. . . Our trainer gave us a sheet with the “right” adjustments. Simple.

USPAP Standards Rule 1-1 says we must be aware of, understand, and correctly employ recognized methods and techniques. What are they? Who recognizes them? How do I apply them?

So, what are these methods and techniques? Let’s look.

In The Appraisal of Real Estate (ARE) p.46, it says: “Qualitative analysis techniques may also be applied for elements of comparison for which quantitative adjustments cannot be developed.”  So, it seems the very first reference in the ARE says some adjustments cannot be quantitatively developed!

For lots more Dell Adjustment Writings, go to the Adjustment Archives:

https://georgedell.com/category/adjustments

My comments on adjustments: CU in 2015 revealed residential form appraising’s “dirty little secret”: lack of support for adjustments.

Before starting my appraisal business in 1986, I worked part time for a local appraiser for 3-4 months. I went out with him first on a few lender appraisals. I will never forget asking him where the adjustments came from. He said “we use these” with no explanation. Later I asked other appraisers and they had the same answer.

Finally, about 3-4 years ago, I quit doing adjustments on form appraisals except for market conditions and factors that significantly affected the value, such as a very good view. Those adjustments were supported.

Appraisal Business Tips

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Covid-19 Residential Appraisers Tips on Staying Safe

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Condo vs. Townhouse for appraisers

Is It a Condo, a Townhouse, a Site Condo or None of the Above?

Excerpt: When appraising townhouses, I always search the MLS for both single-family attached sales as well as condominium sales. Why? It’s because at times, there is confusion between the differences. Often I see real estate agents list townhouses as condos when they are not actually condos and visa versa.

I totally understand why. When it comes to townhouses, it is impossible to know from an outward appearance whether or not it is a condo, or not. Before we get into that, what is a condominium and what is a townhouse?

Well written article. Worth reading.

My comments: The first question in appraising is always “what are you appraising?”. Some appraisers just look at what structure is there. You are appraising the form of ownership, the land and what is attached to the land. With condominium form of ownership, you own the airspace. It does affect what you can do with a home. Some people don’t like HOAs and dues. I sold my house on the water in 2008. There was a large rear yard that was on a “tidelands lease” with an annual payment to the city. It was recently re-listed and only included the original 4,000 sq.ft. lot, not the leased land. Both showed up on plat maps. I wonder what the appraiser for the sale will say about it?

About 20 years ago I appraised a detached home in a project built in the 1980s with both attached (stacked condo style,  duets – sets of 2 semi-detached homes, and townhome (attached) style) plus detached homes. The owner, the HOA president was surprised to learn that they were all condos. I had a title report I showed to him. (The detached homes are now called site condos.) Another nearby small development of sets of two homes (duet or semi-detached) built in the 1960s did not have any common ownership or dues. I have seen these in other nearby cities also.

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

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Will the last appraiser turn out the light?

Is the Appraisal Profession Dying?

By George Dell, MAI

Excerpts:
Yes. Appraisal as we know it is dying.
Can it be saved? No.
So what should I do? What should “we” do?

The data has already been gathered. The analytics software is free. The pictures have already been taken. “Let’s Make a Deal!”

Analysis requires judgment. Human generalization is enhanced by computation. Complete data can be enhanced/cleaned as well as “confirming a comp.” A point value is an inherent part of a predictive value distribution. A documented, reproducible result is the most credible, believable answer.

My comments: I believe that human appraisals will still be needed. There are times that a human appraiser is needed to interpret results, and “go beyond” the data for Highest and Best Use, Unusual properties, etc. Lenders will move to computerized risk management, once investors will accept this. Most residential lender valuations will not need humans as the value of an individual property in investors’ portfolios is not critical. Of course, when the market inevitably crashes, there will be no appraisers to sue to recover some of the lost money. Maybe our E&O premiums will go down.

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

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