Appraisal Regulator Chaos

Newz: Appraisal Regulator Chaos , Cat and Raccoon Damages, Wildfire Risks

September 5, 2025

What’s in This Newsletter (In Order, Scroll Down)
NOTE: Scroll down to see Appraisal Regulator Chaos

  • LIA AD: Legal Request for Old Appraisal
  • The Kitty Litter Duplex: An Appraisal I Wish to Not Remember
  • $300K Maryland Home Is Overrun by Feral Cats and Raccoons
  • The Full Measure August 2025: Navigating Rates, Inventory, and Affordability
  • Appraisal Regulatory Chaos
  • The Town With No Bank: How Rural America Lost Its Mortgage Lifeline By Dallas T. Kiedrowski, MNAA
  • New Cotality Wildfire Risk Report finds more than 2.6 million homes are exposed to moderate or greater wildfire risk
  • Mortgage applications decreased 1.2 percent from one week earlier
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The Kitty Litter Duplex: An Appraisal I Wish to Not Remember

Excerpts: How one property’s furballs left an unforgettable impression on an apartment and an appraiser

Introduction

In the world of real estate, surprises abound. Industry professionals, especially appraisers, all expect the unexpected, but even the most seasoned professionals can stumble across situations that test the limits of their experience, composure, and their judgement. There are stories of haunted houses, collapsing ceilings, and outlandish tenant actions and decorative choices (Live, Laugh, Love), but the tale of the cat-soiled duplex stands out for its sheer yuck-factor. This is the story of what should be a routine property appraisal, which became cemented in my experience stories, due to its unfathomability and coated in an unmistakable, noxious layer of feline mischief.

The Setting: An Unimposing Duplex with a Dirty Little Secret…

The Appraisal Appointment: An Unforgettable First Impression

…I could only see the flooring in the opening and a few other spots around the living room from about a foot outside the threshold, the rest of the floor was completely caked with cat poop. The walls, ceiling, and windows were all enveloped by heavy spider webs in a variety of states, while some were fresh looking, others clearly blackened from a long life filled with dust, dirt, fur, and of course fecal matter. Also, you could see multiple patches of orange mold scattered throughout the walls and ceiling. I quickly replied I would not be going in there, because it was a danger to my health and safety, which somehow surprised her….

Financial and Health Implications: When Cleanliness Becomes a Value Killer

Hygiene, general maintenance, and property values parallel each other. This may be why we have condition codes for our appraisals. Just saying…. I made sure to thoroughly explain the situation and how the value was determined in the report. I did not want this rolling back downhill and getting me. Luckily, a very gracious Fresno Construction, was able to give me a quote very quickly, which came just over $100,000 for an estimate to redo the unit in its entirety.

Conclusion

The Kitty Litter Unit stands as a testament to both the resilience of a property and the unpredictability investors face. Especially in this case, since it was for an estate of a deceased former owner.

To read more, Click Here

My comments: I appraised a house for a relocation company – one story with 3 bedrooms. There were cats on every surface above the floor, such as dressers, – all staring at me of course. In the rear of the home was a very large cat enclosure. They were rescue cats, temporarily at the home. I did not ask the owner where the cats would go when she relocated – back to the shelter or with go with her.  I will never forget about all those cat eyes staring at me!

I had another relocation appraisal where the male cat had sprayed urine along several walls in the living room. I told the relocation company to replace the drywall.

Of course, I could fill up a book with dog stories. Such as two Dobermans that broke down the door of a trailer to get to me. I somehow made it to my car and I will never forget it. Or the small dogs who bit my ankles as I was trying to get through the front door (home was owned by an appraiser I knew). For both appraisals, I told my lender client to get another appraiser.

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300K Maryland Home Is Overrun by Feral Cats and Raccoons

Excerpts: Studio, 960 sq.ft., 4.86 acre, built in 1906

The value is in the land. Do NOT enter the house under any conditions. It is occupied by feral cats and raccoons. How do they get along? I don’t know. Be careful going on the land. It is at your own risk. The house is a teardown and is falling down, although the roof appears newer. From what we know, there is an outhouse on the property, and the drinking water comes from the stream/spring. We don’t believe there is indoor plumbing.

But where else can you get almost five acres of gorgeous Baltimore County land near streams, the NCR trail, and just steps from Bee Tree Preserve? Bring your vision and your money. Seller makes no representations or warranties to anything regarding this property. Buyer must take on responsibility for all tests, easement research, etc. The Subaru is included.

To read more, Click Here

To read the listing, Click Here

My comments: I don’t even want to think about raccoons coming through a dog door and ransacking my kitchen. I have regular raccoon visits in my back yard at night. Once, a long time ago, I left a full trash bag in the rear yard. I never did that again. They keep coming back at night hoping for something to eat, most recently last week. My cat hisses at them to let me know they are there. I shined a flashlight and made a lot of noise. The raccoon left.

