bias

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Appraiser Has Very Big Problems With Borrower

By Ann O'Rourke on January 19, 2024 / bias, humor, non-lender appraisals / Leave a comment

Tags: bias, humor, non-lender appraisals

The Sopranos – Lupertazzi’s Rough Up Appraiser

To watch, click the video above. Opens in You Tube.

Members of the Lupertazzi Crime Family rough up an appraiser who is involved with Tony’s HUD scam.

I will never forget “I’m only the appraiser!” I use the phrase sometimes ;>

It’s one of the few times appraisers are in movies or TV series!

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2024 USPAP For Appraisers

USPAP Myths for Appraisers

By Ann O'Rourke on January 5, 2024 / appraisal, appraisal business, bias, humor / Leave a comment

Tags: appraisal business, bias, humor

Five USPAP Myths Dispelled in 2024 USPAP

By Daniel A. Bradley, SRA, CDEI, McKissock Learning

On May 5, 2023, the Appraisal Standards Board (ASB) voted to adopt changes to the Uniform Standards of Professional Appraisal Practice (USPAP), which will become effective January 1, 2024. These represent the first changes to USPAP in four years. Many of the changes will not have a significant impact on the way appraisers practice but are nevertheless important for public trust.

Appraisers and the public have traditionally held several misconceptions about USPAP, and these changes should help to dispel some of those myths. There are five myths and misconceptions that are addressed in the changes to the 2024 USPAP.

Myth 1: USPAP Allows Discrimination as Long as the Appraiser’s Conclusions are Supported

Myth 2: The Removal of the Definition of Misleading from USPAP Reduces Liability for Appraisers

Myth 3: An Inspection of the Subject Property by a Third Party is the Equivalent of a Personal Inspection by an Appraiser

Myth 4: Appraisers are not Required to Analyze Prior Non-Sale Transfers of the Subject Property

Myth 5: The USPAP Update Course Cycle is the Same as the USPAP Publication Cycle

To read more, Click Here

My comments: It’s worth reading, especially if you do residential lender appraisals. Lender issues are a significant factor in USPAP and Myths 1 to 4. I suppose it is because most appraisals are done (now) for residential lending purposes. Many thanks to Dan Bradley for writing about the 2024 USPAP changes.

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Functional Obsolescence for Appraisers

By Ann O'Rourke on December 29, 2023 / appraisal business, bias, real estate market / Leave a comment

Tags: appraisal business, bias

Understanding Functional Obsolescence in Appraisals

By: McKissock

Excerpts: For appraisers, functional obsolescence can be a challenging concept because the elements that influence property values may not be obvious or immediately apparent. To help you better understand what it means and how to pinpoint it, we’re exploring some examples the different types of functional obsolescence, and how it can influence property values.

Functional obsolescence may or may not be caused by trends in buyer or market preferences, outdated design, or even advances in technology. Let’s look at a few examples:

A home has three bedrooms, but to reach the third bedroom, you have to walk through the other secondary bedroom. Buyers are likely to see this as a flaw in the floor plan regardless of trends.
A home has a separate formal living room, an enclosed kitchen, and a separate dining room. Today’s buyer prefers a more open, casual layout and may find the separate rooms a flaw in the floor plan, though this may change with market trends.
A home with radiator heat and window unit air conditioning may be seen as functionally obsolete, and thus less valuable, as more modern homes have forced air furnaces and central air conditioning.

Measuring functional obsolescence and its effect on a property’s value can be challenging for even experienced appraisers. To ensure accurate reports, it’s essential you stay up to date and aware of market trends, and even code and building updates, as these changes over time do determine both curable and incurable obsolescence.

To read more, Click Here

My comments: All appraisers see functional obsolescence. Making adjustments can be tough. You need to know the market reaction.

For example, there are many Victorians in my market. They were built without closets and used armoires (free standing closets). It is not considered functional obsolescence as it retains a classic feature in many Victorian homes. I always wonder about what appraisers from tract home areas think about Victorians. I assume (hope) they ask local agents. When I started appraising them, that’s what I did.

I regularly tell local agents that “tandem” rooms don’t count as bedrooms. I’m trying not to think about how many listings have an incorrect number of bedrooms!

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Market Your Appraisal Services: 59 Ways to Get More Business Now

Superadequacy Adjustments for Appraisals

By Ann O'Rourke on December 22, 2023 / adjustments, appraisal business, bias, humor, statistics / Leave a comment

Tags: adjustments, appraisal business, appraisal how to, bias, statistics

How to Account for a Superadequacy

By: McKissock

Excerpts: What is superadequacy?

