AVMS

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When Is Single-Family a Multi-Family Appraisal?
SFR or 2 units with an ADU?

by Richard Hagar, SRA

Excerpts: Once upon a time, it was easy to classify single-family homes, duplexes, triplexes and multi-family buildings. Though there have always been exceptions, if a property was zoned single-family residential (SFR) and there was a single home on the site, you’d use a 1004 form for bank appraisals.

If a property was zoned multi-family and there were two to four units on the site, an appraiser would use the 1025 form. And, if there were five or more units on the site, it would be something a commercial appraiser would handle via a narrative format.

Ah, the good old days. Then, along came accessory dwelling units (ADU), which in some states and cities are messing with established appraisal and lending systems.

Things Get Twisted – ADUs

Many counties and cities that allow ADUs do not “change” the official zoning; SFR 5000 still means one single-family home per 5,000-square-foot lot (and allow an ADU). What a few politically and emotionally driven cities have done is bypass the normal requirements for changing zoning (public hearings, notifications, etc.) and passed laws that overlay additional uses and requirements on to existing zoning codes. It’s their “clever” way of changing things without following the historic path to … well, changing things without informed consent by the citizens.

So, here we are: appraisers looking at zoning codes trying to determine the highest and best use for the subject’s site (as if vacant) and the structure as improved. We see SF7500 and say, “great, single family.” But did you look to see if there are overlay additions to the code? If so, did you read them? Did you look at regulations related to accessory dwelling units? If you didn’t, you’d better start looking because these things are popping up in numerous counties and cities across the United States, and they have a massive impact on unit density, the highest and best use, land values and depreciation rates.

Conflict With Lending

The Federal National Mortgage Association (FNMA) will buy a loan where the single-family home has a single ADU. Look at the below form (Figure 1) and note the two options: Units “One” and “One with Accessory Unit.” There is no space on the 1004 form to identify a second ADU.

Now we have a conflict between cities allowing two or more ADUs and the lending world of FNMA, the Federal Home Loan Mortgage Corp. (FHLMC), the VA and FHA. These entities will not buy loans with two or more ADUs. And when FNMA won’t buy (or VA and FHA insure) a loan from a lender it results in fewer lenders offering loans, higher interest rates and possibly larger down payments. In a city’s zeal to lower the cost of housing, they’ve increased the cost of housing.

Required Information

When you run across properties with ADUs, all sorts of additional information is required in the appraisal. ANSI requires the square footage to be separately indicated. Fannie Mae needs additional information specific to the ADU, and just wait until you see FNMA’s new appraisal “form,” along with its 20-plus new information fields in the special ADU section. If you want an example of how we provide square-footage information, email me (See author bio) and I’ll provide you with a copy of the form we use.

The appraisal will also require fully supported adjustments, explanations on how you determined the adjustments, and the ADUs impact on value measured by the cost, income and sales comparison approaches.

To read more, Click Here

My comments: Read this detailed article if you appraise any properties with ADUs. It is a comprehensive analysis of all the new issues. Richard Hagar is one of my favorite appraisal instructors.

Appraiser Liability Risks

By Ann O'Rourke on June 23, 2023 / AI, appraisal how to, AVMS, Fannie, real estate market / Leave a comment

Tags: appraisal how to, AVMs, Fannie, real estate market

This Is Where Appraisal Liability Risks Lie (Plus Tips on How to Avoid Them)

By: McKissock

Excerpts: While it’s difficult for a litigant to win a judgment against an appraiser, that doesn’t spare appraisers the inconvenience of being sued, which can be costly, time-consuming, and harmful to one’s reputation even if the suit fails.

Attorney Peter Christensen, general counsel at the Christensen Law Firm in Bozeman, Montana, notes that lawsuits against individual residential appraisers, or small residential AMCs, are fairly rare, and successful suits rarer still. However, it’s a good idea to know where the risks lie—and how to avoid them.

Topics include:

USPAP and state laws
Types of lawsuits brought to appraisers
Disclosures and disclaimers to reduce appraisal liability risks

To read more, click here

My comments: Peter Christensen is very knowledgeable. Well written, short, and worth reading. As we all (should) know, any person or company. can sue you for any reason at any time.!