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The Full Measure August 2025: Navigating Rates, Inventory, and Affordability

By Kevin Hecht, Appraiser and Economist

Excerpts: As we move toward the end of summer, the housing market is caught between shifting monetary policy signals, a modest rise in inventory, and the stubborn weight of affordability challenges. For appraisers, this month’s backdrop offers both clarity and caution: there are more comparable sales to analyze, but the quality and timing of those comps matter more than ever.

Prices: The Deceleration Continues

While supply is rising, prices are no longer surging. Median home prices grew just 2% year-over-year in July, according to Realtor.com’s analysis of NAR data (Realtor.com, Aug. 22, 2025). On a seasonally adjusted basis, prices are showing slight month-to-month declines.

This reflects what I’ve called in past editions the “lag trap”: comps from three to six months ago may reflect a very different pricing environment. Case-Shiller data confirm that prices have declined for several consecutive months, illustrating how contract dates and closing dates often lag current market conditions.

Final Thoughts

The national data is useful for context, but as always, the real insight comes from understanding your local market. Ask yourself: how does my region fit into this broader story of easing rates, rising inventory, and affordability pressures? Are buyers showing up in greater numbers, or are they still hesitant despite more listings?

The role of the appraiser is more important than ever in this environment. Our job is not simply to reflect past sales, but to interpret where the market is today and where it may be heading tomorrow.

Stay sharp, stay informed, and remember: in a market this dynamic, being accurate matters far more than being fast.

To read more, Click Here

My comments: Worth reading the full article. What these topics mean for appraisers is very, very helpful. These are the only articles I have seen that say what the trends mean for appraisers.

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In the September, 2025 issue of Appraisal Today

  • The Future of Appraisal Regulation. The Current Regulatory System is Broken
  • Appraisal Regulator “Chaos” Risks Undermining Real Estate Markets
  • The Power to Define Appraisal Rules for U.S. Real Estate Belongs to TAF (The Appraisal Foundation)

Excerpts:

The Power To Define Appraisal Rules For U.S. Real Estate Belongs To TAF. It’s Desperate Not To Lose It.

The Appraisal Foundation (TAF), the governing body for appraisers across

the U.S., has overseen the way property values are determined for more than 30 years. But in recent years it has come under heightened scrutiny about its influence and effectiveness, both from within the ranks of the appraisal industry and among the federal officials who monitor it.

Since 2020, TAF has been the subject of a federal fair housing probe,

doubled its financial assets and sought to exert more control over – and extract more revenue from – appraisal certification material.

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The Town With No Bank: How Rural America Lost Its Mortgage Lifeline

By Dallas T. Kiedrowski, MNAA

Excerpts:

For decades, we’ve been told that the problem is demand. That people don’t want to live in rural America anymore. That lending dried up because the buyers disappeared. That it’s just the market working as it should. But what if we’ve been telling the wrong story? Because when you look closely, when you actually follow the data, the decisions, and the people left behind, it turns out rural America didn’t walk away from mortgage credit. Mortgage credit walked away from rural America.

The Collapse of Local Lending

… For rural communities, the S&L crisis was a seismic shift. The number of S&Ls was cut nearly in half between 1987 and 1996 (from about 3,622 to 1,924 institutions). And it wasn’t just S&Ls. A wave of bank consolidations swept through in the aftermath. Larger banks absorbed or out-competed small-town banks, especially after laws in the 1990s removed barriers to interstate banking. The result? Two-thirds of all banking institutions have disappeared since the 1980s, plunging from almost 18,000 banks in 1984 to under 5,000 by 2021. This great shakeout left gaping holes in the financial map of rural America. Today, of the nation’s ~1,980 rural counties, 625 have no locally owned community bank at all, double the number in 1999.

In urban and suburban markets, GSE liquidity fueled massive waves of mortgage origination. It created an entire class of homebuyers, investors, and neighborhoods that didn’t exist before. But in rural America, something strange happened. The capital came. But the loans didn’t.

…Something was getting lost in translation for rural communities. The new mortgage market excelled at making 30-year fixed loans on standard houses in large markets, but it struggled with the realities of rural lending.

The Vanishing Rural Appraisers

At the same time, the appraisal workforce, once largely trained by those local S&L’s, began to disappear. In rural counties across the U.S., there were fewer mentors, fewer apprenticeships, and soon, fewer appraisers altogether. And what happens when you don’t have an appraiser? You don’t have an appraisal. And when you don’t have an appraisal, you don’t have a loan. Without local banks hiring and mentoring new appraisers, the pipeline dried up.

