Excerpt: We continue to see claims alleging that the rural property appraiser failed to adequately identify or report details surrounding a water source. In one claim, the appraiser correctly noted that the property was serviced by a “private water well.” It was later discovered that the well was not located on the property which was appraised. Unfortunately, the well was actually located on an adjacent lot that, at one time, was part of the subject lot prior to the lots being subdivided.
My comments: An appraiser lost a lawsuit because he said the vacant parcel had public water access. It did not even though many lots nearby were developed. Nearby, I noticed a large water tank. It was shared by four nearby homes. This was not in a rural area. I worked for 4 years in rural areas. Water access was critical. If there was no access, trucks had to bring the water.
Appraisers – check the water source!
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NOTE: Please scroll down to read the other topics in this long blog post on real estate market, USPAP and contracts, unusual homes, mortgage origination stats, etc.
My Comments on Market Changes
My inbox is flooded with news emails about opinions on what is happening now and forecasts for the future. (Most of the information in these newsletters comes from emails. I am on many email lists.) It looks like the change is starting because of increasing mortgage interest rates. I have included some of the articles below.
Fannie and Freddie have long said that they want appraisers to tell them about their markets. Include graphs and charts in your appraisal to show your clients what is happening now and why they need human appraisers.
It is extremely important for appraisers now to closely track changes in your local markets at least once every day and tell your lender clients about it. When will it affect your market? No one knows if there will be foreclosures or when they will start. The number of potential buyers will decrease as rates go up in many markets.
Segments may be very different from the overall stats. A few examples:
- Different price ranges – first-time homebuyers, high end
- New homes – what is happening?
- Detached vs. townhomes and stacked condos.
- All cash and investors
- How many offers
- No inspections or appraisals?
COMPS ARE THE PAST. YOU MUST KNOW YOUR MARKET TRENDS. TRACK AND GRAPH THE NUMBER OF LISTINGS VS. PENDINGS AND EXPIREDS, DAYS ON THE MARKET, PRICE CHANGES, ETC.
Today is NOT the same as 2008+, with its massive fraudulent loans made to unqualified buyers. Computer modeling did not predict the 2008 crash. Many were in denial that it was coming and refused to listen to appraisers. We have never seen a pandemic real estate market before. Did anyone think in early 2020 that home values all over the country would go off the charts? No one did. Appraisers wrote up long disclaimers about how they did not know the effects. Some still include them in their appraisal reports today.
Watch the excellent 4-minute video with Mark Zandi, “There’s a comeuppance coming in the housing market”. It discusses how today is different from 2008 and what is happening today. Before becoming the chief economist of Moody’s Analytics, he was a real estate economist. I listened to him for many years about real estate economics. He is very savvy. I agree with what he says about real estate. I am unsure about inflation. To watch the video, click here
I have been writing about these upcoming changes in these newsletters for a while now. Ryan Lundquist writes about this almost every week. He has lots more details and examples of graphs that can help you see what is happening in your market. www.sacramentoappraisalblog.com He writes for the Sacramento, CA market but what he writes is relevant for other markets also.
Two days ago the Fed raised rates by 0.75%. Recession? Lower inflation? Real estate market?