How to Find Comps With Few Sales

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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2024 USPAP For Appraisers

2024 USPAP

Source: Appraisal Foundation

The 2024 Uniform Standards of Professional Appraisal Practice is now available for purchase in physical and digital formats.

This year, for the first time, you can purchase just the book of USPAP standards for $35. This covers all Definitions, Rules, and Standards.

We also have a new product launching this year. All Advisory Opinions, Frequently Asked Questions and the recently launched Reference Manual will now be part of a standalone publication called the 2024 USPAP Guidance and Reference Manual.

This change reflects the maturation of USPAP, resulting in longer effective dates. The ASB will continue to review USPAP for changes when necessary but will shift much of its focus to providing more guidance to the marketplace. Appraisers can now buy one set of USPAP standards and keep that publication on their bookshelf for as long as that edition is effective and purchase just the Guidance and Reference Manual as needed for coursework and updates.

If you like having the USPAP standards and guidance material linked, we still have you covered. You can also purchase a linked digital version of the eUSPAP and Guidance and Reference Manual and get seamless access across both documents.

To read the full letter, click here

My comments: USPAP 2024 is effective January 1, 2024. I’ve been waiting for a very long time for longer than 2 years between effective dates. Also, there is no ending date for the 2024 version.

When USPAP started, it was very exciting as appraisers had to decide what needed to be changed or added. Lots of people wanted to be on the ASB. Over time, I quit following the updates as there were few significant changes.

2024-2025 USPAP 7-Hour Update Course is being approved or is approved, in the states. I assume a new class will be required every two years in the future. Gotta keep that money coming into the Appraisal Foundation, I guess…

I really hated the classes when there was not much to say except a rehash of the past. I taught USPAP before the ASB told you what to teach. It was my favorite class as we could focus on issues in our current market. Of course, now there is appraiser discrimination, the current hot topic. Personally, I think there is very, very little intentional discrimination by appraisers, compared with the intentional discrimination by lenders (and others). “Red Lining” still exists, some are in the same locations.

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NAR Appraiser Survey July, 2023

NAR Appraiser Survey July, 2023

In July 2023, NAR Research conducted a survey of all 9,800 appraiser members and 50,000 randomly-selected residential-focused non-appraiser members.

The survey results had a comparison of 2022 and 2023, which was very interesting.

  • Appraiser Topics
  • Greatest challenges in business
  • Lesser challenges with business
  • Valuations
  • Comfort with valuation tools
  • Radius in which appraisals are conducted
  • Radius by area type (rural, small town, urban, resort, suburban)
  • How often asked to conduct appraisals outside geographic area/Property type of expertise

Sample: Greatest challenges in business

(AMCs) in general among their greatest challenges. This year, this option was broken into three separate AMC-related issues. Forty-four percent cite at least one of these, with 28 percent specifically citing AMC requests for revisions.

This year, however, the single greatest challenge, cited by almost half (47 percent), is “fee pressures,” which, based on comments, is also related in many cases to pressure from AMCs. This is up sharply from 27 percent last year.

One-quarter (26 percent) cite technology fees (not an option in 2022). Appraisers are less likely this year to cite expanding regulations/interpretations of regulations, lender requirements, pressure from real estate agents/brokers, and liability concerns.

The 21 percent who cite other challenges are most likely to cite lack of business/slow market, rising interest rates, low fees, and to reiterate pressure from AMCs.

A very good graphic is included for each section.

To read the report, click here

My comments: Read the appraiser sections in the long report. Fortunately, appraiser results are in the first section. I read the full survey. Most of the questions were for all NAR members, both appraisers and non-appraiser members. Some may be of interest to you. Much of the appraiser results were what we already sort of suspected, but it is good to see actual survey results.

NAR Appraisal Survey 2022

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Appraisers: Be Careful with Your Words

Pesky Words. Keeping Appraisers out of Language Purgatory

Appraisers: Be Careful with Your Words!

by Dave Towne

Excerpts: Appraisers, on July 17, 2023, a document from Freddie Mac was circulated to numerous appraisers around the US which identified certain words and other info that can be considered to be ‘BIASED’ in appraisal reports. Here is the Link to the Bulletin.

We need to step back for a moment and carefully analyze and consider why that was done, and what it means to appraisers.

In many ways, appraisers forget the purpose of the appraisal assignment – which is to value real estate. In other words, the physical structures tied to the land.

But too often, elements of personal or neighborhood demographics or other comments seep into the reports. Maybe not consciously or on purpose, but because appraisers are not critically reading what they write and may not realize the implications of how what they write can be interpreted.

