real estate market

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Where VA loans are soaring. Are you doing VA appraisals?

VA Approves Desktops and Exterior-Only Appraisals

By Ann O'Rourke on August 5, 2022 / desktop appraisals, Fannie, hybrid appraisals, non-lender appraisals, real estate market, va / Leave a comment

Tags: appraisal business, Fannie, non-lender appraisals, real estate market, va

VA Approves Desktops and Exterior-Only Appraisals

Excerpts from the Summary: On August 1, 2022, the Veterans Affairs released Circular 26-22-13 announcing new procedures for alternative valuation methods, effective immediately.

“The use of a Desktop Appraisal may allow an appraiser from outside the market area, but with appropriate credentials for the jurisdiction of the property, to complete the assignment when no local VA fee panel appraiser is available.”

“Appraisal Assignment Waterfall. With consideration for the high demand for appraisal services and limited availability of appraisers in certain local market areas, VA is providing lenders, servicers, and appraisers with a procedural waterfall that clarifies acceptable valuation methods when certain conditions exist. Lenders and appraisers can also refer to Exhibit A for more information. VA continues to explore opportunities for expanding the use of Exterior-only Appraisals and Desktop Appraisals and will update this procedural waterfall, as appropriate.”

To read the full blog post, click here

The summary and Circular are in the blog post.

To read more about the May 2022 proposal to eliminate the fee panel, click here

I wrote about the VA in my July 8 email newsletter. To read it, click here

My comments: The big push to cut down on appraisal turn times because of the appraisal shortage is Very Old News since mortgage volume has plummeted. I always recommend VA as the best lender client for appraisers. I wrote about it in the past and interviewed VA employees, appraisers on the VA panel, and appraisers who did not want to do VA appraisals in my paid monthly newsletter.

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More Terrible Real Estate Agent Photos for Appraisers

Weird Real Estate Agent Photos for Appraisers

By Ann O'Rourke on July 29, 2022 / appraisal business, mortgage loan volume, real estate market, USPAP / Leave a comment

57 Weird Real Estate Agent Photos

Excerpt: Yes, many great real estate photos really capture the house. This post though is a tribute to the other kind that we’ve all seen – hilariously terrible MLS photos.

From horror movie-esque semi-abandoned homes for rent to home decor that overshot “unique”, the owners and agents behind these funny ads thought things were perfect just as they were for their photos and open houses.

Caption for Photo Above: That way, you can still work on the garden even if it’s raining!

To read more, click here

My comment: We all love these photos! If used in the MLS on a comp, makes you wonder how it sold ;> Or an expired listing that didn’t sell. Data for those fixer homes (contractor specials).

Appraising Weird Stuff is Challenging!

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Subject Property Location in Appraisals

By Ann O'Rourke on July 1, 2022 / appraisal how to, real estate market / 1 Comment

Tags: appraisal how to, real estate market

Subject Property Actual Location

By Dave Towne

Excerpts: Appraisers, this article was prompted by my ‘coming in contact with several appraisal reports where different regional appraisers report the physical location of the subject property “in” a particular City associated with the postal ZIP Code for that City. Actually, the property was not “in” the City at all. It was in the County.

Don’t say that the subject property is ‘within’ a particular City or Town due to the postal ZIP Code that applies to the street address unless that is accurate. The actual location may be miles away from there.

Starting with the ZIP Code: those are merely lines on a map the US Post Office established, used to plan mail routes, and distribute mail more efficiently. ZIP Code boundaries do not always follow City Limit or County (Parish) boundaries, and in some cases, the boundaries are a long way from the City name associated with the ZIP Code. See Map 1. This shows 5 ZIP Codes in a region. The ‘City’ for 98273 and 98274 has two ZIP Codes associated. Note how wide the area coverage boundaries are for those two ZIP Codes. It’s not shown here, but 98284 extends north into the adjoining County!

To read more, click here

My comments: I have seen this locally. For example, the two cities were very different. Having an address in one city was more valuable than in the other city. The cities shared a few zip codes. When using GPS internet searches such as Google maps, the city boundaries don’t show up or are not reliable. I keep printed maps in my car that include city and county boundaries.

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

Appraisals – Check the Water Source!

By Ann O'Rourke on June 17, 2022 / appraisal, liability, real estate market, USPAP / Leave a comment

Tags: appraisal, appraisal how to, real estate market, USPAP

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!

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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?

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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Residential Appraisals and Airbnb Income?

By Ann O'Rourke on June 3, 2022 / appraisal how to, bias, real estate market / Leave a comment

Tags: appraisal how to, bias, real estate market

Residential Appraisals and Airbnb Income?

By Julie Friess, SRA, AI-RRS, MA

Don’t get caught like a deer in the headlights! State appraisal boards ARE disciplining appraisers across the country for improperly using the business income (Short term Rental – STR) from Airbnbs on the residential 1007 Fannie Mae form.

Lenders and AMCs want residential appraisers to value these properties as both the real estate and the business values of these properties – Wrong!!