A Vicious Cycle: Less Infrastructure, Less Lending, Fewer Homes

Layer by layer, a structural picture emerges. The collapse of local banks and S&Ls removed the on-the ground infrastructure of lending; the appraisers, the loan officers, the branches, the local knowledge. In its place rose a distant, centralized system that has little incentive to adapt to idiosyncratic rural needs. As that system bypasses many rural borrowers (e.g. rejecting “non-conforming” properties or declining small loans), it further depresses the volume of mortgage lending in those areas.

To read more, Click Here

My comments: I was not aware of this lender problem until I read this article. Comprehensive analysis.

When I worked for an assessor’s office in the late 1970s I appraised many rural properties. No problems. When I started my business in 1986 I worked in the Bay Area and appraised relatively few rural properties.

I used to tell appraisers (before AMCs) that when working in a rural area you had little competition. But now, GSE appraisals are much more difficult in rural areas. Fees are too low.

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New Cotality Wildfire Risk Report finds more than 2.6 million homes are exposed to moderate or greater wildfire risk

Excerpts: Wildfires, once confined to a so-called “wildfire season” are now an ever-present threat, according to a new report published today by Cotality™,a leading global property data and analytics-driven solutions provider. The 2025 Cotality Wildfire Risk Report: Priced Out & Burned Out, finds that more than 2.6 million homes in the Western United States, representing a combined reconstruction cost value of $1.3 trillion, face moderate or greater risk of wildfires, with more than one million of those homes facing very high risk.

Spread across 14 states in the Western United States, nearly half of the homes are in California (1.3 million), with Colorado (319,000), Texas (243,000), Oregon (128,000) and Arizona (124,000) rounding out the top five states with the largest number of homes at risk. These states contain a high number of homes in the Wildland-Urban Interface (WUI) where there is elevated risk due to their proximity to forested or undeveloped areas.

The report also explores the complexities of wildfires by analyzing the Palisades and Eaton fires that occurred in January2025 and resulted in devastating conflagration events. Though both Los Angeles wildfires ignited as conventional wildfires, they transitioned into wildfire-induced conflagration once the fuel shifted from vegetation to the built environment of homes and businesses. The conflagration shift dramatically alters how fires spread and magnifies potential destruction that can occur. Since 2020, wildfire-induced conflagrations have destroyed more than 26,000 structures across the country.

To read more, Click Here

My comments: Insurance coverage is more and more difficult to obtain. In California, the state has special coverage through the FAIR plan, but it is very expensive with coverage limits.

Smoke risks can be substantial. Recently, the East Coast had very bad unhealthy heavy smoke from Canadian wildfires.

Mu city is not in a wildfire area but have been affected by heavy smoke from other areas. A few years ago, there were significant lightning fires about 20 miles away. The sky near me looked like a “Nuclear dawn” in the mornings. Very scary.

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HOW TO USE THE NUMBERS BELOW. Appraisals are ordered after the loan application. These numbers tell you the future for the next few weeks. For more information on how they are compiled, Click Here.

Note: I publish a graph of this data every month in my paid monthly newsletter, Appraisal Today. For more information or get a FREE sample go to www.appraisaltoday.com/order Or call 510-865-8041, MTW, 7 AM to noon, Pacific time.

My comments: Rates are going up and down. We are all waiting for rates to drop in 2025.

Mortgage applications decreased 1.2 percent from one week earlier

WASHINGTON, D.C. (September 3, 2025) — Mortgage applications decreased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 29, 2025.

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 3 percent compared with the previous week. The Refinance Index increased 1 percent from the previous week and was 20 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 17 percent higher than the same week one year ago.

“Mortgage rates declined last week, with the 30-year fixed rate decreasing to its lowest level since April to 6.64 percent. However, that was not enough to spark more application activity,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Refinance applications saw a small increase from the previous week, driven by FHA and VA refinance applications, but conventional refinances declined. The FHA rate is averaging about 30 basis points lower than the conventional rate in 2025, which has made those loans relatively more appealing to eligible borrowers. Purchase activity pulled back, after a four-week run of increases, as slower homebuying activity led to declines in applications across the various loan types.”

The refinance share of mortgage activity increased to 46.9 percent of total applications from 45.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 8.8 percent of total applications.

The FHA share of total applications increased to 19.9 percent from 19.1 percent the week prior. The VA share of total applications increased to 13.8 percent from 13.3 percent the week prior. The USDA share of total applications remained unchanged at 0.5 percent from the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.64 percent from 6.69 percent, with points decreasing to 0.59 from 0.60 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $806,500) decreased to 6.58 percent from 6.67 percent, with points decreasing to 0.39 from 0.44 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 6.31 percent from 6.35 percent, with points decreasing to 0.74 from 0.80 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.84 percent from 6.03 percent, with points increasing to 0.84 from 0.77 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs decreased to 5.90 percent from 5.94 percent, with points decreasing to 0.34 from 0.68 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The survey covers U.S. closed-end residential mortgage applications originated through retail and consumer direct channels. The survey has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, thrifts, and credit unions. Base period and value for all indexes is March 16, 1990=100.

