george dell

Appraisers: Be Careful with Your Words

By Ann O'Rourke on July 28, 2023 / bias, Fannie, Fannie Forms, george dell, non-lender appraisals / Leave a comment

Tags: bias, Fannie, mortgage lending

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.

Fannie: Words and Phrases in Appraisals

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What is a residential complex property?

By Ann O'Rourke on December 23, 2022 / adjustments, appraisal how to, george dell, humor / Leave a comment

Tags: adjustments, appraisal how to, George Dell, humor

How to Identify a Residential Complex Property

By: McKissock December 16, 2022

Excerpts: The property to be appraised is atypical

In this case, the property is an outlier, oddball, or not common for the particular area. Of all the characteristics that can make a property complex, physical features are the ones that are most obvious. Some of the key physical features that can make an appraisal assignment complex include:

The form of ownership is atypical

In this case, circumstances involving ownership are uncommon or make the appraisal more complex. For example: The owner doesn’t own property rights on a waterfront property.

The market conditions are atypical

In this case, unique market conditions increase the complexity of the appraisal. For example:

The property is located in an area where there are no other sales.

There is no market for the house; no sales are occurring for some reason (e.g., the property is near a nuclear site cleanup).

Note: the link to the complementary post, “How to Pull Comps on a Complex Property,” is included in this blog post.

To read more, click here

My comments: Worth reading with good tips. I published “Tips for dealing with complex residential appraisals” in the November issue, much longer with many more tips and examples.

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So Many Appraisal Cost Approach Questions

Cost Approach – When to Use in Appraisals

By Ann O'Rourke on August 26, 2022 / appraisal business, appraisal how to, bias, cost approach, Fannie, george dell, non-lender appraisals / Leave a comment

Tags: appraisal business, appraisal how to, bias, cost approach, Fannie, George Dell

Fannie Mae and the Cost Approach

Excerpt: We often receive questions from appraisers regarding Fannie Mae and the cost approach. For example: “I’m appraising a property and have been instructed to comply with Fannie Mae guidelines. I understand that Fannie Mae requires the sales comparison approach, but what if there aren’t enough good comps? Can I use the cost approach as the primary method of valuation?”

Answer: No!

In order to comply with Fannie Mae guidelines, the sales comparison approach must be the primary method used to determine the value. In fact, Fannie Mae will not purchase a mortgage on a property if the cost approach is the primary or only method of valuation used.

Quite simply, if there isn’t enough data for the appraiser to develop a reliable opinion of value by the sales comparison approach, the mortgage will not be marketable to Fannie Mae.

However…

To read more, click here

My comment: I included this article plus the one below, which both address the Cost Approach’s common appraisal questions.

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The Cost Approach: An Underutilized Approach to Value

Excerpt: In residential appraising, the cost approach and the income approach have in many cases become less utilized in favor of sole reliance on the sales comparison approach.

There are occasions when the income approach can be the primary indicator of value for residential properties, such as developments with a high percentage of homes owned by investors.

The fact that Fannie Mae won’t accept reports that rely solely on the cost approach, with a few rare exceptions, doesn’t mean that approach can’t be the primary indicator of value. It just means Fannie Mae won’t buy that loan.

To read more, click here

My comments: I started with an assessor’s office in the 1970s. At that time, my county was changing from only using the Cost Approach for decades to a sales-based approach. I never liked to use only the Cost Approach when I started doing fee appraisals.

In my area, there are very few land sales. There has not been one for over 20 years in my city. Depreciation is always iffy when appraising Victorian homes built before 1915.

But, I always use the Cost Approach for new construction to determine the financial feasibility of custom homes. I use a few land sales from other cities. If the new proposed home is on a vacant parcel, I go back to when the parcel was purchased, sometimes many years ago, and do a market condition adjustment.

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Non-lender Appraisals Good fees and few hassles
Purchase vs. refi appraisals

Too many appraisers?

By Ann O'Rourke on June 10, 2022 / appraisal business, george dell, mortgage loan volume, real estate market / Leave a comment

Tags: appraisal business, mortgage loan volume, real estate market

How can we fix the excess of appraisers?

Too many appraisers?

By George Dell, SRA, MAI

Easy — we do what we have always done, each time . . .

Excerpts: 1) We will raise the standards (“cost of entry”). 2) We will make it harder to become an appraiser; 3) Let the lower fees discourage newcomer appraisers.

In past issues of the Analogue Blog, we have considered the “five forces of friction” on the advancement of appraisal. Here we consider how these “frictions” will behave as appraisal demand has dropped, just as each of the five forces have found ways to reduce or “eliminate” the need for valuation expertise. Recall the five forces of friction: practices, standards, education, regulation, and client expectation.

