Appraising Unique Properties

By on December 13, 2024   /   adjustments, AI, appraisal, bias, Economic analysis, forecast, future, Highest and Best Use, retirement, ROVs   /   Leave a comment
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Unique Properties, Rocket Mortgage Sues HUD, Trump Shifts in Housing Market?

December 13, 2024

What’s in This Newsletter (In Order, Scroll Down)

    • LIA ad – Each appraisal is unique
    • The Ultimate Guide to Unique Property Appraisals
    • America’s Most Expensive Property Is Sitting in a Flood Zone—Will Anyone Buy the $295 Million Estate?
    • Rocket Mortgage Sues HUD Over Regulatory, Enforcement Discrepancies
    • Donald Trump’s Second Term Could Bring ‘Significant Shifts’ to the Housing Market
    • Report: What’s Driving the Recent Refi ‘Boom?’
    • Mortgage applications increased 5.4 percent from one week earlier
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The Ultimate Guide to Unique Property Appraisals

Excerpts: When faced with a truly unique property, the standard approach of pulling recent comparable sales from the neighborhood simply won’t cut it.

These properties require a real estate appraiser with a different mindset and a more creative approach to valuation.

Here’s a quick break down of exactly how unique property appraisals differ from traditional approaches:

Breaking Down the Time Barrier

One of the most common misconceptions is that we can only use recent sales. For unique properties, this simply isn’t true. Here’s why:

Expanding Geographic Boundaries

Location matters, but for unique properties, finding truly comparable homes often requires the appraiser to look beyond the immediate neighborhood:

The Bottom Line

Appraising unique properties requires breaking free from traditional constraints while maintaining professional standards.

To read more, Click Here

My comments: Good summary of the issues. Read the details plus a table comparing traditional and unique properties. Almost all appraisers appraise unique properties, if only occasionally. This is written for real estate agents, but very useful for appraisers.

I regularly hear about AMCs trying to find an appraiser to do one of these properties. They keep shopping for low fees and fast turn times. After a while they finally go with the appraiser who can do them at a good fee and reasonable turn times.

If you can appraise unique properties you have a substantial advantage over less experienced appraisers. Now is an excellent time to try doing one, especially if your business is slow now.

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Appraisers – Protect against Being Sued

By on October 25, 2024   /   AMCs, bias, humor, liability   /   Leave a comment
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Newz: Protect Against Being Sued, DOJ Sues Rocket Mortgage, Solidifi AMC and Appraiser, Scary Places

October 25, 2024

What’s in This Newsletter (In Order, Scroll Down)

  • Dealing with Unhappy Buyers as an Appraiser (LIA ad)
  • Protect Against Any Grounds for Suing an Appraiser with Defensible Reports
  • A Billionaire Built a Cliffside Version of Versailles. Now It’s Asking $108 Million
  • DOJ Sues Rocket Mortgage, Solidifi AMC and appraiser – Bias
  • Halloween: Paranormal/Haunted places where I live and How to find what is near you. You may be surprised!
  • Very funny Halloween appraiser cartoon
  • Ghosts Are Scary, but 95% of Americans Are More Afraid of Home Repairs (2024 Data)
  • How to Avoid Unexpectedly Buying a Haunted House—Because It Could Happen to You
  • 32 of the most haunted places in America
  • White House Ghost Stories
  • Mortgage applications decreased 6.7 percent from one week earlier
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    Statute of Limitations for Suing an Appraiser

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Protect Against Any Grounds for Suing an Appraiser with Defensible Reports

Excerpts: … appraisers can be sued for several reasons, including negligence, errors and oversight, failure to notice underlying issues, or even fraud. While lawsuits against appraisers can be serious, they are rare when compared to the number of complaints to the state appraisal boards, which are much more commonplace and can also have serious consequences.

Therefore, the best defense for a real estate appraiser against a lawsuit or an appraisal board complaint is an accurate, defensible appraisal report.

Topics include:

1. Why is it important to create a highly defensible appraisal report? Mel Black: Real estate appraisers need to be prepared when the bright spotlight comes shining down on their work. They need to be prepared for issues that arise in a board complaint or civil lawsuit…

2. To ensure their report is defensible, what should real estate appraisers focus on at the beginning of an assignment? MB: There are a number of things to consider at the beginning of an assignment. As an appraiser, you want to look at assignment selection. You want to look at your competency to handle the assignment. You want to make sure you are able to define the problem and create an appropriate scope of work.