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Ann O’Rourke, MAI, SRA, MBA

Appraiser and Publisher Appraisal Today

1826 Clement Ave. Suite 203 Alameda, CA 94501

Phone: 510-865-8041

Email:  ann@appraisaltoday.com

Online: www.appraisaltoday.com

Appraisal Adjustments

Newz: Appraisal Adjustments, How Freddie and Fannie Inflated Home Prices, FHA to Adopt UAD 3.6

August 29, 2025

What’s in This Newsletter (In Order, Scroll Down)

  • LIA AD Navigating Value Revisions in Appraisals
  • Appraisal Adjustments: Types, Methods, and Cheat Sheet Appraisal By Kevin Hecht
  • Inside Artificial Heart Inventor’s $4.8 Million Midcentury Modern Salt Lake City Utah Home
  • Inflated Prices, Taxed to Death, by Jeremy Bagott
  • Can the direction a home faces affect its value? By Ryan Lundquist
  • The Competence to Perform an Assignment, by Timothy C. Andersen, MAI
  • FHA to adopt UAD 3.6
  • MBA: Mortgage applications decreased 0.5 percent from one week earlier

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Time Adjustment Changes for Appraisers

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Appraisal Adjustments: Types, Methods, and Cheat Sheet Appraisal By Kevin Hecht

Excerpts:

Types of Appraisal Adjustments

Appraisal adjustments can take several forms, depending on the property characteristics being compared. Each type of adjustment addresses a different element that may influence value. Below are descriptions of common adjustment categories and their uses, followed by a “cheat sheet” chart with examples.

  • Qualitative Adjustments
  • Quantitative Adjustments
  • Transactional Adjustments
  • Market Conditions Adjustments
  • Property Adjustments
  • Locational Adjustments

Common Methods for Making Appraisal Adjustments

A long list, from matched paired sales to Cost Analysis

Appraiser Survey: What’s Your Go-To Method for Adjustments?

Paired sales/matched pair analysis (Most popular answer!)

“I typically cover rural areas where sales are scarce and there is not enough data for meaningful statistical analysis to be performed. Due to this, paired sales analysis is the most reasonable and defensible analysis position available.”

“I use linear regression to understand market changes and to calculate any necessary market change adjustments.”

“Depends on what item is being adjusted. If it is site or GLA, it is usually a percentage of the per acre or per square foot sales price. Other items are usually paired sales analysis or consideration for depreciated cost.”

To read more, Click Here

My comments: Comprehensive lists and interesting appraiser comments. I quit doing grid dollar adjustments many years ago. A person from our state regulator, speaking at a local appraisal meeting, said they would require support for all adjustments. I started by doing Plus and Minus grid adjustments and then went to “total property comparison” with a value. I do a qualitative analysis comparing the comps.

The only supported dollar adjustments I make are for market conditions and high dollar features such as a fantastic view of the Golden Gate Bridge from very high up a hill.


Inside Artificial Heart Inventor’s $4.8 Million Midcentury Modern Salt Lake City Utah Home

Excerpts: 4 bedrooms, 4.5 baths, 5,447 sq.ft., 0.55 acre lot, built in 1957

The mastermind behind the one-of-a-kind estate was none other than Swiss architect Eduard Dreier, who brought Bauhaus principles to the modernist movements of Utah and Nevada.

Lovingly restored and awarded the Utah Heritage Award for Restoration and Renovation, this 5, 447 sq ft architectural gem blends timeless Dreier elements-exposed steel beams, walls of glass and cantilevered roof line, granite rock walls-with warm modern luxury. The 1,110 sq ft glass-and-steel attached guest house, designed by Dreier protge Brent Groesbeck in 2016, floats above the main home, expanding living where entertaining is elevated to an art form.

To read more, Click Here

To see the listing with 43 photos and a video tour, Click Here

Read more!!

Appraisal Sq. Ft. Appraisal vs. Assessor/Public Records

Newz: Sq. Ft. Appraisal vs. Assessor, The “R” Word, HUD Appraiser Complaints

March 14, 2025

What’s in This Newsletter (In Order, Scroll Down)

    1. LIA AD: Navigating value revisions in appraisals
    2. Why Is the Square Footage in Public Records Different from the Appraisal?
    3. 5 Properties With ADUs or In-Law Suites
    4. Open Letter to Government Efficiency Commission on HUD’s Appraiser Complaints
    5. The “R” word in real estate – Recession
    6. Going In-Depth on a Delicate Issue: The Invisible Fence of Racial Discrimination
    7. Mortgage applications increased 11.2 percent from one week earlier

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Why Is the Square Footage in Public Records Different from the Appraisal?

