appraisal Archives

VA loans up and FHA loans down

By Ann O'Rourke on June 23, 2014 / appraisal, appraisers, FHA, va / Leave a comment

VA loans up and FHA loans down because FHA increased its mortgage insurance cost

Excerpts:

Of the 16.4 million active-duty service members and military veterans with mortgages, less than 12% have a loan guaranteed by the Department of Veterans Affairs.

A sharp increase in Federal Housing Administration mortgage insurance premiums is making the VA more competitive, according to Megan Booth, senior policy representative at the National Association of Realtors.

“There is not a Realtor alive today that thinks FHA is a better deal” for veterans, Booth said. “That is helping the VA grow and it will continue to help the VA grow.”

VA lenders originated a record 629,300 single-family loans in fiscal 2013, which ended Sept. 30. The agency endorsed 90,820 single-family loans in the fiscal second quarter, totaling $20.1 billion, down 10.5% from the prior quarter. FHA endorsements declined at twice that rate over the same period. Sixty-three percent of VA loans are going to homebuyers rather than for refinancing, according to agency officials.

…..

Meanwhile, lenders continue to complain that there is a shortage of VA-approved appraisers and underwriters, which slows processing times. …

But the VA is becoming more responsive. “VA is trying to get more appraisers and weeding out the bad ones,” Booth said at the conference.”

http://www.nationalmortgagenews.com/news/origination/underused-va-mortgage-program-makes-inroads-as-fha-costs-rise-1041954-1.html

If you can’t access the full article without registering, there is a summary at: http://realtormag.realtor.org/daily-news/2014/06/13/va-loans-gain-popularity-fha-costs-rise

The June 2014 issue of the paid Appraisal Today had an article on how to get on the VA panel. It is very different than applying for panels for AMCs, Lenders, or FHA. No AMCs, C&R fees, appraisers treated as professionals, etc. I spent a lot of time interviewing many appraisers and VA personnel to find out about reference letters, re-applying, etc.

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Second unit or accessory dwelling?

By Ann O'Rourke on June 23, 2014 / appraisal, appraisers / 1 Comment

Tags: appraisal

Source: www.sacramentoappraisalblog.com – Ryan Lindquist
Note: Ryan’s blog postings are written for home owners in his area, but are often helpful for appraisers also.

Excerpts:

Is it a second unit or an accessory dwelling? How do you know the difference? If the post office gives the second structure an address, that makes it a second unit, right? Or if the dwellings are separately metered, it must mean there are two units. Let’s talk through some distinctions below, and then discuss a bit of a “monkey wrench” since there is an added subjective layer when making this call.

The Short Answer: A second unit and an accessory dwelling might look like the same thing to a casual observer, but what matters most in determining whether a structure is a second unit or accessory dwelling is what zoning allows and whether the market perceives the structure as a second unit or not. The post office might have a separate address for an accessory dwelling, but that does not make it a legal and legitimate second unit. The utility company might have two meters on site also, but even that does not mean there are two units. The key comes down to the property being legal as two units in the eyes of the city or county, recognized by the market as a second unit, and even how the dwelling contributes to value.

The Monkey Wrench: Part of determining whether something is an accessory dwelling or second unit comes down to its contributory value, and the appraiser is really going to have to give this some thought…

My comment: I’m working on an appraisal of a property that has two legal homes on one lot. The front house is 2 bedroom/1 bath 1,500 sq.ft. The rear house is 2 bedroom/1 bath 1,000 sq.ft. In my city, most detached units are small “cottages” behind much larger homes and are marketed as homes with an extra unit and as duplexes. Most sell as homes with a small rear unit. Of course, when I got to the property, I found out the rear unit was much larger than the typical rear cottage!! Our market is very, very strong with a shortage of inventory. Many buyers are priced out of the sfr market and are looking at properties with 2 units, but they want a unit with at least 3 bedrooms for owner occupancy. I am still trying to figure out how my subject fits into this market as the front unit lacks a third bedroom, but does have a small room that could be used as a child’s bedroom. I am interviewing lots of agents and going on the weekly open home caravan looking at listings. Fortunately, this is not for a lender so I can take extra time to figure it out!!

http://sacramentoappraisalblog.com/2014/06/17/is-it-a-second-unit-or-an-accessory-dwelling/

How to use Google addresses in your appraisals!!