3. Once you’ve accepted the assignment, what are some things to focus on when developing the appraisal?

4. While you’re developing the appraisal, how do you find the best comparable sales information to include to ensure it’s highly defensible?

5. How can you prepare your workfile or appraisal report for a question about adjustments for the differences between the comparable and the subject property?

To read lots more about all 8 suggestions, Click Here

My comments: Information in the blog post is from Mel Black, a Certified Residential Appraiser, licensed real estate broker, and a practicing attorney who provides regular counsel on compliance matters and other industry-related law for appraisers and brokerage services, about creating defensible appraisal reports and why they are necessary in fighting legal battles or against appraisal board complaints.

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Freddie Mac Appraisal Advice

By on July 26, 2024   /   bias, climate change, liability, ROVs   /   Leave a comment
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Newz: Freddie Mac Insights, HUD Bias charges against Appraiser, Lender and AMC, ROV Guidance

July 26, 2024

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What’s in This Newsletter (in Order, Scroll Down)

  • Judicial Appraiser Panels
  • Appraisal Insights With Freddie Mac
  • HUD Charges Appraiser, Appraisal Management Company, and Lender with Race Discrimination
  • Agencies Finalize Interagency Guidance on Reconsiderations of Value for Residential Real Estate Valuations
  • ‘Twisters’ Begs the Question: Can You Truly Tornado-Proof a Home? A Reality Check
  • Southernmost House in Continental U.S. Is for Sale in Key West (It’s Next to the Buoy) for $18.5 million
  • Mortgage applications decreased 2.2 percent from one week earlier

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Thanks to our Sponsor!!

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Appraisal Insights With Freddie Mac

by Scott Reuter, Freddie Mac

One of the goals at Freddie Mac is to help lead the way toward a more transparent and equitable housing finance process. Across our many priorities, we’re committed to offering trends, best practices and insight to the industry. As strategies continue to develop and evolve, we believe it’s important to engage and communicate with stakeholders, so here are three key items we believe appraisers should keep top of mind in 2024.

1. More Objective Appraisals

An important component to transparency is ensuring that appraisal reports for loans sold to Freddie Mac are free of subjective or potentially biased language…

2. Market Conditions Analysis

Market conditions analysis is the backbone of an appraisal. It’s a necessary step in developing credible reports. This analysis is the study of market area conditions and the changes in price levels over time…

It’s important to note from a development perspective that market conditions must be analyzed on every appraisal assignment. Market adjustments should not be viewed as a filler adjustment. Market conditions adjustments are technically among the first modifications that should be made, before accounting for physical differences. Taking shortcuts here diminishes the reliability of the adjustments that follow and the overall credibility of the appraisal report.

3. Quality vs. Condition

While most appraisers demonstrate a solid understanding of the quality and condition ratings, Freddie Mac still sees inconsistencies in the way these are reported. As might be expected, most of the issues for reported condition fall between the definitional lines of C3 to C4 and C4 to C5.

Also, there seems to be a notion by some appraisers that a C3 condition is equal to “average.” Please be mindful that a C3 home is described as generally well-maintained and showing minimal physical depreciation from regular wear and tear. In contrast, a C4 condition applies to a home that’s adequately maintained, has slight deferred maintenance and minor physical wear and tear, and may need cosmetic or minor repairs.

The author, Scott Reuter is single-family chief appraisal officer for Freddie Mac. He is a certified general appraiser with more than 30 years of experience in valuation, appraisal and collateral risk management concerns.

To read more, Click Here

My comments: Well written and practical. Worth reading, with good tips and links for all the topics. If you do residential lender appraisals, read this article.

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Paperless Appraisal Office?

By on May 31, 2024   /   appraisal how to, bias, HOME INSURANCE, liability   /   Leave a comment
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10 Steps to a Paperless Office

By Mike Fletcher

Excerpts: If you’ve talked to appraisers who have gone digital, you know they love not having boxes of old reports and workfiles cluttering their offices, homes, and garages and not spending money on paper, toner, and other equipment. Even better, appraisers who run a paperless office often enjoy increased productivity and efficiency.

If you’re ready to enjoy the benefits of getting rid of paper, I’m sharing 10 steps to switch to a completely paperless office. While you may need to tailor this blueprint to your preferred methods and workflows, this will help you get started.