By Tom Horn

Excerpts:

Why Accuracy Matters

Square footage is one of the most critical factors in determining a home’s value, yet it is often misunderstood. Many homeowners and real estate agents assume that the square footage listed in public records is accurate, but that’s not always the case. When an appraiser measures a home, their calculation often differs from what’s in tax records. These discrepancies can lead to confusion, mispricing, and even appraisal challenges.

Why Square Footage Discrepancies Occur

Public Records vs. Appraisal Measurements

The square footage listed in public records typically comes from the county tax assessor’s office. Assessors determine square footage based on:

Builder-reported figures:…

Estimates or outdated records:…

Conversions and Additions

Another common reason for discrepancies is home modifications. If a homeowner adds square footage without the proper permits, tax records may not reflect the change. Examples include:

Unpermitted additions:…

Incorrect classifications:…

To read more, Click Here

My comments: Worth reading. Written for non-appraisers but the best explanations I have ever read about this topic. I worked for an assessor’s office for my first 4 years of appraising, starting in 1975. I was given a geographic area and appraised every residential in it. Fantastic experience. I learned a lot. I was very lucky. Very different than lender appraising, where you only appraise properties that are suitable for mortgage loans.

The March 2025 issue of Appraisal Today has a very comprehensive article for appraisers: Can you use the assessor’s assessment values for site valuation, by Tim Andersen, MAI.

Read more!!

Finding Comps with Few Sales for Appraisers

Newz: Pulling Comps in 2025, Appraiser Union? AMCs Overcharging Consumers

March 7, 2025

  • What’s in This Newsletter (In Order, Scroll Down)
  • LIA ad: Problem with An Affidavit
  • The struggle of pulling comps in 2025 By Ryan Lundquist
  • Op-Ed: Why An Appraiser Union Would Never Work By Dustin Harris
  • The Full Measure: February 2025 Housing Market Snapshot for Appraisers By Kevin Hecht
  • The Trump Administration’s Regulatory Overhaul: The Impact on CFPB, FHA, and the Housing Industry By Rob Chrisman
  • Homebuilders Warn of Rising Building Costs as Trump’s Tariffs on Canada and Mexico Take Effect By NAR
  • AMCs Overcharging Consumers? Morgan & Morgan Investigates
  • Mortgage applications decreased 1.2 percent from one week earlier

Click here to subscribe to our FREE weekly appraiser email newsletter and get the latest appraisal news!

 

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The struggle of pulling comps in 2025

By Ryan Lundquist

Excerpts:

1) SALES TELL US ABOUT THE PAST

Comps aren’t easy today. The problem is there aren’t that many sales, so it’s not so simple to figure out value. Lately, I’ve been getting a ton of questions about this, so I wanted to share some things I’m doing on my end….

2) TWO OPTIONS TODAY

We have two choices for comps. Go back further in time in the immediate neighborhood, or go out further to competitive areas. Why not do both?…

3) HOW FAR AWAY CAN YOU GO FOR COMPS?

It’s not how far you can go, but where you should go. Read that again. This is true in any market. And where would buyers go for comps? That’s also a viable question. No matter where you’re getting comps, be sure they are a good substitution…

To read lots more plus see graphs and read appraiser comments, Click Here

My comments: Read This Article! Few sales are common in many areas. I prefer going back in time. I have been doing time adjustments since 1975, when prices were going up 5% per month in a semi-rural Northern California county. The GSEs seem to be making it way more complicated. I do them on every appraisal. If not needed, I always comment that the market is stable. It is the only adjustment I make on my non-lender appraisals, except for features that are unusual.

I have no idea why the GSEs complain that many appraisers are not doing them when needed. Maybe the appraisers never learned how? Many dollar adjustments are needed on the grid and can be much more difficult than time adjustments.

Read more!!

Appraisal ADU Price Per Sq.Ft.?

Newz: ADU Price per Sq.ft.? Time Adjustments Insanity

February 14, 2025

What’s in This Newsletter (In Order, Scroll Down)

  • LIA AD: Divorce – no interior access allowed
  • Should accessory dwellings be valued at the same price per square foot? By Ryan Lundquist
  • $4 Million Midcentury Modern ‘Casita’ Complete With a Wacky Circular Kitchen in Rancho Mirage, CA
  • Time Insanity, Part 7 of a 12 part series: GSE Guidelines Time Adjustments
  • The irony of replacing appraisers with technology By Tony Pistilli
  • Home Values To Plunge in ‘Climate Abandonment’ Zones Total loss of property value projected to reach $1.47 trillion
  • Mortgage applications increased 2.3 percent from one week earlier

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Should accessory dwellings be valued at the same price per square foot?

