Remove all bathtubs from home?

By on March 8, 2024   /   adjustments, appraisal business, BATHROOMS, Economic analysis, forecast, modernization, real estate market   /   Leave a comment
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Is it a problem to remove all bathtubs in a house?

By Ryan Lundquist

Excerpts: I’ve been asked this question twice this week. Is it a problem to remove the tubs from each bathroom? People planning a remodel asked if it was a big deal or not to only have a walk-in shower in each bathroom. Here are my thoughts, and I really want to hear from you too. Anything to add?

It’s not a black and white answer: There’s not one black-and-white answer that applies to every house, price range, location, or market. Bottom line. But backing up, part of the fun of working in real estate is figuring out how to answer questions like this in a way that is balanced and hopefully reflective of the sentiment in the marketplace.

Other topics include:

  • It’s never just about resale value
  • 55+ communities
  • Splitting hairs to prove an adjustment

To read more, including Ryan’s many comments, fun images and graphics, his Twitter X and Instagram surveys, plus 50+ comments, Click Here

My comments: This is the only analysis I have ever seen about this appraisal topic and it is great! I started appraising in 1975 and this was an issue then, continuing today.

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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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Appliances for FHA appraisals

By on February 9, 2024   /   bias, liability, real estate market   /   Leave a comment
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How does the FHA define appliances?

By Daniel A. Bradley, SRA, CDEI

In September of 2015, FHA revised Handbook 4000.1 to provide a specific definition, which includes:

Refrigerators

Ranges/ovens

Dishwashers

Garbage disposals

Microwaves

Washers and dryers

It’s important to note this does not include garage door openers, swimming pool pumps, intercoms, sound systems, and security systems.

How do appraisers consider appliances?

FHA Handbook 4000.1 also clarifies when appliances are required to be operational by stating, “Appliances that are to remain and that contribute to the market value opinion must be operational,” and, “The Appraiser must note all appliances that remain and contribute to the Market Value.”

FHA requirements for appliances: Is a house required to have a stove?

To read more, Click Here

My comments: Worth reading if you do FHA appraisals. Short and understandable. I did FHA appraisals for a few years in the mid-80s. Too many requirements so I quit doing them, but they helped me get started in my appraisal business.

 

Appraisers Riding the Waves of Up and Down Mortgage Rates

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2024 Updated UAD and URAR – What does It Mean for You?

By on February 2, 2024   /   appraisal, Economic analysis, forecast, real estate market   /   Leave a comment
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2024 Updated UAD and URAR – What does It Mean for You?
The Appraisal World Is Changing

January 25, 2024

Excerpts: There has been a lot of talk about the Uniform Appraisal Dataset (UAD) and Uniform Residential Appraisal Report (URAR) redesign initiative, and how it will make life easier for appraisers. What exactly does this mean? In this post, we’re providing an overview of the UAD and URAR, what’s changing, and what benefits these changes will bring.

How will these UAD and URAR changes be beneficial?

A redesigned, dynamic URAR will replace the numerous and separate appraisal forms and can be used for different property types, such as two-to-four units, condominiums, and manufactured homes, and for different scopes of work, such as interior and exterior inspections, updates, and completion assignments.

The new URAR will be better organized and populated based on the property type and characteristics.

The standardized data in the new UAD will allow appraisers to better define the property (outbuildings, additional units, site influences, energy efficient and green features, etc.).

Concerns that require attention will be easily identified in each section of the report instead of being buried in an addendum.

Photographs will be included in relevant sections to make descriptions easier for appraisers and enhance reader understanding.

To read more, Click Here

My comments: A brief summary of the coming changes. See below for more timeline information.

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Freddie – Updated UAD and Forms Redesign Timeline

The Uniform Appraisal Dataset (UAD) and Forms Redesign team has released an updated timeline. The overall timeline has not changed; however, we wanted to provide the industry with more milestone details to help in development, testing and training to prepare for the new UAD and Uniform Residential Appraisal Report (URAR).