To read more, click here

To read the Freddie document, click here

My comments: Well written and worth reading. Thanks to Dave Towne! I have subscribed to his emails for a long time. To join his list, send an email to dtowne@fidalgo.net requesting to join. I wrote about the July 17 Freddie announcement in this newsletter’s June 16, 2023 issue. Guess it finally got out into the appraiser internet world.

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Fannie: Words and Phrases in Appraisals

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NOTE: Please scroll down to read the other topics in this long blog post on non lender appraisals, USPAP and Bias, Fannie changes, unusual homes, mortgage origination

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What Tools for Measuring Houses for Appraisals

What tool do you prefer to use when measuring a house?

Recent Appraisal Buzz survey

  • Measuring tape – over half
  • Laser – less than half
  • Guesstimate – a few, but way too many!
  • Phone app. – not many

To see the graph, click here

My comments: I have always wondered about this. I prefer my phone app – no more rose bush thorns, dog poop, tripping over miscellaneous stuff, etc. I was hooked the first time I used it! I was surprised to see how few use phone apps.

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Appraiser Countersues Alleged Discrimination

Appraiser Countersues Black Plaintiffs Who Alleged Discrimination

by Isaac Peck, Publisher WorkingRE

There are now a number of lawsuits facing appraisers where the primary allegation is racial discrimination.

Tate-Austin v. Janette Miller, filed in California in Dec. 2021, was one of the first (and perhaps the most publicized). But since late 2021, a number of similar lawsuits have popped up—from North Carolina to Maryland.

Connolly & Mott v. Shane Lanham et al. is one highly publicized lawsuit covered at length by mainstream media–CBS News, The New York Times, NBC, CNN, ABC News, and more.

Filed in August 2022 in the U.S. District Court of Maryland, Connolly and Mott allege that Lanham discriminated against them and violated professional appraisal standards because of his allegedly “racist beliefs” (among other things).

Mr. Lanham is now countersuing Connolly and Mott for labeling him a racist, making false and defamatory accusations, and causing severe harm to his business, his reputation, and his well-being. Alongside his counterclaim, Lanham has also filed a Motion to Dismiss Connolly and Mott’s initial claim, arguing that they have failed to show any facts that support he discriminated against them.

“Plaintiffs cannot transform allegations of incompetence or a breach of appraisal industry standards into racial discrimination by baldly alleging that Mr. Lanham believed that Plaintiffs did not belong in their neighborhood and that their home was worth less than other homes because of their race. There are no facts alleged in the First Amended Complaint, and none can be alleged with good faith, that Mr. Lanham treated Plaintiffs any differently than homeowners of other races,” the motion reads.

To read more, click here

My comments: Long article and worth reading. Discusses many issues and lawsuits. I don’t write about this topic much. My opinion is that everyone is biased against something. I learned I was biased against young Black men when I was on a criminal jury many years ago.

When a young Black man, the defendant, walked into court, I immediately thought he was guilty. I sent a note to the judge who excused me publically in court. I was very, very embarrassed. But it would have been a lot worse to stay on the jury and vote to convict him. My parents raised us not to be prejudiced against anyone. But I grew up in Tulsa, OK, next to Greenwood, an area of successful Black residents prior to 1921. The Tulsa race massacre occurred on May 31, 1921. I never heard it mentioned by anyone. Older people, who knew about it, never spoke of it. Some newspaper issues were destroyed.

I assume that since I had been appraising in high crime neighborhoods, I became prejudiced. I work hard not to show it. I don’t cross the street when I see a young black man coming towards me, and I smile when we pass, but I do get a little nervous. What is most important is recognizing and not acting on your prejudice.

I have been tempted to lower a value when an owner’s large do dog jumps on me or tries to bite me. But I know I don’t like aggressive large dogs and don’t let it affect my value.

Of course, some appraisers could be biased. But, for residential lender appraisers, there is no advantage to coming in “low” on any residential lender appraisal. You may lose a client.

In the past, appraisers were trained by FHA to redline, with lower values in Black neighborhoods. Appraisal textbooks and classes included this. But, it all changed in the mid-1970s, when I started appraising and was no longer allowed. Hopefully, I would not have become an appraiser working for residential lenders before then because of the obvious bias.

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Appraiser Liability Risks

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.

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Fannie: Words and Phrases in Appraisals

What Fannie Says Effective June 29, 2023

Say This, Not That: Words and Phrases to Replace in Your Appraisal Reports

By McKissock

As part of our contributor series, Julie Molendorp Floyd gives tips on how to use more objective language in your appraisal reports ahead of the new Loan Collateral Advisor (LCA) alert messages that will take effect June 29, 2023.