This blog considers how each friction will respond to this “excess” of appraisers.

Practices:

Current practice is still embedded in the concepts of 8 ½ X 14 paper forms, spreadsheets, or narrative explanation of the opinion of the person (appraiser, evaluator) or automation programmer. Practices will continue to evolve toward objective data selection and predictive models. But this evolvement will continue to stay behind the inherent potential of applied data science. Habitual practice of “comparing comps” over “measuring markets” will prevail (in the absence of change in the other “frictions”).

To read more, click here

My comments: Of course, lots of politicians, appraiser organizations, appraisers and others are complaining now about an appraiser shortage and trying to recruit trainees. This is the past. Loan applications are way down, the lowest in 22 years. What was your business like before the pandemic? Not much work probably compared with 2020-2022. The Inevitable Cyclicality of Mortgage Lending. I hope you saved up lots of money over the past few years!

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How Do Driveways Affect Appraised Value?

By Ann O'Rourke on December 10, 2021 / adjustments, appraisal, appraisal business, george dell / Leave a comment

Tags: adjustments, appraisal business, appraisal how to, forecast, George Dell, real estate market

What’s The Size of Your Driveway?

By Jamie Owen

Excerpt: It really depends on how the appraiser is looking at it. Are they reporting the width of the driveway, the depth, or how many cars can fit on the driveway?

Most appraisers reflect the width of the driveway. Why? For one thing, many lenders prefer the driveway size to be reported this way. This is likely because it is less subjective. For instance, if the appraiser reports the driveway size based upon the number of cars that can fit on it, what kind of automobile are they using for their measurement? After all, a driveway may be able to accommodate a larger number of smaller cars than bigger ones.

Does it affect value? As is the case with nearly every aspect of a home, the answer is, it depends.

For instance, in high-density neighborhoods where street parking is limited, the size of the driveway could make a difference in value. On the other hand, in other high-density neighborhoods, many homeowners may use public transportation. If this is the norm for the neighborhood, the size of the driveway may not have any impact on value.

To read more and see fun animated gif, click here

My comments: Worth reading. Lots of topics are covered. Check out the fun animated gifs, etc.

In San Francisco, for example, off-street parking is at a premium in many neighborhoods. My brother bought a house 25 years ago with no off-street parking (primarily single family homes). I warned him, but he really wanted the house. It was a hassle then, but now, it is very difficult to find parking as many neighbors rent rooms to tenants with cars.

A significant issue with ADUs is where will the car(s) park? Will they take up the neighbors’ on-street parking?

I moved to San Francisco in 1968 and worked in a lab 20 miles away. The closest parking was 2-3 long blocks away when I got home from work. I moved from Tulsa, OK, where there was lots of parking everywhere. I never lived in a place without off-street parking again!

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Appraisal Business Tips

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Fannie Requiring Appraisal Floor Plans Coming?

By Ann O'Rourke on November 26, 2021 / appraisal business, george dell, humor, liability, real estate market / Leave a comment

Tags: appraisal business, George Dell, humor, liability

Are Floor Plans in Your Future?

By Dave Towne

Excerpts: In the Selling/Servicer Guides of FNMA and Freddie Mac, both GSE’s identify a ‘sketch’ to be a diagram of the subject as measured by the appraiser which shows exterior walls, and includes the dimensions. That’s it. They don’t even say that room labels are needed, but most appraisers include those.

Including a ‘sketch’ in reports as an exhibit is an additional Assignment Condition, beyond what USPAP requires in Standard 2, per the Assumption and Limiting Conditions on the residential forms. Both GSE’s require a more detailed diagram including interior wall locations when interior design abnormalities are discovered, and reported – which they call a “Floor Plan”.

I’ve talked with representatives from both GSE’s recently. Their line of thinking, at the present time, is a “Floor Plan” should be provided as an exhibit in the appraisal report even though the report signing appraiser was not physically present at the subject property when data was gathered. Their line of thinking is also slanted to having third parties provide the subject property data, believing appraisers are more valuable as ‘analysts instead of as observers and detailers of the property characteristics.

Thus the evolution to the new 1004 (Desktop) and 1004 (Hybrid) report forms, with different Scope of Work and Assumption and Limiting Condition statements in each version. (These forms are in your software forms package now.)

To read more and watch the video, click here

My comments: Read this post, watch Danny Wiley’s remarks in a video, and read many appraiser comments. Quite a while ago, Fannie started requiring detailed floor plans. This did not last very long, but I continued doing rough floor plans manually. I still do them but do not include the floor plans in the appraisal sketch. It keeps me from missing a small room, bathroom, etc. Of course, when there are floor plan functional problems, I put the details in the appraisal sketch. In my area, tandem rooms are common (usually from additions). They cannot be included as bedrooms.

