Appraisal News and Business Tips

Posts Tagged adjustments

4-5-18 Newz//Weird home interiors, Reduced AQB requirements and state regulators, Data analytical tools

The rage of Airbnb rentals (and stuff to keep in mind about value)

By Ryan Lundquist

Excerpts: The owner has a cash cow. Her second unit is bringing in $3,300 per month as an Airbnb rental, and it’s paying her mortgage. Since these types of rentals are all the rage right now, let’s talk about some important details to keep in mind from a value perspective. This isn’t meant to be exhaustive, but I wanted to share some things on my mind. I’d love to hear your take in the comments.

Topics:
1) Airbnb rent vs. market rent
2) Lenders and market rent
3) Investors & seller expectations
4) The fine print and a 12% tax

Click here to read the details, plus the appraiser comments:

My comment: This stuff gives me a headache ;> These seem to be everywhere now, especially room rentals. The Local Politics can be a mess. I look at the income as a business. Very different than renting by the month or year (at much lower daily rates), unless it is in a popular vacation rental market.

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3-29-18 Newz//Last Minute Tax Tips, FHFA-Value of AMCs, Time Capsule Homes

New FHFA report says AMCs are not much different than direct lender appraisals – value added??

From the March 2018 paper (“Are Appraisal Management Companies Value-Adding? – Stylized Facts from AMC and Non-AMC Appraisals”:

“In this paper, we study whether there are any systematic quality differences between appraisals associated and unassociated with appraisal management companies (AMCs). We find that compared to non-AMC appraisals, AMC appraisals on average share a similar degree of overvaluation despite being more prone to contract price confirmation and super overvaluation.
“AMC appraisals also share a similar propensity for mistakes, despite employing a greater number of comparable properties. Our evaluation employs relatively simple statistical comparisons, but the results indicate no clear evidence of any systematic quality differences between appraisals associated and unassociated with AMCs.”

Note: FHFA is the Federal Housing Finance Agency, established by the Housing and Economic Recovery Act of 2008 (HERA) and is responsible for the effective supervision, regulation, and housing mission oversight of Fannie Mae, Freddie Mac (the Enterprises) and the Federal Home Loan Bank System, which includes the 11 Federal Home Loan Banks (FHLBanks) and the Office of Finance. Since 2008, FHFA has also served as conservator of Fannie Mae and Freddie Mac.

Read appraiser comments here:

Link to the report. Worth reading… or skimming ;>

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2-15-18 Newz//Fannie Appraiser Webinar, Magical Appraiser Wand, Refis Dropping

The Magical Appraiser Wand

By George Dell
 
Excerpt: Can you just give me some magical software which will calculate my adjustments?

I get asked questions like this often. Can you just show me how to do a graph a client wants? Can you just give me your class stuff so I don’t have to come all that way? So often, the question degrades into something like “Why does the regression software give stupid answers?” I pushed the magic button!

People do not like the answer. You’re paid to do an analysis, not wave a magic wand, or push a magical appraisal button. We have another name for that, it’s called an AVM.   In addition to a point value prediction, AVMs can be tested for reliability. This is called the FSD (Forecast Standard Deviation). The AVM. It gets results. It’s fast. It’s cheap. And it provides a measure of reliability – the FSD.

Why would a client want something slower and more expensive with no measure of reliability? Why hire a pesky appraiser?

Click here for the answer!!

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12-14-17 Newz, Underground Digs, AirBnB values, FHA loan limits and PACE

Digging into our drive to tunnel, bore, and head underground.
Just For Fun!!
Excerpt: The deepest tunnelers among animals, crocodiles that can burrow 39 feet down, cannot compete with us at all. Humans have traveled, in the deepest mine in the world, almost 2.5 miles underground (to say nothing of our boreholes, which go nearly three times deeper). The longest and deepest traffic tunnel in the world, the Gotthard Base Tunnel, makes it possible to cross the Alps in 40 minutes or less. The world’s major cities are criss-crossed by tunnels carrying water, sewage, wires, and people. Montreal has an entire subterranean city for its residents to navigate in the cold winter.

My comment: Fascinating!! I have not appraised any properties with tunnels, but I have seen many (and traveled through some) over the years. Railroad and mass transit trains, abandoned tunnels to nowhere, underground parts of cities (mostly abandoned), old mining tunnels, etc. I have seen (and appraised) lots of basements though, some way below ground ;>

How much is Airbnb driving up home prices and rents

Excerpt: The researchers looked at rents and home prices in the 100 largest metro areas in the U.S. between 2012 and 2016. They found that a 10% increase in Airbnb listings leads to a 0.39% increase in rents and a 0.64% increase in house prices.