NOTE: Please scroll down to read the other topics in this long blog post on AVMs and AI, good appraisal book, Real estate market, Fannie, non-lender appraisals, unusual homes, mortgage origination stats, etc.

Click Read More below to read lots more!

Appraiser Gets Subpoena – What to Do 3-17-23

By Ann O'Rourke on April 1, 2023 / appraisal, appraisal business, AVMS, non-lender appraisals, real estate market / Leave a comment

Tags: AMC, AVMs, non-lender appraisals, real estate market

Appraiser Gets Subpoena – What to Do

Excerpts: As an appraiser, you don’t have to be sued or be facing a lawsuit to find yourself on the receiving end of a subpoena—staring down a lawyer who is peppering you with questions.

Appraisers are often subpoenaed in legal disputes involving third parties, usually being tied to the dispute for no other reason than having appraised a property involved in the dispute. If the appraiser is not a party to the lawsuit, then typically they are being subpoenaed for documents and/or being called as an expert witness, sometimes without pay, to testify regarding a past appraisal.

First, subpoenas are court orders and you must not ignore the subpoena or you will find yourself in contempt of court. Tim Andersen, MAI, MSc, USPAP instructor and CEO of TheAppraisersAdvocate.com, says that if an appraiser doesn’t want to comply with a subpoena they can try to fight it, but that requires hiring a lawyer, which can be costly and has its own challenges. “One approach is to protest the subpoena to the judge indicating that your records are private, and requesting that your records be treated as confidential and not be made part of the public record. The judge, however, will do whatever s/he chooses to do,” reports Andersen.

To read more, click here

My comments: This is an excellent article on this topic. Read it to find out the issues. If you lost this link later, when you need help, Google “Dealing with a Subpoena Workingre”. This is specifically for appraisers. If you find other links online, they are not as useful.

I have never been served with a subpoena, but this is a regular topic among appraisers. I get calls occasionally from appraisers about this.

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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 non-lender appraisals, real estate market, regression and AVMs, unusual homes, mortgage origination stats, etc.

Fannie Requiring Appraisal Floor Plans Coming?

Fannie Wants Desktop Appraisals with Floor Plans

By Ann O'Rourke on March 4, 2022 / ANSI, AVMS, bias, Clubhouse, desktop appraisals, Fannie / Leave a comment

Tags: ANSI, AVM, bias, CLUBHOUSE, desktop appraisals, Fannie

Fannie Mae and Freddie Mac to launch remote desktop appraisals in 2022

Desktop appraisals with floor plans

Excerpt:

Beginning March 19, 2022, Fannie Mae and Freddie Mac will accept remote desktop appraisals nationwide on eligible transactions without the appraiser ever stepping foot on the subject property, the Federal Housing Finance Agency (FHFA) announced.

To read more, click here

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Link to FHFA announcement 10/18/21 with more information,click here

My comments: When they submit loan applications, lenders receive a list of appraisal types available for their loans, including waivers. Lenders did not widely choose the desktop Covid appraisals. They preferred full appraisals.

I ran an ad for Cubicasa (floor plan app) on Tuesday this week and got some appraiser complaints. I will be testing it soon and hopefully will be able to use it in my appraisals.

Many anticipate that lender adoption will be slow, including Lyle Radke from Fannie and a group email posting from an appraiser who recently attended a state Mortgage Bankers’ meeting. He said:

“I was on a 4 appraiser panel with +/-60 LO’s representing 20 different lenders. I asked for a show of hands-on how many would be offering Desktop or Hybrid appraisals on March 19… There was not a single hand raised. “

“When we discussed the Desktop and Hybrids, most had no idea about the differences in the two products… All 4 of us thought that the turn time “might” be reduced by 1-2 business days. So, based on a small sample, this may not be as much of a problem as some appraisers think. “

Fannie Wants Desktop Appraisals

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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, tech forecast, ANSI, bias, AVMs, mortgage origination stats, etc.

Appraisal vs Zillow vs AVM which is best(Opens in a new browser tab)

Zillow Quits Buying Homes – Their AVM Did Not Work Well!

