Appraising Fixer Uppers

By on April 14, 2023   /   adjustments, appraisal how to, Fannie, liability, non-lender appraisals   /   Leave a comment
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Appraising Fixer Uppers

Excerpts: We’re all familiar with the term “fixer-upper.” For many different reasons, properties can come on the market in less-than-par condition. The degree and cost to cure becomes an issue to buyers and sellers, and a challenge for appraisers. At some point it’s no longer “normal market value minus cost to cure equals as-is value.”

The terms “entrepreneurial incentive” and “entrepreneurial profit” are typically discussed in terms of investment property, but the principles involved can also be applied to the many fixer-uppers—whether the buyer is a “purely investor type” or an “owner occupied investor type.” Maybe a couple new terms should be discussed: “sweat equity incentive” and “sweat equity profit.”

The rest of the post is a very good case study

To read more, click here

My comments: I have appraised many fixer-uppers. My overall ratings are: Unlivable with holes in wall or ceiling, kitchen, and bath not functional, not lendable, etc. ) In my MLS “contractor special” is often used.  Liveable: needs work but functional kitchen and bath.

Most of my appraisals are for estates, and fixers are relatively common. There are few comps as almost all homes are fixed up for sale. There are some good ideas in this post. Even if you have comps, there is often a very wide range of conditions.

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The Power of Praise for Appraisers and Clients 3-24-23

By on April 1, 2023   /   appraisal, appraisal how to, Fannie, lender appraisals, liability, non-lender appraisals   /   Leave a comment
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The Power of Praise

By Rachel Massey, SRA, AI-RRS, CDEI

Excerpts: …I received a really nice compliment from a reviewer with the Farm Credit Bureau. I had completed a complex appraisal assignment and was expecting multiple revision requests, but instead, got a note saying how thorough my appraisal report was and thanking me for the work. A couple days later, I got a call from a relocation company reviewer on another mind-boggling relocation assignment. Again, I was expecting multiple questions about the report since it was complex and atypical for the area. Instead this reviewer proceeded to tell me that it was one of the most detailed and well-developed reports he had seen in all his years reviewing relocation work. Boy I wish I had that one in writing!

Granted, I tend to be a bit verbose because I like to write, and I believe that it is important that my work be understandable, and not just now but in the future. I tend to put a similar amount of effort into the communication side for all clients, and like to think that my work product is solid. This begs the question of why two reviewers went out of their way to compliment my work, when it seems that almost every mortgage assignment that I complete for a production group, comes back with stipulations.

Stipulations that I forgot to add a listing which was a requirement of the engagement agreement (yes, I missed that) or that I didn’t put a sketch of an unfinished basement in the report (yes, I missed that as well). No words of thank you for an otherwise job well done. I missed something, fix it.

To read more, click here

My comments: Rachel is one of my favorite appraisal authors. She has seen all sides of the residential appraisal profession. Rachel has shifted between lender staff appraiser and reviewer and fee appraisals. Currently, she is a reviewer for a large lender. You could send a link to this article to a Very Picky or Very Supportive reviewer.>

Why Appraisers Love Appraising!

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Practical Tips for Working With AMCs

By on November 4, 2022   /   adjustments, AMCs, liability, non-lender appraisals, ROVs   /   Leave a comment
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Appraisers Share Their Best Tips for Working with AMCs

By McKissock

Excerpts: In a nutshell, our survey respondents recommended that you should:

1) do your research and get to know the AMCs,

2) build a relationship with them,

3) treat the relationship as a partnership, and

4) prioritize communication.

Build a relationship

“Be personable so they remember you.”

“Make yourself known by being efficient as well as timely with your reports. Be friendly—even when you feel like the UW’s question may be redundant or was already answered in the report. I promise you that this will make you known in your area.”