To see the timeline (from 2018 to 2026) PDF, Click Here

Too large to include in this newsletter.

To go to the Freddie UAD page (mostly technical) Click Here

To go to the Fannie UAD page, Click Here

——————–

A few comments from Dave Towne:

My concern at this point is ‘training’ materials will be available in Q4 2024, but actual implementation of the ‘new reporting process’ won’t begin until Q3 2025 with limited production, into 2026.

As someone who’s potentially interested in ‘training’ appraisers on the new process, it seems to me that providing training in Q2 2025 would be more appropriate than 6 months before. But we’ll have to see how things progress as this time-line gets more firmed up.

To read the recent appraisersblogs.com post with new comments from Dave plus other appraiser comments, Click Here

My comments: No date changes, but more information on the timeline. Maybe there will be some appraisers left to do full appraisals…

The UAD and Appraisers – Past, Present, and Future

5-24-18 Newz//UAD and Fannie Form Changes. Floating Island. Refis dropping

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Appraisal Time Adjustments Underutized

By on January 12, 2024   /   adjustments, Economic analysis, forecast, non-lender appraisals, real estate market   /   Leave a comment
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FHFA Report: Underutilization of Appraisal Time Adjustments

Published: 1/8/2024

Excerpts: Fannie Mae, Freddie Mac, and Federal Housing Administration appraisal guidelines require such adjustments whenever market conditions have been changing. However, this blog shows that appraisers frequently do not make time adjustments, even when they are likely to impact the appraised value substantially. This analysis also finds that the adjustments appraisers do make are typically substantially smaller than house price indexes would suggest.

The main dataset used in this blog is a 5 percent sample of single-family housing in the Uniform Appraisal Dataset (UAD) that Fannie Mae and Freddie Mac (the Enterprises) collect.5 The time period covered, the third quarter of 2018 through the fourth quarter of 2021, includes all the UAD data available to FHFA when the analysis began.

…monthly house price indexes for ZIP codes are used to walk forward the comparable sales amounts. For each comparable in the data, the price indexes are used to calculate a predicted time adjustment corresponding to the age of the comparable and local price trends.

To read more, Click Here

My comments: Check out the very good graphs. Maybe the indexes were not as reliable as actual appraisal adjustments, but overall adjustments were lower by appraisers.

When I started my business in 1986, several very experienced local appraisers said don’t make time adjustments for lender appraisals. In a significant drop in prices, in the 1990s, some appraisers who made negative adjustments lost their businesses. I always made them and never had any complaints from my lender clients. I worked for an assessor’s office in the late 1970s where we were making 2% per month time adjustments upward. Since Fannie started focusing on UAD analysis around 2015, losing business because of negative market conditions has almost stopped. They are one of the easiest adjustments to make.

My market is very volatile. The only dollar adjustments on non-lender appraisals that I make on homes are market conditions unless it has a valuable feature, such as an excellent view, that needs an adjustment.

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Online comments by a very experienced and savvy appraiser:

This (price indexing) is one thing that AVMs do quite well.

I’ve seen thousands of appraisals over the years where appraisers made no Positive or Negative Market Conditions adjustments, as though the market is always in balance and prices are always stable, even during periods of rapidly changing prices.

Ignoring market conditions adjustments makes us look incompetent to buyers, sellers, lenders, Realtors, and the general public. I purposely omitted AMCs from this group as they are order takers. It’s not good for Residential Fee Appraisers when FHFA tells the public how poorly we’re performing with regards to what most call “time adjustments”.

 

Appraisal Adjustments Yes, No, Maybe

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Functional Obsolescence for Appraisers

By on December 29, 2023   /   appraisal business, bias, real estate market   /   Leave a comment
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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:

  1. 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.
  2. 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.
  3. 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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OK to average adjusted comps on appraisals?

