9-25-20 Newz: 8 Common Violations – Unlearning? – Beer Can Condo

8 Common Violations Made by Appraisers

Excerpt: When it comes to appraisal violations, certain minor violations are very common. In this article, I outline several examples of less serious breaches of development STANDARD 1 and reporting STANDARD 2—and a few other types of violations, too. I have compiled these based on many years of personal experience in appraisal regulation, as well as feedback I have received from other states’ enforcement agencies. Once you’re aware of these common mishaps, you should be able to avoid them more easily.

1. Use of inappropriate sales

One of the big problems is the use of inappropriate sales in a sales comparison approach….

2. Use of unsupported site value

Another common violation is the use of unsupported site value in the cost approach. That’s something that a lot of boards have cited as a prevalent deficiency or shortcoming in appraisal reports.

To read more click here

My comment: useful information. Nothing new, but good reminders. Don’t get the “violation letter” from your state board!!

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South Florida Condo Covered in Beer Cans Receives Multiple Offers

Excerpt: When Kristen Kearney received a call about listing a condo in Lake Worth, FL, she said it wasn’t quite like other listing calls.

“They warned me that the home was wallpapered in beer cans,” she says. “And I thought to myself, ‘Well, I wonder where in the world they found beer-can wallpaper.’”

When she first walked through the unassuming front door, she remembers the shock of seeing the walls of the 815-square-foot abode covered in actual beer cans. In every room.

To read more and see lots of photos, click here

My comments: Adjustment? Cost to Cure? Market survey? Multiple offers?? What if it was not listed and there was no data??? Plus a short video of the (infamous) Sex dungeon house that rents for up to $2,000 per day.

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Highest and Best Use and The Check Box on Fannie Forms

By Dave Towne

Excerpt: The appraiser had checked the H&BU question box on page 1 of the 1004 form as “NO”, which immediately stops the lending process.

This H&BU topic is sometimes difficult for appraisers due to many variables that need to be analyzed.

The twisted part of this situation (which influenced the appraiser’s H&BU reporting) is the property is in an area where some, not all, surrounding properties have had additional homes placed on single sites – allowed by current zoning code – while others of the surrounding properties have remained 1 dwelling per site. In other words, not all local sites have been ‘re-developed’ to increase density.

To read what Fannie says and more, click here

My comments: I appraised a small home with a very large lot for a local lender many years ago, long before AMCs took over. The neighborhood was transitioning to apartments. The lender said to complete the appraisal as it was a portfolio loan. I estimated the current use was an interim use for 5 years and did a financial analysis. Current and future values with discounting back to current value.

I also did house appraisals for this lender and other lenders where the current highest and best use was a lot split. Not lendable but a good portfolio loan.

I started appraising at an assessor’s office in 1975. The first question on every appraisal was the highest and best use. I still do it on every appraisal I do.

For commercial appraisals in my market, the current use is often not the present use. Lenders accepted my appraisal at the highest and best use, not the current use.

This is how many residential form appraisers (and other appraisers) get into Big Trouble!! Highest and best issues are not seen very often. Appraisal classes spend minimal time on it. Too many appraisers don’t know what they don’t know.

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Strong Home Prices Expected to Continue Through at Least 2021, But Economic Uncertainty is Clouding Long-Term Outlook

Excerpt: Housing experts and economists have grown more bullish on the housing market in the near term, but expect economic headwinds to persist, dampening the long-term outlook, a new survey shows

— In a survey of 104 economists and real estate experts conducted by Pulsenomics and Zillow, home prices are expected to grow 3.7% in 2020. Three months ago, panelists expected a 0.3% decline.

— The panel also improved their annual forecast for next year, and are now more optimistic about 2021 home price growth than they’ve been in more than three years.

— There is more pessimism about the long-term for home prices with elevated unemployment expected to remain for the remainder of the decade.

To read more, click here

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New in the October issue of the monthly Appraisal Today newsletter

  • Appraisers Don’t “Create” Value! By Tim Andersen, MAI
  • Practical tips you can use today for getting more appraisals done and make more money
  • New appraisers need live, not “virtual” field training By Julie Friess, SRA
  • My new blog, Covid Science For Everyone! Covidscienceblog.com

To read the articles, plus 2+ years of previous issues, subscribe to the paid Appraisal Today.