By Ann O'Rourke on November 12, 2021 / appraisal business, AVMS, bias, zillow / Leave a comment

Tags: appraisal business, bias, zillow

A ‘Fail’ Stamp vector over a white background.

Zillow Quits Buying Homes – AVM Did Not Work Well!!!

Two appraisers comment – Jonathan Miller and Ryan Lundquist

Goodbye Zillow

By Ryan Lundquist

Some of the topics:

Failure despite massive price increases
Zillow losing isn’t about the market
The school of hard knocks
Public perception
Cannot smell the cats: I gave a quote to Money.com last week, and I was especially excited they used my “Zillow cannot smell if 20 cats live there…” line.

To read more, click here

My comment: I love the “20 cats” comment. I appraised a house with at least that many cats. They were on all the tops of dressers, cabinets, etc., Very Creepy! I still have nightmares about it sometimes. A volunteer owned it for a local animal shelter. She had a large outdoor enclosure. Did not smell, but…

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By Jonathan Miller

Zillow Offers As A Proxy For ‘Big Data’ Shows The Lack Of Qualitative Analysis

Yes, big data usually infers ‘quantitative’ analysis, as in “relying on numbers.” The Zestimate legacy of profound inaccuracy finally reached a devastating conclusion with the collapse of Zillow Offers this week and the loss of hundreds of millions in shareholder…

To read more, click here

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This Just In: The ‘A’ in ‘Zillow’ Stands for ‘Accuracy’

Excerpt: Yet it would seem unlikely that Zillow Offers used something completely separate and conceptually very different from their ‘Zestimate’ because it would be quite expensive and extremely difficult to keep a radical new valuation concept a complete secret. All we know at this point is whatever valuation methodology they used was a complete fail. And to go a step further their Zestimate valuation methodology has long been a complete failure in the accuracy department. But it hasn’t been a complete failure in the consumer credibility department at all.

To read more and see fun videos, click here

Zillow (in) accuracy(Opens in a new browser tab)

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NOTE: Please scroll down to read the other topics in this long blog post on unusual homes, mortgage origination stats, etc.

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Dr. Seuss House aka The Goose Creek Tower

Complex Residential Properties for Appraisers

By Ann O'Rourke on March 19, 2021 / adjustments, AVMS, bias / 1 Comment

Tags: adjustments, appraisal how to, bias, unusal homes

How to Identify a Residential Complex Property

Excerpts: A complex one-to-four family residential property is defined as a property that meets at least one of the following criteria:

The property to be appraised is atypical
The form of ownership is atypical
The market conditions are atypical

“Below we dig a little deeper into each type of complex property outlined above, providing detailed descriptions and examples of properties that would fall under each of the three categories.”

To read more, click here

My comments: This is the best explanation I have read about this issue. All appraisers encounter complex properties. You may or may not decide to accept the assignment. Always check the info you have on the property before accepting the assignment. Or, you find out after starting on the appraisal that it is more complex than you thought. I regularly turn down assignments because it will require more time, or I don’t want to “reinvent the wheel,” as I may never do another like it, etc.

Mortgage lending appraisals are very, very cyclical. When you are very busy, I recommend turning down these assignments to make more money. You will have lots of time during the slow period to accept these assignments.

In ancient history, before AMCs, I often did the tough ones for loyal clients as a favor. AMCs will go down the list, sometimes for days, trying to find an appraiser. One called me yesterday about a mixed-use property that their lender client said was residential. From online information, it looked like commercial on first floor. The issue was highest and best use, of course. I told them I did not know any commercial appraisers who work for AMCs, plus the fee would be over $2,000. You have to know that city’s local zoning regulations, requiring local expertise to determine the highest and best use.

The Bottom Line: Don’t Risk Your Appraisal License if it is too complicated for you!! I get many calls from appraisers having problems. This is always my answer. I have returned fees up to $2,000 after spending lots of hours on the assignment.

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, mortgage origination stats, etc.

Coronavirus and Appraisals March 13 2020

By Ann O'Rourke on March 13, 2020 / AMCs, appraisal business, Appraisal fees, appraisal management company, AVMS, future, lender appraisals, Mortgage applications, mortgage loan volume, unusual homes, weird properties / 1 Comment

Tags: AMC, appraisal business, appraisal fees, appraisal management company, future, mortgage loan volume, unusal homes, unusual buildings

Appraiser’s (Changing) Role

Q&A with Mark Verrett, Chief Innovation Officer at Accurity Valuation

Excerpts: WRE: How can appraisers adapt to meet the profession demands?