By Ann O'Rourke on June 3, 2014 / appraisal, appraisers, Google / 3 Comments

Tags: appraisal, Google

How to use Google addresses in your appraisals!!

Google’s Street View is doing photos all over the world!!

I used to spend a lot of time doing preliminary research on an appraisal by looking up property data on public records. Now, I just google the address!! Google provides a front photo and the search often includes other services such as zillow and trulia that provide public records data.

Someone calls or emails you about an appraisal. Hopefully, you check out the property before you decide whether or not you want to do the appraisal and decide your fee. Just google the address!! You can do it in your car with your smart phone.

Do you ever get back to the office and notice that your comp photo doesn’t match the MLS photo or, more likely, you are not sure you are selecting the correct photo?
You sometimes can also zoom in on google photos to check the address of a property.

Living in a rural area? Keep a lookout for a Google car,motorcyle,bicycle,camel,?? They seem to be everywhere!!! Or, just check out your relatives’-friends’-ex’s-child hood homes. It is endless!!

Click here to see where Google is now, has been, and where it is going?
https://support.google.com/maps/answer/68384?hl=en

The Big Issue for Appraisal Fees – Consumers are paying more for appraisals if AMCs are used

By Ann O'Rourke on May 19, 2014 / appraisal, Appraisal fees, appraisers / 9 Comments

Tags: appraisal, appraisal fees

The Big Issue for Appraisal Fees (if you want to get higher fees) – Consumers are paying more for appraisals if AMCs are used

There is only one relevant consumer issue: they are paying more for appraisals since AMCs took over.

They just want to get their loan. Why would they care about the appraiser? Plus, much more complicated issues such as Dodd Frankenstein, AMCs, etc. etc. are very difficult to understand for consumers. Lenders don’t care. They just want to pass their regulatory audits and sell their loans to investors.

I have no idea why appraisers don’t promote this simple message.

You could change the pitch to all consumers in the U.S. : “Why have borrower’s appraisal fees gone up?” Nobody cares about what appraisers are paid, except appraisers and a few others. Everybody, including appraisers, does not want to pay for inflated appraisal costs.

But, for appraisers, AMCs are a much easier target. AMCs work for lenders and do what they want.

I have been hearing that a few direct local lenders have started changing their fees up and down depending on the market. I don’t know why they hardly ever changed their fees before.

FYI, before licensing and mortgage brokers, lenders managed their own appraisal departments but didn’t change fees much and there was no or little bidding (residential) – since the 1930’s, when lender regulators started requiring appraisals and American appraising took off.

———————————————-

What are customary fees?

I don’t know. AMCs have about 80% of the market. What is left for lender fees? VA (doesn’t change fees very often) and direct lenders are dropping fees.

What about non-lender fees? With borrowers paying lots more for appraisals, I keep increasing my fees to well over customary lender appraisal fees. They are still less than what borrowers are paying.

Japan's disposable homes

By Ann O'Rourke on April 8, 2014 / appraisal, appraisers, unusual home / 2 Comments

Tags: appraisal

During my morning walks, I listen to podcasts. One of my favorites is Freakonomics Radio (Yes, the same guys that wrote the book)

I recently listed to a podcast where they analyzed Japan’s very unusual home sale market. They consider many homes to last about 20 years (economic life) and then they are demolished and new homes built.

A few excerpts from the summary of the podcast:

It turns out that half of all homes in Japan are demolished within 38 years – compared to 100 years in the U.S. There is virtually no market for pre-owned homes in Japan, and 60 percent of all homes were built after 1980. In Yoshida’s estimation, while land continues to hold value, physical homes become worthless within 30 years. Other studies have shown this to happen in as little as 15 years.