“That may sound minuscule, but between 2012 and 2016, rents rose by about 2.2% annually [on average in the 100 areas], so a 0.39% increase in that context isn’t very small at all,” says Dr. Edward Kung, an assistant professor of economics at the University of California Los Angeles and one of the study’s authors. The same is true for home prices, which rose by an average of about 4.8% annually in the 100 areas, he adds.

My comment:

Seems like Airbnb rentals are all over, such as my small city, not just in popular vacation spots. From an appraisal point of view, Airbnb rentals are tricky. More cities are regulating them. A lot more hassle than renting out an ADU for a year, for example. Tax issues for owners. To me, seems like it is business value rather than real estate value. Very confusing!!

Appraiserville from Jonathan Miller’s Housing Notes

Check out the topics below
– The Appraisal Industry Needs Better PR
No one knows what we do.
No one appreciates what we do.
– More on Tristar Bank in TN (you know, the one that shouldn’t be in the mortgage business)
– Loan origination graph 2006 to 2017
– The Next Appraisal Bombshell: Economic Growth Regulatory Reduction and Consumer Protection Act

Scroll down the page to Appraiserville, and maybe make a few stops along the way ;>

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11-16-17 Newz//:Value Of Additional Bedrooms, 13 Animal-Shaped Homes, Timber Towers

Architectural menagerie

13 animal-shaped buildings

Just For Fun!!
Excerpt: Novelty architecture can take on many fantastical forms – think municipal water towers done up like peaches and soft serve-shaped ice cream stands – but animal-shaped buildings are in a league of their own.

Often built as roadside attractions meant to lure motorists off the highway, these completely functional structures serve a greater purpose than just kitschy ornamentation. Some are truly mimetic – that is, the building is representative of its original purpose be it a poultry shop, seafood restaurant or woolen clothing boutique. Others are more symbolic, which is probably a good thing.

Here are a few:
– Big Sheep Wool Gallery – New Zealand
– Turtle Building – Niagara Falls
– Crocodile Hotel – Australia

Good fotos and write-ups at:

Why Timber Towers Are On the Rise in France

Excerpt: Spurred by concerns over climate change and the negative impacts of concrete manufacturing, architects and developers in France are increasingly turning to wood for their office towers and apartment complexes.

Concrete was praised through much of the 20th century for its flexibility, functionality, and relative affordability. In France, the material ushered in an era of bold modernist architecture including housing by Auguste Perret and Le Corbusier. Today, however, wood is lauded for its smaller environmental footprint and the speed with which buildings can be assembled.

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11-2-17 Newz .Crazy Appraiser Stories, AirBnB and Value, 31 abandoned places

Crazy Appraiser Stories

Excerpt: I had a house where the 1st floor den was connected to the basement via spiral staircase. Wife did not want the appraiser to go down the spiral steps and said she would “show” room from the basement. Telephone rang, appraiser proceeded to the basement, opened the door and the room was full of whips, chains, and other erotica ala “50 Shades of Grey.” I said we would just call it a rec. room and shoot from the best angle to disguise the “toys”.
-Sharon Finnerty Cremen

My comment: I have heard this story a few times but never encountered it… Lots of other weirdness though, such as seeing the sky through a big hole in the ceiling, falling down backwards into a partially covered pond and destroying my camera, etc. Check out the Cat Photo and make up your own Cat Comments!! Here is mine: Those appraisers need to take more naps and Get A Life. I guess they do have a sense of humor occasionally though ;>

Check out the other stories and add your own to  the 26+ comments at:

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9-21-17 Newz//Pivot- Not enough Appraisers To Too Many Appraisers, Appraising New Home In Old Neighborhood

How do we value a brand new house in an old neighborhood?