By Ryan Lundquist, February 4, 2025

Excerpts: Should accessory dwelling units be valued at the same price per square foot as the main house? This question came up recently, and many people believe the price per sq ft of the house should simply extend to the ADU. This post isn’t targeted at any one person, but I have a different perspective that I’d like to share.

Comps

When we look at comps with an ADU, do we see a value that resembles anywhere close to what the ADU equation above suggests? In other words, if the house was worth $800,000 and we added a 750 sq ft ADU, would that really add $200,000 in value? Or would a 400 sq ft ADU on a $450,000 house really add $163,640 in value?

What do the comps say? That’s the question we ask about solar panels, a kitchen remodel, a new driveway, or a house with an ADU. I find looking to the comps can sound like a very frustrating solution, but the focus is really simple. What are buyers willing to pay? That’s always the question.

Closing thoughts

I realize there are situations where the appraised value of an ADU legitimately comes in too low, and there is no excusing that. So, just as I recommend caution in using an arbitrary math formula, appraisers need to be careful to not just pick a number that doesn’t make any sense when we think about data and the income being produced by the ADU.

All I’m saying is the ideal is to scour comps, do our best to discover value, and support the value in whatever credible way we can. And my concern is if listings are priced without consideration of comps or data, it could result in properties not selling and/or appraisal issues in the future. Know what I’m saying?

To read more, including over 40 comments, Click Here

My comments: Read the article. Good examples, tables and graphs, but too long to put in this newsletter.

Read more!!

Appraisals and the Cost Approach

Newz: DEI and Appraisers, New GSE Market Analysis Deadline Feb. 4

January 31, 2025

What’s in This Newsletter (In Order, Scroll Down)

  • LIA AD: Weather Impact
  • What is the Cost Approach to Real Estate Appraisal?
  • ‘Unparalleled’ 3-Mansion Compound on Miami’s Exclusive Palm Island Splashes Onto the Market for $150 Million
  • DEI and Appraisers
  • Fannie and Freddie Forecasts

  • Fannie, Freddie: New Market Analysis Requirements February 4th

  • Mortgage applications decreased 2.0 percent from one week earlier

 

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What is the Cost Approach to Real Estate Appraisal?

By Kevin Hecht

Excerpts: When to Use the Cost Approach

There are circumstances when it’s necessary to use the cost approach, for example, unique properties and new construction. The cost approach can also be used to support the sales comparison approach.

Fannie Mae only accepts the sales comparison approach as its primary valuation tool. However, that does not preclude an appraiser from also using the cost approach to substantiate their findings. And there are other lenders who may accept the cost approach over other real estate appraisal methods for certain properties or situations…

Some Disadvantages of Using the Cost Approach

There are inherent benefits of using the cost approach, especially when you’re tasked with challenging properties that have little or no comps. But there are also some downsides.

One of the primary disadvantages is the assumption that land is available for purchase to build an identical property. Land is a scarce resource. When comparable land sales are not available, the value must be estimated.

The bigger issue here is undervaluing the land costs based on scarcity. In real estate, location is everything. A small ocean-front cottage has its value because of the land it sits on, not necessarily its four walls…

Other disadvantages include how to depreciate an older property or find costs for similar building materials. This can be particularly tricky when using the reproduction method of the cost approach or appraising a historic home.

Appraisers should consider whether the cost approach is the best tool to use. In many situations, it’s best used in tandem with the sales comparison approach.

Tips for Using the Cost Approach

As part of our monthly survey series, we asked our community of real estate appraisers, “What’s your best tip for using the cost approach to appraise?” They shared many helpful comments, including common pitfalls to avoid as well as general advice and recommendations. Here’s what they said:

“Use and research valuable comps and educate yourself on the surrounding market.”

“Call local developers for better support on cost estimates. Make friends with builders.”…

To read more, Click Here

My comments: When I saw the article topic I thought it would be boring. Not! When I read it I realized it was one of the best on the Cost Approach I have read! If you only do GSE appraisals, you probably don’t use the Cost Approach very often, except for new construction. This article explains when and why. It also includes “basic” info such as reproduction vs. replacement. Keep it as a reference for the future when you may need to use the Cost Approach.

When I first started appraising in a Northern CA assessor’s office in 1975, the Cost Approach was the only approached used for decades for all properties. My supervisor devised a table based on square footage for homes which we used.

In the Oakland CA firestorm in 2021, many of the homes had reproduction replacement in their insurance policies. Many were historic homes with features that were very difficult to reproduce, assuming you could find anyone who still knew how to build them. The home owners with reproduction costs got very large payments from their insurance companies. Many had larger homes built with sometimes very unusual designs. The insurance companies learned their mistake and never offered reproduction again.