In the podcast, we look into several factors that conspire to produce this strange scenario. They include: economics, culture, World War II, and seismic activity.

Richard Koo, chief economist at the Nomura Research Institute, has argued in a paper called “Obstacles to Affluence: Thoughts on Japanese Housing” that whatever the rationale behind the disposable-home situation, the outcome isn’t desirable…

My comment: Fascinating and worth listening to!! Very interesting for appraisers, especially.

http://freakonomics.com/2014/02/27/why-are-japanese-homes-disposable-a-new-freakonomics-radio-podcast-3/

How accurate is the reported square footage from the tax records in your primary service area?

By Ann O'Rourke on April 8, 2014 / AMCs, appraisal, appraisal management company, appraisers, lender appraisals, square footage / 20 Comments

Tags: appraisal, square footage

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How accurate is the reported square footage from the tax records in your primary service area?

3/10/14 poll – www.appraisalport.com

Poll Results

– Very accurate for most homes 869 votes – 16%

– Mostly accurate (about 75% of the time) 2495 votes – 55%

– Hit and miss (about 50% of the time). 1470 votes – 27%

– Not reliable (accurate less than 25% of the time). 475 votes – 9%

– The tax records do not usually show the square footage in my area. 127 votes – 2%

Total votes = 5,346

My comment: AMCs seem to be assuming that tax records are more reliable than appraisers’ measurements. WRONG!! I started appraising at an assessor’s office in 1975. We were no more accurate than any other appraisers and never thought that our square footages were exact.

I used to do a lot of relocation appraisals where 2 or 3 appraisers were hired to appraise the same property. Very, very seldom did the appraisers have the same square footage.

A few years ago, a local real estate agent asked me about an appraisal where the sketch did not match the house. Tax records sq.ft. was way off. The appraiser had “fudged” the dimensions to match public records.

Do many appraisers do this to avoid AMC hassles or they were taught to do this by their supervisors?

I have always looked at tax records sq.ft. as a cross-check, but never assumed it was more accurate than my measured sq.ft. In some neighborhoods and cities, they are accurate and are very unreliable in other areas as they often are not correct.

9/20 update. Not much has changed. Still a big problem!!

Generally speaking, how accurate do you find MLS data in your area?(Opens in a new browser tab)

10 reasons why public records and the appraiser’s square footage can differ(Opens in a new browser tab)

12-27-18 Newz:// Change Your Templates!!/Corelogic takeover?/Square footage?(Opens in a new browser tab)

6-7-18 Newz//Square footage, Novelty Architecture, Appraisal Fraud(Opens in a new browser tab)

Voluntary Appraiser Disciplinary Action Matrix Based on 2014-15 edition of USPAP

By Ann O'Rourke on December 10, 2013 / appraisal, Appraisal Foundation, appraisers, USPAP / Leave a comment

Tags: appraisal, USPAP

A very interesting document provided by the Appraisal Foundation to state boards. Not mandatory, just information for them. State boards vary dramatically in how they handle discipline. Fortunately, I am in California, which has never had a state board (Governor of CA at that time did not want to increase any expenses, including advisory boards). Investigators are all state employees.

3 examples:

An appraiser states in his certification on an appraisal that he inspected the interior and exterior of the subject property, when in fact he only drove by the property.
As a result, he stated that the subject property was in average condition when it was actually in poor condition and essentially uninhabitable. He did not use any extraordinary assumptions or hypothetical conditions in the assignment. He knew that the lender required an interior inspection.

An appraiser accepted an appraisal assignment in an area where he is not geographically competent, failed to notify the client that he was not geographically competent and failed to take the necessary steps to become competent. As a result, he produced an appraisal that was not supported by market data.

In the sales comparison approach, an appraiser simply adds the adjusted value of the three comparable sales used and divides by three for an indicated value, even though some sales were far better indicators of value than others.

Note: These are the simple examples. There are more commercial appraisal examples and more complicated residential examples.

Click here to download from the Oklahoma state regulator web site.

My comment: Well worth reading. What does your state board do?

