SFR with ADU or Two Units?

How to Identify a Single-Family with ADU vs. Two-Family Property

By McKissock

Excerpts:

The presence of an additional living unit can complicate the appraisal process. It may make it difficult for you, the appraiser, to know how to classify the subject property. How do you know whether you’re dealing with an accessory dwelling unit (ADU) or a second unit?

Topics include:

  • ADU meaning and types
  • What is a two-family property?
  • How to tell if it’s a single-family with ADU vs. two-family property
  • It’s more likely to be a two-family property vs. single-family with ADU if:
  • It’s more likely to be a single-family with ADU vs. two-family property if:

To read more, click here

My comments: ADUs have been a controversial topic for a long time in California as state and local governments kept changing their ADU requirements. Finally, what they are and where they can be built became standardized. Today, they are becoming popular to get extra rentals in markets low on housing. Most recently, there is a possible regulation to sell them separately from the main house. Another tricky HBU issue in California!

Check the regulations in your state, county, or city.

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NAR Member Survey on Appraisal Data Collectors

NAR  Member Survey on Data Collectors

Excerpts: In May 2023, NAR surveyed its members pertaining to data collectors in the appraisal process. Here are a few of the many survey results.

Survey respondents

Sales agents accounted for the largest proportion, with 45% of participants holding this license. Brokers followed with 24%, and appraisal-certified professionals comprised 14% of the respondents. Broker-Associates and Appraisal Licensees accounted for 13% and two percent, respectively, while the remaining two percent reported holding other types of real estate licenses.

According to the survey responses, the majority of participants (76%) perceive the quality of property data collected by data collectors to be lower than that collected by appraisers themselves. Conversely, 23% of respondents believe that the quality of data collected by data collectors is comparable to that of appraisers.

The survey findings indicate that 30% of respondents reported that a data collector had given them the impression that they were the appraiser or had a role other than merely collecting property data.

Fifty-one percent of respondents expressed safety concerns with the data collection process.

To read more, click here

My comments: Now we know what NAR members think about it. Not very positive. I was surprised at how negative they were. Read the full report. Very interesting. I am working on an article on Hybrid Appraisals for the November issue of Appraisal Today. To me, the big issue is who is doing the inspections. Only appraisers do the appraisals. I see very different levels of inspectors.

Before Covid, I talked with various AMC upper-level managers who were testing it. What they were doing about inspectors had a wide range. They included appraisers, real estate agents, and someone with a week, a month, or online video training. They should definitely not be paid the same. An AMC can offer different levels to their clients, depending on how much reliability their lender customers want or need.

On a more positive side, I have done thousands of drive by appraisals since 1986. I drove by the house and looked at what was nearby, etc. For example, I’m appraising a Victorian built before 1910. There is no way to know what the inside looks like or the foundation (many are brick). Using MLS photos is a joke, as real estate agents don’t take photos of defects. A buyer gets a seller’s disclosure statement for that information. I would be more comfortable if someone used an app that was set up to take specific photos, do floor plan, etc. At least I would have some independent photos.

Data Collectors: Appraisers vs. Uber Drivers

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How to Reduce Appraisal Revision Requests

How to Reduce Appraisal Revision Requests

By Clear Capital November 14, 2022

Excerpts:

To cut down on appraisal revision requests, it is important to keep these best practices in mind:

Communicate in a timely manner

Address the request thoroughly and professionally. Add additional commentary where appropriate.

Ask questions. If you disagree with the request for appraisal submissions or have concerns or need clarification, please reach out for clarification.

1. Explain ‘How’, not ‘Why’ in the appraisal report

The most common frustrations arise when the appraiser focuses more on the type of adjustments made while the reader would look for the ‘how’ in the appraisal report. For example, if a positive or negative adjustment was applied in the report, the reader wants to know how the adjustment was determined.

“How did you determine that the subject comparable was inferior or superior in condition? Don’t leave the ‘how’ part out while applying adjustments. Be sure to address those questions; it will certainly help you in the long run.” says Ken Folven, Senior Director, Appraisal Quality Assurance at Clear Capital

2. Reduce lengthy commentary

In some cases, appraisers provide lengthy boilerplate commentary in an attempt to avoid a revision request. This strategy often backfires because parties involved in the lending process cannot find the specific information they are looking for in the report. Inconsistent commentary can result in common requests for revision.

Prior to submission, read the letter of engagement in detail, which highlights the customer-specific information, and make sure to include all required information in your report. Organize your commentary and explain your comparable selection process briefly.

“I always recommend organizing commentary by adjustment rather than by comparable and make it a habit to review the pre-delivery rules,” says Khan.

Derek Mitchell, a California-based Senior Appraiser at Clear Capital, has a different approach: “I use a lot of characteristic-based comments as opposed to comparable-based comments because it cuts down on the amount of writing that I have to do and the amount of reading the reviewer has to do,” Mitchell says. “It tends to get redundant when you’re just talking about different comparables but the same characteristics.”

In addition, staying up-to-date with Uniform Standards of Professional Appraisal Practice (USPAP), Federal Housing Administration (FHA), and GSE guidelines and industry requirements also goes a long way in drafting error-free reports that would otherwise create unnecessary revision requests.

To read more, click here

My comments: Good practical tips. We all hate revisions unless maybe it was because we forgot to put the value in. I did this sometimes in appraisals for a local bank ;> Your clients hate them also. They take appraisers too much time and can sometimes make you very upset, which interrupts your workflow.

What Causes Appraisal Revisions?

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