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3-Mansion Compound on Miami’s Exclusive Palm Island Splashes Onto the Market for $150 Million

Excerpts: 3 homes, 92,00 sq.ft. 300 linear ft. of water frontage

The pricey property, which initially debuted in 2023, was relisted in 2024 at the same price. Now, with Florida’s luxury housing market experiencing a major boom, the compound is back on the market with the same sky-high price.

“Potential buyers might include high-profile individuals like celebrities or CEOs, investors, entertainers or hosts, or luxury lifestyle seekers,” he tells Realtor.com®.

“This offering appeals to those who prioritize exclusivity and are willing to invest significantly for a unique, turnkey luxury compound.”

The trio of homes was assembled by owner Jorge Luise Garcia and the Adria, Maria, Adrian Almeida Trust. They were purchased separately over a period of 17 years.

The first of the three mansions was purchased in 2004 for $3.45 million, the second in 2019 for $13.9 million, and the third in 2021 for $17 million, for a total of $34.35 million, according to property records.

To read more, Click Here

Read more!!

Construction Code Violations and Expertise Appraisals

Newz: Appraiser Humor, Mortgage Rate Changes, New GSE Time Analysis

January 3, 2025

What’s in This Newsletter (In Order, Scroll Down)

  • LIA – Code Violations and Expertise
  • Mortgage Rate History Since 1971 What about 2025?
  • Hurricane-Proof $600K Dome Home on Florida’s Space Coast
  • Lyle Radke of Fannie Mae with George Dell, SRA, MAI, ASA, CRE to discuss upcoming changes by the GSEs on Time Analysis
  • Backers of most U.S. mortgages (GSEs) have done little about climate risks
  • Top Ten Reasons Why It Is Great to be an Appraiser – Humor
  • Mortgage applications decreased 21.9 percent from two weeks earlier

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Mortgage Rate History Since 1971 What about 2025?

Excerpts: For many homebuyers, the last few years have felt like a perfect storm of challenges—soaring home prices and climbing mortgage rates colliding to limit affordability. It’s left many wondering if 2025 will finally calm the waters. Will rates dip low enough to bring some relief, or is another wave of increases on the horizon? While there’s no magic compass to navigate these market shifts, a look back at mortgage rate history can offer clues—and maybe even some hope for those waiting to make their move.

Despite the Federal Reserve’s 25-basis-point rate cut in November, mortgage rates have remained in the high 6% range, offering limited relief to borrowers. However, optimism persists in the market as many believe rates could continue to ease in the months ahead, potentially sparking renewed interest among buyers and homeowners.

While the history of mortgage rates provides valuable context, it’s important to recognize that average mortgage rates are just a benchmark. Borrowers with healthy credit profiles and strong finances often get mortgage rates well below the industry norm.

Current rates are more than double their all-time low of 2.65% (reached in January 2021). But if we take a step back and look at the history of mortgage rates, they’re still close to the historic average since 1971 of 7.73%

To read more and see the graphs and many links to more info, Click Here

Read more!!

Appraising Unique Properties

Unique Properties, Rocket Mortgage Sues HUD, Trump Shifts in Housing Market?

December 13, 2024

What’s in This Newsletter (In Order, Scroll Down)

    • LIA ad – Each appraisal is unique
    • The Ultimate Guide to Unique Property Appraisals
    • America’s Most Expensive Property Is Sitting in a Flood Zone—Will Anyone Buy the $295 Million Estate?
    • Rocket Mortgage Sues HUD Over Regulatory, Enforcement Discrepancies
    • Donald Trump’s Second Term Could Bring ‘Significant Shifts’ to the Housing Market
    • Report: What’s Driving the Recent Refi ‘Boom?’
    • Mortgage applications increased 5.4 percent from one week earlier
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The Ultimate Guide to Unique Property Appraisals

Excerpts: When faced with a truly unique property, the standard approach of pulling recent comparable sales from the neighborhood simply won’t cut it.

These properties require a real estate appraiser with a different mindset and a more creative approach to valuation.

Here’s a quick break down of exactly how unique property appraisals differ from traditional approaches:

Breaking Down the Time Barrier

One of the most common misconceptions is that we can only use recent sales. For unique properties, this simply isn’t true. Here’s why:

Expanding Geographic Boundaries

Location matters, but for unique properties, finding truly comparable homes often requires the appraiser to look beyond the immediate neighborhood:

The Bottom Line

Appraising unique properties requires breaking free from traditional constraints while maintaining professional standards.

To read more, Click Here

My comments: Good summary of the issues. Read the details plus a table comparing traditional and unique properties. Almost all appraisers appraise unique properties, if only occasionally. This is written for real estate agents, but very useful for appraisers.