“Have a very responsive credo. Keep them up to date in every step of the report so that they can keep the Lender (and the Buyer/Seller/Realtor/Closing Attorneys when applicable) all in the loop on the progress of the report. Remember when they look good and trust you—you look good

Communicate, communicate, communicate!

“Update the orders quickly.”

“Keep them informed.”

“Over communicate!”

“Always communicate—even if it feels like too much. Our office updates AMCs on every scheduling attempt with details, every inspection appointment set and completion, and any materials needed ASAP in the assignment. They really appreciate it, and it ensures you can complete assignments on time as you had planned (no one likes waiting for a legal description only to have it show up on your day of 4 inspections!). It’s truly a win-win.”

“Stay in communication. Appraisers tend to get annoyed with constant emails from the AMC about inspection date, completion, report submission, etc. I make it a point to update them and answer their emails ASAP. In my opinion, that’s good business. And if you do need more time, more info, they are more willing to oblige.”

To read more, click here

My comments: Read this blog post with practical tips from practicing appraisers. It can help you get more business from AMCs (and other lender clients). Savvy appraisers I know who mostly do non-lender work also have a limited number of carefully vetted AMCs they work for, plus a few local lenders and “private” lenders.

Advertising Disclaimer: McKissock is one of my regular email advertisers. I keep my advertising clients and this newsletter’s content separate. But, McKissock’s blog posts are short, well written, and popular with readers, so I include them regularly.

LIA runs an informational ad at the top of each email newsletter. The ads regularly get the largest number of “hits,” indicating that readers like them. We all like free Liability advice!

Practical real estate appraisal writing tips for AMC questions

Reconsideration of value and Appraisers

Appraisal Business Tips 

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Reconsideration of Value and Appraisers

By on September 9, 2022   /   appraisal business, Appraisal Foundation, appraisal how to, liability, USPAP   /   Leave a comment
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How to Respond to ROV Requests: Updated Guidance

By Greg Stephens, SRA, AI-RRS

Excerpts: Suggested protocols for responding to Reconsideration of Value requests

When you receive an ROV request, some recommended steps to take include:

1. Maintain USPAP compliance – Confirm the ROV request came from your client, either directly or through the client’s AMC, acting as an agent for the client, or other party designated as an agent by the client. The importance of this cannot be overstated. Appraisers are still required to comply with USPAP when responding to an ROV request, including the confidential nature of assignment results.

2. Identify ROV content to determine next steps – take the time to analyze the content of the ROV to determine what specifically is being requested of you (the appraiser) and what level of information will be needed to respond to the requestor of the ROV. This is an opportune time to maintain a professional demeanor and not react to an ROV request as if it is an affront to your competency or experience. After receiving an ROV request, send an acknowledgement of receipt and advise the client that the ROV request will be analyzed and responded to in a timely manner.

To read more, click here

Click here to listen to Tim Andersen, MAI’s podcast, “Reconsiderations of Value: Satan’s Own Seed, Right?” (Podcast 9.5 minutes) on ROVs, included in a 12-21 issue of this newsletter, so it may look familiar to you.

My comments: ROVs are a PITA for many appraisers. Very well written and practical. Greg Stephens is a very experienced appraiser and reviewer. He worked in management positions for several large AMCs.

Reconsideration of Appraised Value

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Fannie’s New ANSI FAQS July 2022

By on July 22, 2022   /   ANSI, appraisal business, Fannie Forms, lender appraisals, liability   /   Leave a comment
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Fannie’s New ANSI FAQS July 2022

Standardized Property Measuring Guidelines

Excerpts: Updated guidance, including some new and substantively revised FAQs

In response to your feedback, we’ve updated the Standardized Property Measuring Guidelines with some new and substantively revised FAQs, including clarifications on the terms “declaration” and “statement of finished sq ft.”

A few of the Q&As

Q5. When common practice in the local market differs from the ANSI standard, can the appraiser modify the subject’s GLA to conform to local custom?

