So Many Appraisal Cost Approach Questions

So Many Appraisal Cost Approach Questions!
So Few Answers! Such Low Fees!

By Tim Andersen, MAI

Excerpt: It is clear most appraisers do not like to do the Cost approach. Generally, we are not too familiar with it. So, it is clear that most appraisers, because of this, do not appreciate the deep analytical power the Cost approach really has. So Many Appraisal Cost Approach Questions!

Therefore, I’m going to ask you 10 questions on the Cost approach (and stuff related to it). After you’ve finished reading them, you probably will still not like to tackle the Cost approach. Nevertheless, you just may have a better understanding of, and appreciation for, its powerful analytical capacities.

First Question: On the 1004 form is the indication that Fannie Mae does not require the Cost Approach to Value. Where does the form instruct the appraiser not to complete the analytics of the Cost approach?

To read the other questions and answers click here

My comment: Appraisers, including myself, seem to have a love/hate relationship with the Cost Approach. But, it can be useful. Tim’s much longer article “But Fannie Mae says I don’t have to do the Cost Approach!!” will be in the September issue of the paid Appraisal Today.

Appraisal Process Challenges(Opens in a new browser tab)

Which Appraisal Clients are used the most?(Opens in a new browser tab)

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Strange Appraisal Terms

Excerpts: Since space is the only place that is pandemic free, I thought it would be fun to try to apply space and science fiction terms to real estate. Let’s take a little break from the stressful atmosphere we are experiencing here on earth and have a little fun. Perhaps you can think of more.

Here are two:

Orbit– The path homeowners take whilst following the appraiser around the home, trying not to follow too closely by maintaining at least six feet of distance. (Probably taking pictures of the appraiser in the PPE)

Blackhole – The place where Zestimates go after being debunked by reality.

To read and see lots more Strange Appraisal Terms, click here.

My comment: I love Jamie Owens’ blog posts! Unbelievably creative!! Plus, outstanding/strange videos, animated gifs, etc. etc. I have been a big SciFi fan since high school and used space videos in my experimental music band for many years.

More Appraisal Humor

Appraisal business tips

For lots more appraisal topics, Click  Read More below!

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7 Things to Watch in your Appraisal Market

Seven things to watch in real estate during a pandemic

April 14, 2020 By Ryan Lundquist

Excerpts:

1) Listings: We often think about listings increasing as a way to see the market changing, but right now many markets across the country are seeing fewer new listings. So at times change is best seen with less of something rather than more. It’s not a surprise to see fewer new properties during a pandemic, right?…

7) Prices: In real estate we are so obsessed with prices, but that’s really the last place to look to see the market. What I mean is change happens first in the areas above before showing up in sales stats a couple months down the road. In short, for now the slower pandemic trend hasn’t infiltrated sales price figures as of yet in Sacramento. This doesn’t mean the market is stable in every price range and location. All I’m saying is regional and county stats don’t show price declines right now. Normally I pull monthly price data, but I’ve switched to weekly in order to see the trend sooner rather than later.

To see the other 4 factors plus lotsa graphs and many appraiser comments , click here

Appraisal Humor

Appraisal business tips

Pandemic and market for buyers and sellers: Appraisals(Opens in a new browser tab)

Very, very funny appraisal video!!(Opens in a new browser tab)

To read about lots more appraisal topics, continue reading below!

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4-1-20 Newz: Effects on Value; FHA/VA; Return to Normal?; Fun Video

The paid Appraisal Today April newsletter will be free on April 3, Friday.

It focuses on what COVID-19 means for appraisers. I researched and discuss details: why data is the key, what are the comps, etc. Topics such as using gloves and face masks. There is lots of mis-information out there. I use the experts – scientists, especially epidemiologists.