If these articles gave you one good idea, it is worth the subscription price!!

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Closing The Gap Between Yesterday’s Prices & Today’s Values

Excerpts: Sometimes my opinion of value is higher that the contract price. Why? There are numerous reasons why this might be the case. Here’s one. Typically, the effective date of my report is weeks, and sometimes months, after the contract date. Therefore, by the time I complete my appraisal, the market value of the home may have increased, since the contract was signed. It’s also good to remember that the contract price is not a target for the appraiser to aim for. The market value of a home is not always reflective of the contract price.

Due to bidding wars, sometimes, my opinion of value is less than the contract price, because the price has been bid up above market value… You can see this in my chart below, which clearly demonstrates that many buyers are paying more than the list price.

To read more, click here

My comments: Written for buyers and sellers but good for appraisers to see the market from the participants’ point of view. Some excellent graphs that you can include in your appraisals.

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Unlearning? 

By George Dell, SRA, MAI, ASA

Excerpt: …first heard the word unlearning at an Appraisal Institute national conference. The speaker said that unlearning was as important as learning. Perhaps more so.

We human beings tend to want to maintain the status-quo, unless somehow compelled to change. Change is not easy they say.

Psychological inertia involves inhibiting any action, just because it causes the stress of change. Status-quo bias avoids any change which might involve the thought of loss. The loss does not have to be real. Worse yet, even when the gain might be a great reward, we tend to stick with the old and proven.

To read more, click here

My comment: Short, with good ideas. No statistics…

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COVID-19 recent posts at covidscienceblog.com

Get a flu shot by the end of October at the latest!! 

Many are worried about overwhelming the hospitals with both Covid and flu. Do you want to risk getting the flu and having to go to a hospital with a lot of sick Covid patients? 410,000 flu hospitalizations in 2019-2020.

Lots of info and stats, click here

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Dr. Fauci answers questions many people have in a humorous interview with Fauci and a comedian. Lots of smiling and laughter.

If you, or someone you know, want understandable explanations from a widely recognized expert for questions that a lot of people have, email the link to them. 34 minutes and Fauci has time to answer the questions. 

To watch the video, click here

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When can we get fast cheap Covid-19 saliva testing at home?

The best podcast I have ever listened to on this topic! A scientist and the person who helped set up the NBA saliva testing system. I want to get fast, cheap Covid-19 testing at my home now so I can go out anytime, anywhere, with anyone I want!! I can test every day or several times a day.

To listen to the podcast, click here

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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, go to www.mbaa.org 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 issue go to https://www.appraisaltoday.com/products.htm or send an email to info@appraisaltoday.com . Or call 800-839-0227, MTW 7AM to noon, Pacific time.

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Mortgage applications increased 6.8 percent from one week earlier

WASHINGTON, D.C. (September 23, 2020) – Mortgage applications increased 6.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 18, 2020. The previous week’s results included an adjustment for the Labor Day holiday.

The Market Composite Index, a measure of mortgage loan application volume, increased 6.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 18 percent compared with the previous week. The Refinance Index increased 9 percent from the previous week and was 86 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index increased 13 percent compared with the previous week and was 25 percent higher than the same week one year ago.

“Mortgage applications activity remained strong last week, even as the 30-year fixed-rate mortgage and 15-year fixed-rate mortgage increased to their highest levels since late August. Purchase applications were up over 25 percent from a year ago, and the demand for higher-balance loans pushed the average purchase loan size to another record high. The strong interest in home buying observed this summer has carried over to the fall,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Despite the uptick in rates, refinance applications increased around 9 percent and were almost 86 percent higher than last year. Both conventional and government refinance activity, and in particular FHA refinances, picked up last week.

The refinance share of mortgage activity increased to 64.3 percent of total applications from 62.8 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 2.2 percent of total applications.