Summary

Switching to digital files and a paperless office saves you time and offers better protection for your files. Making the shift to get rid of printed documents and handwritten notes isn’t easy at first, but by going one step at a time and relying on your appraisal software’s tools, you’ll be paperless in no time.

Topics with detailed and practical advice:

1. Why do you want a paperless office?

2. Commit to change – Be aware of wanting to stay in the familiar

3. Identify your paper and how to go paperless

4. Obtain needed equipment for your paperless office

5. Determine your storage needs in a paperless office

6. Establish a new workflow in your paperless office

7. Going paperless starts small

8. Add another paperless item

9. Get trained

10. Seek out your peers

To read more, Click Here

My comments: What appraiser does not want to go paperless? No one. Read this article with lots of good advice!

Business is slow for many appraisers. Going paperless is an excellent option to consider.

This is by far the best article I have read on going paperless. It is written for appraisers, is understandable, and is not too long. The author is a veteran residential appraiser and self-proclaimed “Data Nerd.” He is currently a Senior Data Steward at Corelogic.

I have a home garage and business office full of appraisal files, plus my business records for taxes. I keep hoping someone will come in and steal all the paper and the filing cabinets

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Non-Arms Length Sales for Appraisers

By on April 26, 2024   /   appraisal business, bias, GSEs, lender appraisals   /   Leave a comment
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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.

What should appraisers look for in a sales contract?

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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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Why Appraisal Workfiles Are Important

By on April 5, 2024   /   appraisal business, bias, Economic analysis, USPAP, waivers   /   Leave a comment
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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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How to select appraisal comps

By on March 22, 2024   /   appraisal business, bias, climate change   /   Leave a comment
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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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Appraising Luxury Homes

By on March 1, 2024   /   appraisal, appraisal business, bias, real estate market   /   Leave a comment
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What Are the Top Luxury Markets in North America Right Now?

Excerpts: Where are the hottest high-end real estate markets? Whether you’re looking to specialize in luxury home appraisals or you’re simply reading up on the latest market trends, you may want to pay attention to areas where luxury homes are in high demand.

According to the Institute for Luxury Home Marketing’s February 2024 report¹, the single-family luxury home segment is showing promising signs of growth. Both inventory levels and new listings increased significantly in recent months, leading to an 18 percent increase in sales and a 1.6 percent increase in the median sold price. Even more telling, contract signings for homes priced at $1 million or more have increased by 11 percent over last year, and demand remains high among affluent buyers.

According to the Institute for Luxury Home Marketing’s February 2024 report¹, the single-family luxury home segment is showing promising signs of growth. Both inventory levels and new listings increased significantly in recent months, leading to an 18 percent increase in sales and a 1.6 percent increase in the median sold price. Even more telling, contract signings for homes priced at $1 million or more have increased by 11 percent over last year, and demand remains high among affluent buyers.

Top list of luxury home markets in 2024. You may be surprised!

To read more, Click Here

My comments: In this newsletter, I always know what are hot topics. Constant Contact gives me the number of clicks. Most popular is usually Claudia’s advice at the top of every email. Also popular are large luxury homes with a photo.

I have been thinking for a while about including appraising luxury homes, since my subscribers like to read about them. Maybe a possible specialization? There were not many where I worked, so I did not specialized in them But, I see my area, East Bay California is listed now! The median home price in the Bay Area is around $1,300,000.

Check out the list of areas in the article to see if any are close to you.

Lenders have always had special, very small lists of appraisers who can appraise these homes. I assume the AMCs have these types of lists. Some may not have them. You definitely must get a higher fee for them.

I know several appraisers who have been doing them in my area for a long time. To do them, it is best to work in an area with many luxury homes. You need to network with the brokers that sell them.

The post above is also a promo for McKissock’s Certified Luxury Home Appraiser Program. 14 hours of CE for $650. I have not taken it, but I don’t know of many other types of diversification with a certificate. Might be interesting even if you don’t know if you want to do them.

CubiCasa – Home Measurement From Inside A House

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How to Find Comps With Few Sales

By on February 23, 2024   /   appraisal, bias, Fannie   /   Leave a comment
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The challenge of pulling comps in 2024

By Ryan Lundquist

February 14, 2024

Excerpts: Pulling comps in 2024 is tough. Think about it this way. If we have 40% fewer sales happening, that means there are 40% fewer comps. Yikes. Let’s talk about this. I also have some market recap visuals to unpack what’s been happening in 2024 so far.