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SOCIAL DISTANCING IS CRITICAL. WE ALL MUST WORK TOGETHER TO SO THAT FEWER PEOPLE GET THE VIRUS. WE MUST MAKE PERSONAL SACRIFICES. FOLLOW THE ADVICE OF YOUR STATE AND LOCAL HEALTH DEPARTMENTS.

Louisiana is an example of what happens when lots of people gather together. Mardi Gras was February 25. No one knew much about it then.

On March 5 I took an appraisal class. No one did social distancing, even myself, or even talked about it. Some hand shaking. One person coughed and quickly said something got caught in his throat so attendees were somewhat aware of it. Hard to remember what those days were like… when there were live classes or meetings…

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BE GRATEFUL THAT YOU CAN STILL WORK!!

We all see shuttered stores, many businesses shut down, employees laid off. Appraisers are still working. Lenders need appraisals. You choose which personal protection to use. You decide which appraisals to accept. You can drive around while most of us are staying in our homes.

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Interior Inspections: Tough Choices for Appraisers

More comments in workingre article here:

http://www.workingre.com/interior-inspections-tough-choices-for-appraisers/

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You already know what think – Just Say No.

Here are a few ideas:

  • Turn down FHA with interior inspection. way too risky!!
  • Raise your fees a lot for interior inspections. They are risky.
  • Drivebys and desktops will take a lot of time getting photos from borrowers. Asking questions, Etc. Ask higher fees than you used to ask.
  • Take fewer assignments.
  • This will not last very long. Lenders are shifting to drivebys and desktops. Why risk heath and safety you, your family and others, for a few appraisals?

GSEs/FHA/VA and bank commercial lenders are trying to protect appraiser’s health and safety by eliminating interior inspections. Freddie Mac has new guidelines for apartment appraisals.

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3-20-20 COVID-19 and Appraisers. What are lenders doing? – FREE Webinar – Interior inspections?

There are many, many issues which seems to be changing on a daily basis. I wrote this yesterday. There have already been changes I am sure. I am including links to relevant information below

The big refi boom is causing lots of desperate lenders and AMCs trying to find appraisers.

You don’t need more info on keeping safe as it is available all over. What I discuss today is shift from interior inspections to drivebys, forms, what lenders are saying, what real estate agents are doing, the market changes (maybe), liability, etc.

What are lenders and AMCs doing?

Some direct lenders, such as Citibank, are sending out emails about what they recommend. On the other side AMCs are acting like nothing has happened and sending out email blast low fee appraisal request. FYI, it is a lot easier for one lender to change. AMCs work for many lenders.

Info on what Citibank is recommending from VaCAP:

Many are fearful exterior only appraisals will be the end of the traditional appraisal as we know it. Right or wrong, exterior only appraisals are a possibility that may be acceptable in certain situations. VaCAP does not believe it will end traditional appraisals with interior inspections. The profession has been down this road before. It will not fly long term, especially if the market turns downward.

Some lenders are establishing COVID-19 protocols to follow and some have remained quiet on the subject. There are rumors that one lender has instructed appraisers not to inquire as the health of the occupants of the home due to privacy laws. Others like Citibank have developed their own protocol on how appraisers should handle COVID-19 concerns. There is great flexibility to the appraiser. See Citibank’s protocol below:

Worth reading. To read more, click here

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12-13-19 Newz: Fannie Appraiser Update – “Affordable” Mansions – Pyramid House

Fannie Appraiser Update December 2019

Topics:

  • Multiple parcels
  • Significant appraisal defects
  • How are you modernizing?
  • How appraisal waivers fit with our risk mindset

To read more, click here

To go to Fannie’s Appraiser Page, click here

Lots of info, including their updates. I use it a lot. Read this month’s newsletter and the old newsletters.

My comment: Some useful info in the Update. Of course, appraisers are worried about appraisal waivers. Fannie has a short explanation about the risk and when they are used. I have known for decades that some properties were low risk and appraisals were not really “necessary”. Especially with a low LTV, good credit, etc. CU has so much data now it is much easier to make a determination. Bifurcated are coming. Fannie decided to postpone them without an appraisal, but I am sure this is the future.