Per The Dictionary of Real Estate Appraisal, 6th Ed., superadequacy is defined as “an excess in the capacity or quality of a structure or structural component; determined by market standards.” It’s a type of functional obsolescence in which the structure or one of its components is overly improved to a capacity or quality than a prudent buyer or owner would build or pay.

While we provide more detailed illustrations below, a simple example would be a 5,000 square foot luxury home built in a neighborhood comprised of two and three-bedroom mid-century ranch homes.

Example #1: Superadequate custom fireplace

Example #2: Superadequate 12-car garage

To read more, Click Here

My comments: Although the blog post references luxury homes, this can occur anywhere. Have you ever driven closer and closer to your subject and noticed that the homes are much smaller or have standard designs? You keep getting closer, hoping it is not your subject. It Is! This definitely has happened to me. Large unusual additions, two large kitchens, very extensive landscaping, etc.

Maybe you were busy and forgot to check it out in public records, MLS or speaking with the owner or agent (if a sale) when scheduling the appointment.

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The UAD and Appraisers – Past, Present, and Future

UAD and Forms Redesign Update for Appraisers

By Ann O'Rourke on December 15, 2023 / appraisal business, appraisal forms, bias, Economic analysis, forecast / Leave a comment

Tags: appraisal business, appraisal waivers, bias, Fannie, future

UAD and Forms Redesign Update

Excerpts: Improving the Quality and Consistency of Appraisal Data

Freddie Mac and Fannie Mae (the GSEs) have worked on the UAD redesign since 2018, leveraging extensive stakeholder input to update the appraisal dataset, align it with current mortgage industry data standards (MISMO® v3.6), and replace the GSE appraisal forms with a single data-driven, flexible, and dynamic appraisal report for any residential property type.

To watch the Excellent UAD and Forms Redesign Video (3 min. 47 seconds) Click Here

For more detailed information on web page Click Here

My comments: Watch the short video. On the links list on the right side of the webpage, GSE Experts Answer Your UAD Redesign Questions is short and understandable.

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NAR Member Survey on Appraisal Data Collectors

Appraisers and Property Data Collectors

By Ann O'Rourke on November 17, 2023 / appraisal business, bias, modernization / Leave a comment

Tags: appraisal business, bias

4 Myths About Property Data Collection

By McKissock

Excerpts:

Myth #1: PDC is the same thing as property appraisal

As a professional appraiser, you know very well that what a property data collector does is not the same as what you do — even if your clients don’t always understand the difference. While there is some overlap, being qualified to perform an appraisal requires much more training, education, and expertise, and the job goes far beyond gathering physical data.

Myth #2: Data collectors are going to replace appraisers

There’s a lot of buzz right now about PDC possibly replacing traditional property appraisal, but the intent of this service is to fill a gap in the lending process. The job assignments given to property data collectors are often the types of assignments that wouldn’t come across an appraiser’s desk. For example, property data collectors (PDCs) may be engaged by lenders for very low-risk loans where an appraisal is not required.

Myth #3: PDCs are not properly trained or qualified

While there isn’t a license, PDCs are still required to be trained and competent to do their job. Both Fannie Mae and Freddie Mac require that PDCs must be professionally trained and vetted. They must adhere to Fannie Mae or Freddie Mac’s property data standards which set forth the minimum requirements for collection of the subject property data.

Myth #4: PDC is bad for appraisers

Probably the most prevalent myth is that PDC is bad for appraisers and bad for the profession in general. But in actuality, it may offer some significant upsides for appraisers. In particular, becoming a property data collector may be beneficial for:

Appraisal trainees in need of extra income
Busy appraisers who are looking to delegate tasks
Older appraisers who are looking to reduce physically demanding tasks or may be transitioning into retirement
Any appraisers wanting to grow their bifurcated and hybrid appraisal services

To read more, click here

My comments: We all know that appraisers would be the best PDCs. My article in the November issue of Appraisal Today has lots of information, including lists of which AMCs use PDCs. “Property Data Collectors (PDCs) Will Be Widely Used by Lenders in the GSEs Value Acceptance + Property Data Option”

This is an excellent diversification opportunity while business is slow. Trainees can do them.

Data Collectors: Appraisers vs. Uber Drivers

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Appraisers: Be Careful with Your Words

Freddie Advice: How to Avoid Using “Bad” Words

By Ann O'Rourke on November 10, 2023 / bias, FHA, liability, real estate market / Leave a comment

Tags: bias, FHA, forecast, Freddie, liability

More Objective Appraisals: A Practical Guide for Appraisers

By Scott Reuter Single-Family Chief Appraisal Officer, Freddie Mac

Excerpts: Changing the Mindset – Facts First

What’s the number one thing appraisers should be doing when they develop an appraisal? Stick to the facts. Here are a few more best practices that can help appraisers achieve more objective appraisals.