By on December 8, 2023   /   lender appraisals, non-lender appraisals, real estate market   /   Leave a comment
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OK to average adjusted comps on appraisal?
To Mean, or Not to Mean, That is the Question

By Brent Bowen

Excerpts: There seems to be a consensus among appraisal reviewers that the appraiser should not average the adjusted sales prices of their comparables in order to arrive at an indicated value of the subject from the Sales Comparison Approach. Fannie Mae is referenced as the source of this prohibition, although no such prohibition explicitly exists according to Fannie Mae’s Selling Guide.

There is a prohibition on averaging techniques, but that applies in the Reconciliation section with regards to reconciling the three approaches to value. In other words, Fannie Mae does not want you averaging the indicated values from the Sales Comparison Approach, Cost Approach, and Income Approach in order to arrive at an opinion of value. The discussion of the reconciliation of the indicated value of each comparable sale contains no such prohibition.

The conventional wisdom is that the most similar comparable be given the most weight. But that begs a question… similar how? We can fairly easily observe the comparable which is the most physically similar, but what about the one that is the most transactionally similar? In other words, which comparable deviates the least from the mean?

To read more, Click Here

My comments: Excellent analysis. One of the best I have read. Basic Appraisal, but not all appraisers know about this, especially if they “appraise to fit the form” aka form fillers. Worth reading, plus the appraiser comments.

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Freddie Advice: How to Avoid Using “Bad” Words

By on November 10, 2023   /   bias, FHA, liability, real estate market   /   Leave a comment
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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.

 

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Fannie Files Complaint Against Appraiser

By on October 20, 2023   /   ADUs, manufactured housing, non-lender appraisals, real estate market   /   Leave a comment
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Fannie Mae Filed a Complaint Against Me

October 18, 2023

Excerpts: In June of 2021, I completed an appraisal for a conventional purchase. The appraisal was ordered by an AMC on behalf of a lender. At that time, the real estate market was still being wildly affected by the COVID pandemic. Remote work was in full swing, and consumers were desperately seeking to get out of the cities. Prices for all types of residential properties were rising rapidly, and this held especially true for niche properties that consumers believed would make a good short-term rental.

My subject was a mountain cabin, in reasonably close proximity to a National Park. This approximately 900sf, 1.5 story, 2-bed, 1-bath cabin was situated on a critically sloped 2.5 acres of wooded land. This is not unusual at all. Many similar properties exist, but they are spread across a wide area. The inspection was uneventful. I was given a lockbox combination and inspected the vacant home. It was unremarkable. A basic Q4, C3 home.

Five days after the report has been delivered, I received a revision request. The AMC stated that the lender indicated the appraisal received a high risk score by Fannie Mae. Fannie Mae provided two sales and two listing based on their “model”. In addition to the sales provided by Fannie Mae, I was asked to provide at least two better comps. As anyone who has been an appraiser for more than five seconds can attest, you use the best comps available. There were no “better comps” to be used.

In June of 2022, one year after completing the original appraisal report, I received an email from the AMC stating the lender had received a repurchase demand from Fannie Mae. The demand letter cited an accounting error during the origination of the loan (not an appraisal issue) and the appraisal as the reason for the buy back. This was the first time I had ever experienced this problem. None of their comments seemed to make any sense. I had a terrible time understanding why this appraisal was such a problem for Fannie Mae. I have attached the Fannie Mae comments and my responses below. I have redacted the areas that could reveal sensitive information.

To read more, plus appraiser comments, click here

My comments: I have heard that Fannie’s repurchase demands can trigger problems for the appraiser. The post is long. Be sure to read the Final Thought on the last page with a link to Jeremy Bagott’s always interesting analysis, “Insider: Fannie’s Loan Buyback Sophistry Relies on Modifying Analyst’s Behavior,” posted on October 13, 2023

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SFR with ADU or Two Units?

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2024 USPAP For Appraisers

By on October 6, 2023   /   adjustments, appraisal how to, Economic analysis, Fannie, hybrid appraisals, non-lender appraisals, real estate market, USPAP   /   Leave a comment
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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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