Q6. The standard mentions a “statement of finished sq ft”; does Fannie Mae require appraisal reports to make an affirmative statement that the standard was followed?

Q7. The standard describes three scenarios in which a “declaration” is required. What is the difference between the statement of finished sq ft and the declarations?

Q19. Will appraiser adherence to the ANSI standard cause confusion when the subject GLA differs from other sources such as MLS or public record?

Q20. The GLA of comparables available to appraisers may not be based on the ANSI standard. How should appraisers manage this issue?

To Read this 5-page Update click here

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Bryan Reynolds speaks with Fannie Mae representative about the new ANSI FAQ. 37-minute podcast. Listen to this podcast!!

The Appraisal Update – Episode 109 | Fannie Mae’s New ANSI FAQ

Speaker: Bryan Swartwood III, Fannie Mae Credit Risk Senior Manager – Single Family Collateral Policy

Topics: The two Bryans discuss below grade, subject GLA different from MLS, comps not measured using ANSI, what happens to appraisers not following ANSI, ceiling height below 7 ft., manufactured homes, using exception code, and many more from the FAQs.

To listen to the podcast, click here

It is on the top of the web page now. scroll down the page looking for Episode 109. If possible, a copy of the ANSI Standards and the new FAQs makes it easier to follow the speakers. I subscribe to The Appraisal Update Podcast from Appraisal eLearning.

My comments: I listened to the podcast. The speaker was very good with practical advice. Reading the 5-page FAQs was okay, but the speaker helped me remember and understand what was written.

I received the Fannie email notice on July 19, 2022, at 10:30 Pacific time. The Appraiser eLearning podcast was available on July 19 at 2 PM. Whether or not FAQs were original, revised, or new is not indicated in the document. I did not compare it to the original Fannie FAQs.

When Fannie first announced in December 2021 that ANSI would be required on April 1, 2022, there was lots of confusion among appraisers who had never used ANSI or were not using it properly. ANSI was designed by home builders, not appraisers or lenders. Also, what Fannie wanted was not clear.

ANSI standards and Fannie requirements sometimes appeared to conflict. The forms were not designed to accommodate ANSI, such as where to put the different square footages on the form. Owners, reviewers, underwriters, real estate agents, and many others who read the appraisals are sometimes confused. These FAQs help to answer some of the questions.

ANSI Z765-2021 Resources for Appraisers

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Appraisals – Check the Water Source!

By on June 17, 2022   /   appraisal, liability, real estate market, USPAP   /   Leave a comment
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Excerpt: We continue to see claims alleging that the rural property appraiser failed to adequately identify or report details surrounding a water source. In one claim, the appraiser correctly noted that the property was serviced by a “private water well.” It was later discovered that the well was not located on the property which was appraised. Unfortunately, the well was actually located on an adjacent lot that, at one time, was part of the subject lot prior to the lots being subdivided.

My comments: An appraiser lost a lawsuit because he said the vacant parcel had public water access. It did not even though many lots nearby were developed. Nearby, I noticed a large water tank. It was shared by four nearby homes. This was not in a rural area. I worked for 4 years in rural areas. Water access was critical. If there was no access, trucks had to bring the water.

Appraisers – check the water source!

10-12-17 Newz//FHA-Appraisers responsible for water quality reporting?, Hybrid appraisal survey)

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My Comments on Market Changes

My inbox is flooded with news emails about opinions on what is happening now and forecasts for the future. (Most of the information in these newsletters comes from emails. I am on many email lists.) It looks like the change is starting because of increasing mortgage interest rates. I have included some of the articles below.

Fannie and Freddie have long said that they want appraisers to tell them about their markets. Include graphs and charts in your appraisal to show your clients what is happening now and why they need human appraisers.  

It is extremely important for appraisers now to closely track changes in your local markets at least once every day and tell your lender clients about it. When will it affect your market? No one knows if there will be foreclosures or when they will start. The number of potential buyers will decrease as rates go up in many markets.