Don’t think like a salesperson – avoid words that may be common in Multiple Listing Service (MLS) and used to help sell a home.
Don’t use shorthand – both ‘123 Church Street’ and ‘123 Church’ could refer to an address but might come across differently in an appraisal.
Don’t copy and paste – avoid copying from Wikipedia or old appraisal reports or commonly used templates when providing neighborhood descriptions for similar communities.
Use pre-screening practices – while you can implement your own pre-screening process, some appraisal companies can implement them too.

To read more, click here

My comments: Read this article! Not just a list of words and phrases. Excellent examples and analysis. The author started as a second-generation practicing residential appraiser. He knows what you want.

Fannie: Words and Phrases in Appraisals

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2024 USPAP Changes Clarify Nondiscrimination

By Ann O'Rourke on November 3, 2023 / bias, desktop appraisals, Economic analysis, hybrid appraisals / Leave a comment

Tags: bias, desktop appraisals, Economic analysis, Hybrid appraisals

Changes to the 2024 USPAP Improve Clarity Surrounding Nondiscrimination

Excerpts:

Revising the ETHICS RULE with a Nondiscrimination section

To provide clarity and eliminate concerns, the ASB removed the previous ETHICS RULE language regarding supported and unsupported conclusions, and crafted a new Nondiscrimination section which clearly indicates to appraisers and stakeholders that discrimination is prohibited.

Advisory Opinions

For 2024, the ASB has retired Advisory Opinion 16 (AO-16) and replaced it with two new Advisory Opinions, AO-39 and AO-40.

How do the USPAP revisions to the Nondiscrimination section affect appraisers?

Appraisers were also always prohibited from performing assignments with bias. These requirements are carried forward in the 2024 edition of USPAP. The primary difference is that the new USPAP contains clear and concise language regarding an appraiser’s ethical obligation not to engage in discrimination.

To read more, click here

My comments: Be sure to read this blog post. USPAP 2024 is effective January 1, 2024. You may, or may not, take the mandatory USPAP class prior to this date.

2024 USPAP for Appraisers

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Every unusual home has appraisal comps

Appraising Unusual Properties

By Ann O'Rourke on September 1, 2023 / adjustments, appraisal business, Bad lenders, bias / Leave a comment

Tags: adjustments, appraisal business

Appraising Odd Properties: What’s the Weirdest Property You’ve Appraised Recently?

McKissock Survey

Excerpts: As a professional appraiser, you’ll likely encounter some strange properties from time to time. Odd properties tend to be challenging yet rewarding in terms of the fee. To gain insight into these types of assignments, we asked our appraisal community, “What’s the weirdest property you’ve appraised recently?” Thank you to the many respondents who shared stories about the most unique and complex properties they’ve come across lately!

Most of them fall into these categories:

Challenging and complex properties
Unique property types
Properties with atypical characteristics
Historic properties
Rural properties
Non-compliant properties

“A yurt, a space dome, and a two-story single-wide mobile home. This was two single-wide mobile homes stacked on top of each other with a spiral staircase that was encased in semi tractor trailer chemlite panels. The stories behind them are lengthy.”

“It was a house on three lots. It has been added on to over the years. The GLA is 3200sf and there are two separate basements with a total 1100sf. There are funky angles, two kitchens next to each other divided by a wall. It was only 3 bedroom, but had 3.1 bathrooms. It had 3 family rooms on the GLA. Lots of weird spaces.”

“A custom-built art school built by artist named Solonevich that is used as a single-family dwelling. Every couple feet was a random angle. Nearly impossible to measure accurately.”

To see more examples, Click Here

My comments: I was inspired by this post and included two unusual homes in this newsletter. The one below with a jail is a good example! Down the page is a $1 listing.

If the appraisal is for lending purposes, be sure to find out if it is “lendable” before spending much time on it. Lenders and CU/AVMs, like nice newer tract homes.

Whenever two appraisers meet, there is never a lack of conversational topics! This one is very popular! Be sure to get a higher fee, of course. These properties are an excellent learning experience. If your business is slow, now is a good time to do the “tough ones.”

Highest and best use are often the issues that are the most tricky for me, especially if you have to consider non 1-4 unit uses. HBU is a regular issue for the older commercial and mixed-use properties I appraise.

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