The FHA share of total applications increased to 10.1 percent from 9.7 percent the week prior. The VA share of total applications decreased to 12.0 percent from 12.3 percent the week prior. The USDA share of total applications increased to 0.6 percent from 0.5 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased to 3.10 percent from 3.07 percent, with points increasing to 0.46 from 0.32 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) decreased to 3.35 percent from 3.41 percent, with points increasing to 0.42 from 0.27 (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 increased to 3.23 percent from 3.16 percent, with points increasing to 0.37 from 0.35 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 2.64 percent from 2.61 percent, with points increasing to 0.47 from 0.35 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.The average contract interest rate for 5/1 ARMs decreased to 3.19 percent from 3.20 percent, with points increasing to 0.64 from 0.58 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. 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 

www.appraisaltoday.com

 

 

Beer can house in Houston, TX(Opens in a new browser tab)

9-4-20 Newz: Humor – Castle in Ohio – Appraising Weird Stuff

How to Handle the Weird Stuff: Appraisal Methods from an Experienced Florida Appraiser

Excerpt: Going further away or back in time

One method is to go further back in time for comparable sales.. Another method is to use sales that are more distant to find data to utilize. Both of these techniques have long been available to appraisers. When using these appraisal methods, most often a comparison is made between properties with similar characteristics to the question at hand to extract a ratio/percentage which is then brought current or to the locale and applied. This could work for the above illustration with only four houses on leased land and no similar nearby sales. Most appraisers are familiar with and have utilized these techniques,

Well written and worth reading. To read more, click here

My comments: Lots of good tips. All of us are asked to appraise the “weird ones”. Of course, sometimes we don’t know a house is weird until we drive up and see it!! Very good discussion of methods. I have used all of them except depreciated cost, which is a good method. Plus, lots of tips on doing them for lenders. Of course, sometimes I just say “no” as it will take too long.

I have learned that they often are money losers due to the increased time. This is what can happen with lender UAD appraisals for AMCs due to the excessive amount of questions and trying to fit the appraisal on the form. I sometimes accept the weird ones for

non-lender work with no time pressures. They can be very interesting and challenging.

Read more!!

8-28-20 Newz: Pay to Be on AMC List – Dirty vs. Disheveled Homes – Top 10 Appraiser Blogs

Should appraisers pay to be on an AMC approved appraiser list?

By Dustin Harris

Excerpt: Should appraisers pay to be on an AMC’s approved appraiser list? Is this one way to get new clients? If an AMC solicited you, would you check it out? Now, I work for some AMCs that, frankly, you might not choose to work for. That’s fine. It’s a choice we all make. Understand that most of the areas I work are rural, so AMCs are generally willing to pay more because of this. Some AMC are very demanding. Yet, when I meet those demands, I get a lot of well-paying jobs from them.

To read more, plus lots of appraiser comments, and listen to the podcast, click here

My comment: A never ending very controversial topic ever since AMCs took over residential lender appraisals after the mortgage crash around 2008!

Read more!!

8-7-20 Newz: What type of clients do you have? – Rotating Dome Home – Fannie Solar Panel Update

Survey: Which Appraisal Clients Make Up the Majority of Your Client Base?

Excerpt: What types of clients do property appraisers serve? Do most of their assignments come from lenders vs. non-lenders? To help answer these questions, we recently asked our real estate appraisal community, “What type of appraisal client makes up the majority of your client base?”

While most appraisers said that the majority of their work comes from lenders (most often through AMCs), some said the bulk of their client base is made up of other types of appraisal clients, such as attorneys or private individuals.

To read the results and appraiser comments click here

Read more!!

7-17-20 Newz: Basement Rooms in GLA? – Toilet House – COVID Humor

What’s your favorite part of the appraisal process?

Excerpt:

Number 1. Data collection and property description (38%)

“The best part is the property review. I enjoy seeing what people have done to their properties and talking to them about their homes.”

“I enjoy viewing/observing the subject home.”

“Detective work”

“Each dwelling is different, and not every appraiser takes the time to clarify the differences in the dwellings. The quality, the construction, the egresses, and especially the correct way to calculate GLA or measure a dwelling.”

Number 2. Data analysis (27%)…

To read more about favorites, click here

My comment: I love working in the field, so my choice is Number 1. But, my very best choice is getting paid ;>

Read more!!

6-10-20 Newz: Another New Fannie Update; Suburban Definition?

How to Tell If You Live in the Suburbs

Excerpts: The U.S. hasn’t had a formal definition for what constitutes a suburb. A new data analysis comes closer to defining America’s most popular neighborhood type.