By Ryan Lundquist
Excerpt: Tip #5. The wrong one & modern homes: Just because something is brand new does not mean it’s going to fetch top dollar. If it’s the wrong type of house for the neighborhood, buyers might actually pay less for the property. It’s like when someone builds a plain earth-tone stucco tract home in a classic area with Tudors and Bungalows. Despite being new it might actually sell with a price discount if it doesn’t have any hint of era charm for the neighborhood. On the other hand there are modern homes popping up all over Sacramento (CA) and beyond that seem to defy this idea. These homes definitely don’t blend into the neighborhood at all in terms of design, but they’re still fetching high prices. Keep in mind though modern homes tend to carry wide appeal, so they are often able to break the mold of the neighborhood and still command a price premium because of their style. In short, modern homes are not vibeless tract homes, so it’s not really the same thing.
Click here to read the other 4 great tips plus some interesting comments!!

http://sacramentoappraisalblog.com/2017/07/26/how-do-we-value-a-brand-new-house-in-an-old-neighborhood/ 

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5-25-17 Newz: Lenders’ AMC problems, Arms-length Transactions, Incredible Private Islands

3 incredible private islands

Just for Fun – very short video
A few tidbits
– Locations: Key Largo  (FL), Washington state and Long Island NY
– Space for 110 ft. yacht
– Lowest price: $11 million
– Tennis court that doubles as a helicopter pad

http://www.realtor.com/videos/video-the-ultimate-getaway-you-can-own-one-of-these-3-incredible-private-islands/ac74f30c-de71-43ba-bae1-e54d8336a7ae 

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Analyzing the subject’s sales history

By Josh Wailitt
Short video. Worth watching. Check out some of the other videos in his USPAP errors series at www.appraiserelearning.com
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Arm’s-Length Transactions, Part 1

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5-18-17// Newz, AVM/BPO Problems, Castles in America, Cherry Picking Comps

Castles in America

Excerpts:
Roger Declements likes to build his castles the medieval way.
He starts with stone – up to 1,000 tons of it – and then constructs two parallel walls. After years of work, sometimes an entire decade, these walls add up to what he considers “the most advanced, strongest and most comfortable” abode a person can have.
In the United States, where there are no authentic medieval castles, imitation ones are few and far between. But interest in them has grown, in part because of the popularity of books and shows like “Vikings,” “Downton Abbey,” “Game of Thrones” and the Harry Potter series.

My comment: Very interesting article with good photos plus some info on castles in Europe for comparison. FYI – article is in the New York Times, which only allows a few free articles before requiring a subscription.

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Cherry-picking comps & being connected to the neighborhood

By Ryan Lundquist
Excerpts: On paper it looked like value was going to be so much higher. Why? Because comps to the north were easily 10-20% higher, and even Zillow came in $100,000 above the appraisal (ahem). The big cause of such a legitimately lower appraisal boiled down to one thing. Location. Today I want to show a situation where a small section of the neighborhood was blocked off from the rest, and it was a big deal for value. Have a look below and let me know what you think. Anything to add?
Methodology when only 5 sales in 5 years: When appraising something in this section, there were zero sales over the past 2 years and otherwise only 5 sales in the previous 5 years. This means I had to really study older sales to understand how value works…

My comments: Lots of good ideas. Very well written with good analysis and excellent use of graphs and annotated maps. I regularly go back in the past for comps and analysis. Making market conditions adjustments is very easy. I also use percent adjustments, which tend to be stable over time.

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5-11-17 Newz:: Zillow Sued, Value of Views, Portable Architecture

Portable Architecture You Can Roll, Wear, Tow, or Float

A sauna on skis and 11 other dwellings made to move.

Excerpt: Some of the examples are ideal for recreation, such as the compact-cute, California-made Golden Gate 2 camper, with a rounded timber frame, portholes, and a spot for a surfboard. For lovers of winter sports, the Nomad Sauna, which was built on a lake in Norway, includes an internal ice-hole for intensely refreshing breaks from the heat.
It is not all fun and games-others are designed for important, practical use. It can also be used to provide shelter during a crisis, or for protection in extreme weather.
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Sleeping lawyer at mortgage fraud trial

Excerpt: A businessman will get a new trial on mortgage fraud charges because his defense attorney was seen sleeping by the judge, witnesses and the federal court jurors who convicted him last year.
U.S. District Judge Donetta Ambrose ruled James Nassida was denied a fair trial because Stan Levenson dozed during the October trial. Levenson has acknowledged that he fell asleep because he was taking cold medicines that made him drowsy.
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What are views worth?

To figure out the premium that these vistas can command, the realtor.com® data team compared the prices for all the homes for sale on our site that highlight these sought-after panoramas, and then compared them to similar-size properties in adjacent ZIP codes with no view to speak of.

Here are a few:
4. Chicago, IL: Lake Michigan
Median list price for homes with views: $525,000
Killer view premium: 96.8%

1. Manhattan, NY: Central Park
Median list price for homes with views: $3,795,000
Killer view premium: 39.9%

My comment: Percent of value varies widely. Of course, the total dollar amounts vary even more! I love data!!

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