I regularly hear about AMCs trying to find an appraiser to do one of these properties. They keep shopping for low fees and fast turn times. After a while they finally go with the appraiser who can do them at a good fee and reasonable turn times.

If you can appraise unique properties you have a substantial advantage over less experienced appraisers. Now is an excellent time to try doing one, especially if your business is slow now.

Read more!!

Market Trends and Market Conditions Adjustments Appraisals

Newz: GSE New Market Conditions Policy, State Board Complaints, Waivers

December 6, 2024

What’s in This Newsletter (In Order, Scroll Down)

  • LIA ad – Navigating Value Revisions in Appraisals
  • Market Trends and Market Conditions Adjustments.
  • A Ferrari Inspired Masterpiece With 20K square Feet of Luxury Resort Amenities Listed at 55 Million in Delray Beach FL
  • November 2024 Real Estate Market Update By Kevin Hecht
  • 5 Tips to Handle Appraisal Board Complaints
  • Correcting the Record: Accurate Group’s Commitment to Compliance and Industry Excellence
  • FHFA’s Massive Expansion of Appraisal Waivers: What It Really Means
  • Mortgage applications increased 2.8 percent from one week earlier

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Market Trends and Market Conditions Adjustments

Working through the new Market Conditions policy and advisory from Fannie Mae

By Ken Dicks

Excerpts: Did Fannie Mae just throw a wrench into how residential appraisal reports for mortgage transactions are completed with their recent announcement on Market Conditions?

As an appraiser, it is highly likely at some point you will see the following or a similar request soon after your appraisal is submitted to your client, or even months after your appraisal is accepted by your client: Please provide support for your market conditions adjustment conclusions.

Appraisal Quality Control and Appraisal Quality Assurance create a revision request minefield filled with Lender and Investor tailored appraisal reporting requirements and preferences. Review of the appraisal reports is required by the lender or whoever the lender chooses to delegate this requirement to (i.e. Appraisal Desk, AMC, etc.).

As a practicing appraiser, the announcement and accompanying exhibit prompted a series of questions in my mind.

  • Does Fannie Mae want to see this specific graph in all appraisals?
  • What does USPAP say?
  • What level of data and analysis does an appraiser need to present when providing support for market conditions adjustments?

The following is where I have arrived at developing answers:…

To read more, Click Here

My comments: Worth reading the full article, plus the appraiser comments.

I am so glad I have not done any GSE appraisals since 2008! I don’t care what the GSEs say. I comply with USPAP. Of course, I always make market adjustments on my residential appraisals or explain why no adjustments was needed. It is the only dollar adjustment I make on non-lender forms unless the subject has an unusual feature requiring research and analysis.

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Read more!!

Q3 Fannie Update – Concessions, Rural, Environmental Hazards

Newz: Fannie Update, Concessions Are a Mess, State Board Complaints

October 4, 2024

What’s in This Newsletter (In Order, Scroll Down)

  • State Board Complaints and Renewal

  • Q3 2024 Fannie Mae Appraiser Update – Concessions, Rural, Environmental Hazards

  • $47 Million Ski Chalet With Private Tesla-Style Gondola, Bowling Alley, and Basketball Court

  • September 2024 Real Estate Market Update: What Appraisers Need to Know By Kevin Hecht

  • The hot mess of concessions in real estate By Ryan Lundquist

  • That A-Frame Life: What It’s Really Like To Live in These Triangular Houses

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    Appraisal Business Tips 

    Humor for Appraisers

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Q3 2024 Fannie Mae Appraiser Update – Concessions, Rural, Environmental Hazards

Excerpts:

Rural

Worth reading with links to Fannie info, including a link to: Free Fannie online Rural Appraisal Challenges eLearning course. Plus other tips.

Environmental Hazards

While Fannie Mae does not expect the appraiser to be an expert in the field of environmental hazards, we do expect appraisers to analyze and report any information about environmental hazards that is available in the normal course of business…

If an appraiser has knowledge of or identifies an environmental hazard in or on the subject property or on any site within the vicinity of the property, we require the appraiser to…

Seller Concessions

The article about seller concessions in our December 2023 Appraiser Update generated a lot of questions and buzz.

First, we heard that some appraisers, in reaction to our article, adopted a practice of always adjusting dollar for dollar for seller concessions. While this may seem sensible from a theoretical perspective, it could have adverse unintended consequences (such as undervaluation) if the concession did not actually have a dollar-for-dollar impact on the price. Making either assumption (that there is no impact or that the impact is dollar-for-dollar) is not the correct approach…

PSAs – UAD, Bias with useful links to Fannie info

To read more, Click Here

My Comments: Read the concessions section to see what Fannie Mae says on this hot topic! Plus the useful info and links on other topics above.

See Ryan Lundquist’s post below on Concessions – A Mess

Read more!!