Read more!!

11-29-19 Newz: Choosing Comps – VA and Bifurcated – Most Expensive Homes

By George Dell

Excerpt: This question caused me to rethink the relationship of ‘spiritual’ or ‘mental health’ principles to profitable business practices. From last year’s blog, the research showed benefits with: relationships, physical and emotional health, reduced anger/isolation, sleep, self-esteem, and even improved brain power! Cool.

So, do these things cost me money? Or do they help make more money?

Let’s start with the obvious: what’s in an appraiser’s required belief system: Standards, ethics, and conduct. Recall that USPAP requires you to be worthy. Worthy of belief. Credible.

So, what in that list helps me make more money?

To read more, click here

My comment: Very good appraisal comments for Thanksgiving and the upcoming holidays! Worth reading.

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5-24-19 Newz: Hybrids the new normal? – $9 million lot – Refi boom over?

Are you violating USPAP every day?

If you pick comps the old way, you may be violating USPAP every day!

Excerpts: (In the past) Data was hard to get. I was taught it was only necessary to use only three or four comps. And only a few comps were available. I did learn the importance of bracketing from my trainers (it was nowhere in my appraiser education). I was diligent, and of course, I picked my necessary and available comps carefully.

Then things changed. No one noticed. MLS came on line. Income properties came online. Public records came online.  All relevant sales became available. Instantly. Without thinking, I ignored the “as available” rule. But stuck to the ‘as necessary’ rule. And heck, everybody used just three comps. In fact, USPAP says I should do what my peers would do. And they all used just three or four.

So, what changed?

Today in most areas, all the sales are available. But are they necessary? Well no. All my peers use just three or four, so it is ok. But what if I want to do more than achieve credible results?

To read more, click here

My comment: I love George’s Most Excellent headlines plus his writings!! His blog posts are short, as they should be. But, sometimes we want to read more. The June issue of the paid Appraisal Today will have his 6-page article: “Old Versus New: Conflict or Opportunity?” about the past, current and future in appraisal analysis. Very interesting!!

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12-20-18 Newz//VA-No More 1004mc| Santa’s Home| What kind of appraiser are you?

The Most Astonishingly Unique Homes of 2018

Great Videos, Just for Fun!!

  • Frank Lloyd Wright Mayan inspired home
  • Dome Home, Hurricane Proof,  in South Carolina
  • Brady Bunch House in Southern California

My comment: Great to look at but don’t ask me to appraise them!!

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7-27-17 Newz// LA-FTC and AMC fee survey, Silent place, No Bubble?

One Square Inch of Silence

A tiny red pebble marks what may be the quietest outdoor spot in the United States.

Just For Fun!!
Excerpt: One Square Inch of Silence, an independent research project created by the author and Emmy Award-winning acoustic ecologist Gordon Hempton, aims to protect the space from human noise intrusions. The tiny quiet spot, accessible via a three-mile rainforest hike down the Hoh River Trail near Forks, WA was designated on April 22, 2005 (Earth Day) as a “noise control project” to ensure the decibel count at the square inch would never rise.
 
My comment: Our lives today are very noisy: cars, lawn mowers, refrigerators, air conditioners, fans, etc. etc. Plus, external noise can affect property values. There is quite a bit of noise “pollution” in most places. It is very hard to find a quiet place today, even in very remote locations. I keep reading articles on this topic.

Smoking pricing crack, era charm, & blaming appraisers

By Ryan Lundquist July 5, 2017
Excerpt: Smoking Pricing Crack: Did you see that listing in Waco Texas of the property that was rehabbed by Chip & JoAnna Gaines of the reality show Fixer Upper? It was purchased for $28,000 and now it’s listed for sale at $950,000. Would you pay more because Chip and Joanna rehabbed it?
My comment: Interesting blog post plus lots of comments!!

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