Thanks to Long Time Reader and author Doug Smith in Montana for this great link!!

Review appraiser liability

By Ann O'Rourke on November 23, 2013 / appraisal, appraisers, lender appraisals, Reviews / Leave a comment

Tags: appraisal, reviews

By attorney Todd F. Stevens

Excerpts:
Here’s a trend in real estate law: attorneys are waking up to the potential liability of review appraisers. Couple this with the common misunderstanding among review appraisers that their risk is less than the author of the original report, and you get a burgeoning new area of litigation. Here’s how to protect yourself.

Another big myth is that reviewers have less liability than the original appraiser. In fact, I have heard some attorneys argue that reviewers have more liability than the original appraiser since reviewers have the “last” opportunity to correct any problems with the report. While I am unaware of any case precedent specifically addressing this issue, logic dictates that the liability of a reviewer and the original appraiser are the same.

My comment: a topic that appraisers who review appraisals don’t like to think about. This article was written several years ago and refers to mortgage brokers, but it applies now. The author defends appraisers.

http://www.keenlaw.com/topics/reviewappraisals.html

Appraiser Survival Plan?

By Ann O'Rourke on November 6, 2013 / appraisal, appraisers / Leave a comment

Tags: appraisal

What is your plan to survive this period of slowed loan originations and appraisal volumes?
9/13/13 www.appraisalport.com poll

Nothing different – I’ll be OK. 2,925 votes 51%
Rely on spouse/relatives for any shortfall. 235 votes 4%
Take on some extra work outside of appraising. 593 votes 10%
Leave the appraisal profession for a different occupation. 558 votes 10%
Not sure yet. 1,438 votes 25%

Total Votes: 5,749

My comment: Somewhat encouraging. Of course, lender work goes up and down regularly!! Could be different results in a few months. Always too much or not enough work since I started my appraisal business in 1986. I have just the right amount of work for a couple of hours or maybe a day ;>

Go to www.appraisalport.com and vote on the current poll!!

Statute of limitations for appraisals

By Ann O'Rourke on October 23, 2013 / appraisal, appraisers / Leave a comment

Tags: appraisal, appraisers

Statute of limitations for appraisals
Why You Should Keep Your Workfile for 7 to 8 Years
By Peter Christensen, Liability Insurance Administrators, www.liability.com

Excerpt:

In 2013, many lawsuits against both residential and commercial appraisers continue to relate to appraisals performed years ago at the peak of the real estate price bubble, 2005 to mid-2008. These lawsuits are filed by borrowers, lenders, investors or the FDIC and typically allege that an appraiser’s inflated value resulted in the plaintiff borrowing, paying or loaning too much money. The plaintiff blames its loss on the appraiser and sues for damages.

When reporting a claim like this to our office, one of the most common questions a defendant appraiser will ask us is about the applicable statute of limitations. The question is usually something like: “I did the appraisal in 2005, more than five years ago. I threw out the workfile because USPAP only requires me to keep files for five years. Won’t the lawsuit be dismissed based on the statute of limitations?” The answer to that question is almost always “probably not.”

The purpose of this Claim Alert is to clear up misconceptions that appraisers read and hear regarding statutes of limitations and to advise appraisers about the importance of retaining workfiles well beyond USPAP’s bare minimum recordkeeping requirement. A good workfile is the appraiser’s defense tool kit when a claim comes in. Without that workfile in hand, the appraiser’s defense counsel will usually be hampered in his or her ability to defend a claim. Our advice on this issue is simple: keep your workfile for seven to eight years (unless a longer period is required under USPAP’s special requirement for assignments where the appraiser has provided testimony). The discussion that follows should help you understand why.

My comment: Worth reading. You can be sued at any time, for anything, by anybody. Be careful out there. Have I always kept my files for over 5 years? No. Three years ago I significantly downsized my office at got rid of a lot of appraisal files over 5 years old. Mistake!!!

http://www.liability.com/claim_alerts/statute-of-limitations-for-a-claim-against-an-appraiser.aspx