Segments may be very different from the overall stats. A few examples:

  • Different price ranges – first-time homebuyers, high end
  • New homes – what is happening?
  • Detached vs. townhomes and stacked condos.
  • All cash and investors
  • How many offers
  • No inspections or appraisals?

COMPS ARE THE PAST. YOU MUST KNOW YOUR MARKET TRENDS. TRACK AND GRAPH THE NUMBER OF LISTINGS VS. PENDINGS AND EXPIREDS, DAYS ON THE MARKET, PRICE CHANGES, ETC. 

Today is NOT the same as 2008+, with its massive fraudulent loans made to unqualified buyers. Computer modeling did not predict the 2008 crash. Many were in denial that it was coming and refused to listen to appraisers. We have never seen a pandemic real estate market before. Did anyone think in early 2020 that home values all over the country would go off the charts? No one did. Appraisers wrote up long disclaimers about how they did not know the effects. Some still include them in their appraisal reports today.

Watch the excellent 4-minute video with Mark Zandi, “There’s a comeuppance coming in the housing market”. It discusses how today is different from 2008 and what is happening today. Before becoming the chief economist of Moody’s Analytics, he was a real estate economist. I listened to him for many years about real estate economics. He is very savvy. I agree with what he says about real estate. I am unsure about inflation. To watch the video, click here

I have been writing about these upcoming changes in these newsletters for a while now. Ryan Lundquist writes about this almost every week. He has lots more details and examples of graphs that can help you see what is happening in your market. www.sacramentoappraisalblog.com He writes for the Sacramento, CA market but what he writes is relevant for other markets also.

Two days ago the Fed raised rates by 0.75%. Recession? Lower inflation? Real estate market?

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Tips on appraising new construction homes

By on May 27, 2022   /   appraisal business, appraisal how to, Fannie, liability, va   /   Leave a comment
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6 Tips for Appraising New Construction Homes

Excerpts: New construction is treated a little differently by lenders, FHA, and the GSEs. When appraising new construction homes, you must take into consideration certain features and attributes that don’t necessarily apply to re-sales. It requires more work, so you want to be sure that you are charging for your effort. However, perhaps more than that, you want to be sure you’re following the proper protocol. Stick to these best practices to ensure you cover all your bases.

3. Talk to multiple local builders You can gain valuable information from builders—as long as you talk to them now to evaluate current costs and value. Some of the best construction cost data is compiled by you as you complete new construction appraisal assignments. When appraising new proposed construction, the prior data can be reviewed for those construction projects that are most similar to the subject property in quality, size, and features and be used as cost data to support cost estimates for the current appraisal. As the cost of construction materials generally continue to spiral upwards, it may be necessary to adjust for time, depending on how old the cost data is.

To read more tips, click here

My comments: Well written and worth reading. New home construction appraisals can be tricky. I quit doing them a while ago – too many various hassles, but many appraisers like doing them. There are few new homes built in my area, except stacked condos. Land is too expensive.

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Does A “Crazy” Neighbor Lower Value?

By on April 29, 2022   /   adjustments, ANSI, Clubhouse, desktop appraisals, liability, real estate market, waivers   /   Leave a comment
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Does A “Crazy” Neighbor Lower Value?

By Jamie Owen
Excerpts: It’s tax appeal season, and I’ve had several homeowners say that they feel their neighbors are negatively impacting the value of their homes for different reasons. Is that the case? Can that be the case?
The homeowners of one property stated that their neighbors are a nuisance. My clients said that one of their neighbors has people coming and going until late in the evening, most evenings. They also complained about there being noisy. Additionally, they claimed that the neighbor directly behind them is not a very nice person and is always causing neighborhood trouble.
Meanwhile, in a different neighborhood, a different homeowner claimed that their home was suffering a loss of value due to their neighbor’s home not being kept up and needing repairs and updates on the exterior. The neighbor’s property is an eye-sore.
The long-winded point I am trying to make is that the appraiser will need to find some evidence to support the claims that a neighboring property is really creating a loss in market value to its neighboring properties.
To read more, and see some fun animated gifs and videos, click here
My comments: As always, Jamie often writes about appraisal topics from a different “angle”! I have a crazy next-door neighbor also, who waits for me to come home to “attack” me with some perceived problem… since 1986 when I purchased the property.