GO BACK FURTHER IN TIME:

One of the things I’m doing more often today is looking at older comps in the immediate neighborhood. I find myself scouring 2021 onward especially. The truth is there are portions of 2021 and 2022 where prices are exactly the same as today too, so if I use an older comp, I don’t always need to adjust for the way the market has changed. But backing up, I can look at older stuff for the sake of research, but this doesn’t mean I’ll use a super old comp in a report. In short, it’s not enough today to go back 90-180 days because there just aren’t enough data points in so many cases…

WATCH THE MEDIAN TREND

The median price for the region doesn’t translate rigidly to neighborhoods, so be careful about saying stuff like, “The median is up 3% this year, so neighborhood prices are up 3%.” Maybe. Maybe not. Look to the comps most of all. In my experience, some people get really upset when I share median trends because the sentiment is the median isn’t a perfect metric (true)…

EXPAND TO OTHER NEIGHBORHOODS:

Looking up other nearby neighborhoods is something I’ve done much more of lately since sales volume has plummeted. The ideal is to compare areas with similar prices, but even if the price point is a bit different, it can be valuable to see what is happening in a different nearby neighborhood. I may or may not use comps from a different neighborhood. I’m just trying to understand what the market is doing…

To read more and see the graphs with excellent illustrations, Click Here

My comments: Very good tips from Ryan. Market conditions is the easiest adjustment to make. This is my first choice for any unusual homes without current data in any market. I quit making dollar adjustments on form appraisals many years ago, but I always do market conditions adjustments when needed. I appraise a lot of 2-4 units and regularly go to other neighborhoods for comps.

I have been doing this for many years. I do a lot of estate appraisals, which are not current value.

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Appraising Historical Homes

By on February 16, 2024   /   adjustments, appraisal classes, bias, non-lender appraisals   /   Leave a comment
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Historical Properties and Their Unique Appraisal Approaches

Excerpts: Appraising historical properties involves a complex interplay of factors, making it a specialized field within real estate valuation. This article provides an insight into the appraisal process of historical properties, emphasizing the role of market data, potential buyers, specialized databases, appraisal methods, and the significant impact of preservation restrictions.

The appraisal process begins with a thorough analysis of market data, focusing on sales of properties that share historical or antique characteristics. This comparative market analysis extends beyond standard parameters like size and location to include age, architectural style, and historical significance. The scarcity of historical properties often requires appraisers to expand their search to find comparable sales, both geographically and over longer time frames.

The distinction between a historic property with preservation restrictions and an old house without them is crucial in the appraisal process. Preservation restrictions, often governed by the National Register or local historical commissions, can add value by ensuring the property’s integrity. However, these restrictions may also limit modifications, potentially affecting the property’s market appeal.

To read more, Click Here

My comments: If you don’t want to appraise a historic property, be sure to check it out before accepting the assignment!

Worth reading. A good summary. I suspect that a company based in Boston, MA sees lots of historic homes!

For many years I appraised in the nearby city of Berkeley, CA. There were definitely adjustments for homes built by famous, widely known, architects. Fortunately, their names were listed in the MLS.

In my small city, there are a few homes by famous architects. One was sold about 20 years ago by a famous architect, Julia Morgan. She designed more than 700 buildings in California during a long and prolific career. She is best known for her work on Hearst Castle in San Simeon, California. No effect on value. I was surprised. If it was in Berkeley, there would be a substantial adjustment.

Some cities have large historic buildings, such as the City Hall in my city, built in 1895, twenty years after the city charter in 1872. The Gold Rush in California started in 1848, which brought many people to Northern California.

But, in my city, there are many restrictions on what can be done with older homes, such as Victorians. For example, window replacements must replicate the original windows, plus some other restrictions on exterior modifications. Restrictions are from the city, the county, and the state. In my city of 78,000 population, there are over 10,000 buildings constructed prior to 1930, including many classic Victorians.

Many downtown mixed-use buildings (retail and apartments) are in my city. I appraised many of them, but never noticed any effect, plus or minus, for historic designation.

Knowing what modifications are allowed is very important for the appraiser. Many people don’t like them. You need to know the market. Sometimes buyers like them and sometimes not.

See how many historic homes and buildings are where you do appraisals and where you live. You may be surprised!

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