Verrett: I think there are several ways to adapt to these challenges. The first is to work toward diversifying your practice away from 100 percent mortgage business niches. Our firm is a leader in green valuation, rural valuation, valuation consulting and litigation support and we help our offices diversify into those spaces. However, this solution isn’t for everyone….

To directly take on the challenges facing appraiser relevancy in the mortgage space, significant change is required. Appraisers need to unite to create a like-minded national voice that is not rejecting proposed changes for the profession, but rather working with stakeholders (regulators, lenders, clients, etc.) in conceptualizing, testing, tweaking, and ultimately modernizing the appraisal process on the mortgage side.

The appraisal community has a tough assignment in their role in this modernization. To be useful in the discussion, we need to challenge ourselves to be creative and open-minded, yet diligent in maintaining or, even better, improving the quality of the valuation being produced. I think it is extremely important for appraisers to listen and understand the needs of their clients and to creatively develop solutions that meet those needs.

Worth reading with some good ideas. To read more, click here

My comment: Accurity has franchisees and some very savvy appraiser officers and directors.

Covid-19 Residential Appraisers Tips on Staying Safe

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

Appraiser Covid Survey Results April 2020

To read more of this long blog post, click Read More Below!!

Top Ten Reasons Why It Is Great to be an Appraiser Humor(Opens in a new browser tab)

6 Reasons Appraisers Are NOT Needed

By Ann O'Rourke on February 7, 2020 / adjustments, appraisal, Appraisal Foundation, appraisal how to, AVMS, commercial appraisal, mortgage loan volume, Podcasts, unusual home, USPAP, weird properties / Leave a comment

Tags: adjustments, appraisal business, Appraisal Foundation, appraisal how to, mortgage loan volume, unusal homes, weird properties

Appraisers Are NOT Needed???

Excerpt: You can buy a car in little to no time so why not a house? Over the years I have heard that the home buying process is too long. There are too many headaches for buyers and the process should be easier.

We are in a microwave society and everybody wants things instantly. This should, of course, carry over to the home buying process, right?

A house is probably the most expensive purchase people will ever make but that doesn’t mean that the process needs to consume your entire life, right? The appraiser just adds to the stumbling block that most home buyers face in getting into the house of their dreams. Today I am going to discuss 6 reasons that appraisers are not needed (wink, wink) in the home buying process.

Written for home buyers but good explanations for appraisers to use.

To read more click here

My comment: I have appraised many apartment properties. 2-4 unit properties are more difficult to appraise than a 60 unit apartment building, which I appraised recently! Owner occupants, motivations, etc. are big issues. 4 units are the most difficult.

My city has had rent control, which keeps getting stricter, for 4 years. CA recently passed rent control for the state. Must use actual, not market, rents in appraisals. Very, very difficult to appraise. 3 weeks ago I decided not to do them any more.

But, last week a family was thinking about selling their 4 unit property. I pre-screened them. If it had low rents, I don’t know who would buy it. Fortunately the rents were around 80% of market. They wanted to know if it was good time to sell. I told them I would let them know, then do the appraisal. Not a good market now.

I met one of the owners this week at the inspection. He brought a copy of the 2005 date of death appraisal and asked for an “update” or an “evaluation”, for a lower fee, which his sisters requested. I told him I could not do it and did not know any licensed appraiser who would do it. And told him to use a local real estate agent for free. I doubt if they would recommend not listing now as I speak with them regularly at open houses.

Appraisal Humor

Appraisal business tips

To read about lots more appraisal topics, continue reading below!

Appraisal Neighborhood Analysis

By Ann O'Rourke on December 7, 2019 / AMCs, appraisal business, appraisal how to, AVMS, computers, marketing, Mortgage applications, mortgage loan volume, real estate market, Strange homes / Leave a comment

Tags: appraisal business, appraisal how to, appraisal management company, lenders, marketing, mortgage lending, neighborhood, real estate market, unusal homes

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.

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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