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1004MC or 1004 ANSI

By on February 25, 2022   /   ANSI, appraisal forms, liability, real estate market   /   Leave a comment
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1004MC or 1004 ANSI

By George Dell, MAI

Excerpt: The 1004MC “market conditions” appraisal addendum was created by Fannie Mae and Freddie Mac to require a form-based market analysis. This added to the traditional practice to collect a handful of ‘comps’ to opine and foretell market price. There are problems and unintended consequences.

The ANSI requirement is that residential appraisers measure houses according to the ANSI (American National Standards Institute) method. This constraint can have good long-term results for consistency, if it is adopted by the full universe of participants. The requirement would have to include tax assessors, building permit agencies, real estate agents, investors, insurance companies, architects, contractors, and unlicensed appraisers. This part might take years, if ever.

We can take a quick look at some similarities, some differences, and where things may go…

To read more, click here

My comments: George and I talked about this and agreed to disagree. He is not the only one with doubts about ANSI. Most are appraisers, like George, who have never used it. I finally found a somewhat negative post about ANSI, instead of social media rants ;>

My opinion: This Standard is better than no standard. Appraisers have been using ANSI since 1996. I did not hear about problems with using it or with lender clients. Change is hard.

See the end of this newsletter for info on Appraisal Institute’s New 4 hour online ANSI class and an excellent ANSI webinar this Monday with Lyle Radke from Fannie being grilled by three appraisers! Two of them had negative comments.

ANSI Z765-2021 Resources for Appraisers

Appraisal Business Tips 

Humor for Appraisers

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Appraisal Comps in Lopsided Markets

By on February 11, 2022   /   ANSI, appraisal, liability, USPAP   /   Leave a comment
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Different colorful shapes wooden blocks on beige background, flat lay. Geometric shapes in different colors, top view. Concept of creative, logical thinking or problem solving.

Choosing comps in a lopsided market

By Ryan Lundquist
Excerpt: QUESTION: With so many listings receiving offers above list, and people having to pay the shortfall between the appraised value and the contract price, how do appraisers look at comps? If a property sold at $580,000, but it actually appraised for $547,000, and the buyer paid the difference, which number do you use? $580,000 or $547,000?
ANSWER: Here are a few things on my mind.
1) Weigh the comps:
In any market (not just today), we have to weigh the comps. Or another way to say it is, we have to appraise the comps so to speak. What I mean is if something clearly sells for too much, it’s reasonable to give that property less weight in our analysis. Likewise, if a property sells for too little, we might also give less weight to that sale. Granted, selling for too little isn’t as common lately, but in past markets we regularly considered whether short sales or bank-owned sales sold below market value.
2) One sale doesn’t make or break the market:
It’s important to note one sale doesn’t make or break the market. This means one lofty “lone ranger” sale doesn’t all of a sudden mean the rest of the market will go to that level. This would be like saying that record-breaking $7M sale in Shingle Springs from August will pull the rest of the market up. Nah, I don’t think so. Or Zillow buying a house for $40,000 more than the comps will cause the rest of the market to rise. Nope. If one sale closes at $580,000, but the rest of the market is below $550,000, we won’t arbitrarily accept $580,000 as the new neighborhood price threshold. The same would hold true if a different house sold at $450,000. This one “low ranger” (sorry) won’t automatically drag the rest of the market down.
To read more plus lots of comments, click here
My comment: Some good comments and tips for this crazee market!!

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