When I used to do relocation appraisals, I always included a full interior floor plan with walls and doors. This was standard practice in my area. Doing an interior floor plan with walls and doors takes a lot of time, both measuring and using my sketch software.

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What to Do When Your Appraisal Is Under Review

What AMCs Say to Appraisers and How to Respond

By Ann O'Rourke on July 9, 2021 / adjustments, AMCs, appraisal how to, E&O, Fannie, FHA, george dell, square footage / Leave a comment

Tags: AMC, appraisal how to, appraisal management company, Fannie, FHA, George Dell, square footage

What AMCs say to appraisers and How to Respond

By Steven W. Vehmeier

Excerpts: A student contacted me with the following dilemma concerning an Appraisal Management Company (AMC) request: “I told the Management Company that I cannot mark the Zoning Compliance as ‘Legal’ if the report is marked “as-is,” because this would not be true for the current “as-is” condition of the subject on the effective date of the appraisal. The AMC insists that as long as I disclose in the addendum that the zoning is currently ‘illegal,’ then I can mark on the first page as ‘Legal.’”

Taking the matter to the source can be accomplished by: 1) personal research of the appropriate documents, which is sometimes faster, or 2) emailing the controlling entity for their official answer. Notice I didn’t say to phone them. I want the answer in writing to pass on to the client/AMC.

To read more, click here

My comment: Some Most Excellent and practical tips!! My bottom-line advice: Fire the AMC! We all know there is always another AMC that is desperate for appraisers today. Now is a good time to shop for one that is easy to work for. You could check in appraisal online groups to see what they say. If they are not competitors, hopefully, you can get some good ideas. Be sure to post your location.

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Bias in Housing is Not Appraisers’ Fault

By Ann O'Rourke on June 25, 2021 / george dell, rental market, statistics, USPAP / Leave a comment

Tags: bias, Fannie, George Dell, racial bias, real estate market

Racial Bias in Real Estate: Is it the Appraisers’ Fault?
The best analysis I have ever read.

By Maureen Sweeney, SRA

Bias in Housing is Not Appraisers’ Fault

Excerpt: The appraiser must be independent, impartial, and objective. In a mortgage transaction, the appraiser evaluates the property that is to be used as collateral in a mortgage finance transaction. The appraisal is provided to the lender, who uses the appraisal as one of the many criteria used to underwrite the loan and determine if a mortgage loan will be funded or not. Contrary to what some may believe, the appraiser does not make underwriting or lending decisions.

Discrimination, including the long list of anti-cultural, anti-national, and anti-ethnic terms, is a multi-layered, multi-cultural, and multi-generational issue. The systematic, historic, and institutional causes of the various business and government policies and practices need to be addressed and cured. We do not blame the doctor for a cancer diagnosis.

We do not blame the journalist as the cause of the natural disaster that is reported on the evening news. Why is the appraiser blamed for reporting on the real estate market?

To read more, click here

My comment: By far the best, understandable analysis I have read. No whining or ranting. Many appraiser comments and forwarding. Comprehensive post with many references. I had not heard about some of the references. Appraisers are not the problem. We have been told for many decades to be knowledgeable and aware of Fair Housing issues.

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Zoning in the Appraisal Process

Zoning and Appraisals

By Ann O'Rourke on June 11, 2021 / appraisal, appraisal business, bias, george dell, real estate market / Leave a comment

Tags: appraisal, appraisal business, real estate market

The Infamous History of Zoning in the Housing Industry (Video)

Excerpts: History of zoning in the housing industry and how past practices shape the problems we are currently experienced today.

What was the purpose of zoning in the very beginning? How exactly were these practices harmful to people of color? What are some of the problems we see today because of this? These questions and much more will be answered.

To watch the video, click here

My comment: A controversial topic. Today this often involves “downzoning,” allowing for properties to have more than one unit or more density – apartments, condos and townhomes.

Experts Say Zoning Changes Are Most Effective Path to Boost Housing Supply for a More-Balanced Market

Excerpt: A Zillow survey of economists and other real estate experts finds high costs are expected to slow construction and may lower homeownership among today’s 30-somethings. Relaxing zoning rules is what the panel says would be most productive to increase new housing supply.

Other ways include:

Ease the land subdivision process for landowners
Relax local review regulations for projects of a certain size
Accelerate adoption of new construction technologies (e.g., modular building, 3D printing of certain components)

To read more, including details and the full list of survey suggestions, click here

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