Excerpts: Following that thought process, our appraisal language has simply got to change to reflect current times. In addition, our lenders and GSE’s are implementing tools and programs to identify when “Certain prohibited, subjective or potentially biased words or phrases are included in appraisal reports.”

(Freddie Mac Announcement: “Loan Collateral Advisor: Starting June 29 New Messages Alert Users to Certain Unacceptable Appraisal Practices,” April 28, 2023)

To read, click here

So, if we have the technology and tools to present our conclusions in clearer, fact-based ways, let’s get ahead of the program and make the changes proactively.

None of us enjoy completing revision requests. They take time, effort, and ultimately do not contribute to our bottom line. However, revision requests are part of an appraiser’s life. How can you go about crafting your appraisal report to avoid a revision request for “problematic language” or “unsupported conclusions”? Let’s dive into some words or phrases that should not be included in your appraisal reports and uncover ways to convey your meaning in a compliant, credible way.

Topics:

  • Moving toward fact-based language
  • Words and phrases to replace in your reports
  • Samples:
  •    Say This     Not That:
  • Within 10 blocks of shopping areas — Convenient to shopping areas
  • Conforms to current market trends — Traditional
  • Primary bedroom, ensuite — Master Bedroom

To read more, click here

My comments: If you do lender appraisals, read this post.

Changes in names is nothing new for appraisers. Since FHA, etc stopped redlining since the 1970s, appraisers have been asked to avoid certain words. Now Fannie’s computers will let lenders know.

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Data Collectors: Appraisers vs. Uber Drivers

Certified Appraisers vs. Unlicensed Data Collectors

By Jonathan Miller

(13-minute video) Here’s a great take on the difference between Certified Appraisers vs. Unlicensed Data Collectors by Leigh Brown, President of the NC Association of REALTORS. Fannie Mae has been working hard to get rid of appraisers for years. Their latest twist is to re-categorize many appraisers as “Unlicensed Data Collectors.”

Fannie Mae will end up creating more instability for the trillions in the bond market – investors will have to process millions of valuations with the physical attributes of the home collected by unlicensed, uninsured, and unprepared individuals getting paid $10-$25 per inspection.

This is to follow up on a meeting Appraisal Institute representatives held in Washington, D.C. with members of the Federal Housing Finance Agency Divisions of Housing Mission and Goals and Fair Lending March 8 to discuss the new Value Acceptance program released by Fannie Mae…

Of particular concern is the encouraged development of an alternative workforce of property data collectors that may negatively impact aspiring appraisers’ ability to enter the appraisal profession…

To read more and watch the video, click here

To sign up for his weekly Housing Notes, click here I have been a subscriber for many years.

My comments: Miller tends to be negative about the AI, but this excerpt from his weekly email is worth reading especially the video!

This is the future of GSE using appraisers. Inspection or desktops are fine, but fees may be low and many don’t want to do them. Full appraisals only on the “though appraisals” where Fannie’s AI does not work.

Many appraisers are retiring or quitting. If you make it through this downturn there will be few appraiser competitors left for the next big upturn in business.

Appraisal vs Zillow vs AVM which is best

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Appraising Solar Panels

Appraising Solar Panels

By Mark Buhler

Excerpts: You drive up to the property. There they are, on the roof: those shiny black rectangles that are just about to turn a simple assignment into a headache. What to do? Put the car in reverse and slowly back away? Call the client and have them re-assign the order?

Those are certainly options. But in today’s tight market, with orders as scarce as hens’ teeth, let’s explore some other approaches to solving this problem.

First: How do appraisers value any amenity of a property?

Appraisal 101 would suggest the matched pairs analysis. So our first task is to find a property with solar panels that’s similar to the subject.

That search quickly comes to a screeching halt. (I can almost smell the brake dust.) There are no comps with solar panels in the area. So when we type the report, a comment like this might slip past the reviewer and underwriter: “A thorough search of the subject’s marketing area revealed a scarcity of sales comparables with solar panels.”

So far, so good. Now let’s continue with that reasoning: “Due to a lack of comparables with solar panels, no contributory value can be extracted.”

This supports a zero (0) adjustment, right?

Well … maybe. A savvy underwriter or reviewer might wonder why the appraiser didn’t consider the cost and income approaches…

To read more click here

My comments: Good, practical advice. The article is worth reading. Solar for homes is everywhere now. I recently spoke with Mark. I asked some technical questions about financing solar and electric companies lowering what they pay to homeowners with solar. He knew everything! Taking a webinar or class from him is definitely worth the price. He has been teaching the classes for a long time.

Complex Residential Properties for Appraisers

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