Some of the topics:

• USPAP issues

• GRM is an Income Approach that applies to homes with long long-term tenants, not homes with many Short Term Rentals.

• Functional Obsolescence

• External Obsolescence

• Covid-19 Pandemic and Airbnb’s

The photo below has an exterior entrance to a bedroom, typical for an Airbnb remodeling.

To read more, click here

My comments: This mainly applies to cities where many homes are being converted to Airbnbs, including exterior doors for bedrooms (see foto below) and expanding the number of bedrooms. In popular vacation areas, such as Sedona, AZ, where Julie lives, investors purchase homes and do extensive remodels to turn them into Airbnbs with Airbnb management companies handling everything for them (clean up, new furnishing, and renting).

Julie does not include short-term rental income (STR) in her appraisals of homes with Airbnbs. I posted her article on my website so that everyone can read it. I have a few of my comments, of course!! I’m a commercial appraiser and know how hotels and Bed and Breakfasts are appraised. The appraisals include separate values for real estate, fixtures, and Going Concern (business income and expenses).

Julie speaks about this topic regularly on our weekly Clubhouse meetup, Real Estate Appraisal Questions, every Thursday at 2 PM Pacific Time (audio-only social media). All the sessions are recorded. The May 12, 2022 session was “Residential 1004/1007 Form Appraising & AirBnB Income”.

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Price per square foot not very reliable for appraisals
Fannie Wants Desktop Appraisals

CubiCasa – Home Measurement From Inside A House

By Ann O'Rourke on May 20, 2022 / ANSI, appraisal business, desktop appraisals, real estate market / Leave a comment

Tags: appraisal business, desktop appraisals, real estate market

CubiCasa and a Desktop Mess – an appraiser’s experience

By Jamie Owen

Excerpts: I called the listing agent on the property I was to appraise and asked if they knew how an appraiser might go about obtaining a floor plan (for my desktop appraisal). She had no idea and had never heard of this type of thing being needed. I was really at a dead end here. I called the bank and explained the situation. They ended up converting the assignment to a traditional type of appraisal so that I could just make the inspection myself.

I called the chief appraiser of the bank that ordered the appraisal. I know him well and have worked together with him on some complex assignments. He said the whole thing is a mess. Some appraisers are submitting reports where they have the listing agent hand-draw the interior walls on copies of the county auditor’s sketch outline. This is also a no-no. Fannie Mae will accept nothing hand-drawn in terms of the sketch…

I decided to test CubiCasa. I downloaded the software to my iPhone 11… I must tell you that I was very impressed! The scan took 15 minutes to do. By the way, I measured the home also. It took about 15 minutes for me to measure the home. But it would have taken a lot longer if I had to add walls and doors!

In less than a day, the sketch was sent to me via email, and it was awesome! It was professional-looking and had all the data that I needed. Its measurements were within 15 square feet of mine on a home that was just over 2,400 square feet. It also broke down the square footage of each floor and the dimensions of each room and its gross living area calculations.

I have been using it and then comparing my measurements with its measurements. It is consistently within 1-3% of my measurements. The 3% variance is with larger homes with complex angles and tricky areas to measure. In my view, that’s pretty good!

To read more and see a fun video and animated gifs, click here

My comments: Desktop appraisals are a new type of assignment for appraisers. I wrote about CubiCasa and Desktops in recent newsletters. I tested it and spoke with knowledgeable people. I am using it. No more exterior measurements!

Appraiser Retirement?

Appraiser retirement plans?

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Crazy Appraiser Stories!!

Does A “Crazy” Neighbor Lower Value?

By Ann O'Rourke on April 29, 2022 / adjustments, ANSI, Clubhouse, desktop appraisals, liability, real estate market, waivers / Leave a comment

Tags: adjustments, CLUBHOUSE, desktop appraisals, real estate market, waivers

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.

Crazy Appraiser Stories

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What is a “good” appraiser?

By Ann O'Rourke on April 15, 2022 / desktop appraisals, Fannie, real estate market / Leave a comment

Tags: desktop appraisals, Fannie, liability, real estate market

8 Characteristics of a Successful Real Estate Appraiser

Excerpt: Here are two:

Unbiased

The ability to form an unbiased, objective opinion of value is absolutely essential in this line of work. According to this survey, many appraisers agree that this is the single-most-important trait you need to have as a real estate appraiser. In order to provide trustworthy results and uphold the integrity of the appraisal profession, you must be unbiased. Otherwise, you risk losing your professional reputation.

Analytical

It’s important for appraisers to be analytical, as each appraisal assignment will require thorough analysis and critical thinking.

To read more, click here

My comments: I was hooked on science in my first science class: high school biology. I studied biology and chemistry in college. I learned to be objective and unbiased, analytical, and open to almost any possibility. I have used these skills in appraising. I have always been curious, which keeps me up on what is new and other ways of looking at appraising a property. As far as I know, relatively few appraisers have science degrees.

Appraisers – The Past and The Future

Appraisal Business Tips

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