The United States is a land of suburbs, with just one problem: No one’s quite clear what a “suburb” is.

It’s a question of semantics with real-world implications, as government programs, political campaigns and developers try to spend money in the “suburbs,” where a majority of Americans say they live despite the category having no formal definition.

For some people, it’s obvious: A suburb is a smaller city on the periphery of a larger city. Or it’s a sprawling neighborhood filled with vast swathes of single-family homes. Still other more dated conceptions of suburbia in the popular mind involve the people who live there: allegedly white, middle class and socially homogenous.

Now a new team of researchers believe they’ve cracked the code…

To read more, click here

My comments: Of course, if you do residential lender appraisals this is a Very Big Issue due to lender “requirements” such as no rural properties. Lots and lots of online discussion about this for a long time. Post this topic on your favorite Internet chat site or email list… and wait for the wide variety of opinions!!

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My Favorite Definitions

(This has been floating around for many years…)

Rural  Suburban  Urban

  • If you stand naked on the front porch and the neighbors can’t see you… it’s rural.
  • If you stand naked on the front porch and the neighbors call the cops on you… it’s suburban.
  • If you stand naked on the front porch and the neighbors ignore you… it’s urban.

There are other variations, of course, that are not suitable for this newsletter ;>

Read more!!

7-3-20 Newz: New Fannie Update – Street Name Values – Converted Church

Fannie Mae Appraisal Update June 2020

Excerpts from Section on Impact of COVID-19 on appraisals

Through mid-May, about 15% of Uniform Collateral Data Portal® (UCDP®) appraisals completed after our announcement used the flexibilities, either desktop or exterior-only. As you know, circumstances vary widely across the country, and the uptake of the flexibilities reflects this. The highest percentages of appraisals using the flexibilities are around 40% in some northeastern states, while the lowest percentages are around 10% in some of the less impacted states…

We found that appraisers have used the flexibilities correctly about 90% of the time. Appraisers have done a great job identifying external obsolescence for desktops and exterior-only appraisals, as well as leveraging their local knowledge, maps, aerial photos, and other data sources. We’ve been pleasantly surprised to find that, although not required, about 35% of nontraditional reports include a sketch pulled from prior reports,

assessors records, or other sources. Also, the supporting comments in the nontraditional reports have been even better on average than those in traditional reports.

Worth reading. 5 pages and well written. Also includes comments on “one mile rule” and flood zones. To read more, click here

My comments: There are very few of these done in the Bay Area. 10% sounds about right. However, now we are now in a major virus surge in some states – opened too soon and people in some areas did not do social distancing, hand washing and wear face coverings. Use of the alternative reports may increase in some states, and decrease in the northeast.

These appraisals are not easy to learn how to do, and are very different than doing full 1004 with interior inspections. In the June issue of the paid Appraisal Today I have lots of information on them, including useful references. See the ad below.

Read more!!

6-26-20 Newz: Lot Size Mistakes – Reconsideration of Value- Unusual Mailboxes

Lot size mistakes 

By Ryan Lundquist

Excerpts: I’ve seen it happen twice lately where Tax Records lists the lot size, but it’s actually incorrect. In one instance Realist showed the lot was five acres when in fact it was only two acres. In another example it said two acres when it was less than one. Yikes.

My advice? Thankfully most of the time we can trust the lot size in Tax Records, but it’s still a good idea to quickly double-check just to be sure. After all, listing the wrong lot size in MLS or an appraisal could lead to litigation, right? What we can do is view the plat map to see if there is anything abnormal as well as try to piece together the lot size (easy to do if it’s a rectangle)…

To read more, click here

Short with good map illustrations. Plus many, many appraiser comments. I guess it is a hot topic!!

My comments: Also check out Ryan’s local recent market video for some good ideas on how to show market conditions. Plus, all his graphs illustrating his local market.

When I want to know the lot dimensions to determine lot size, I always get a copy of the legal description (usually from the recorded deed). Assessor’s office maps are for assessment purposes and do not always match the legal description. Google Maps is a good way to determine parcel size if the site boundaries are clear.

When an owner asks about lot dimensions and lot line locations (usually a dispute with a neighbor), I always give the same answer: “I Always Assume the Fences Are Not on the Property Line. Hire A Surveyor! ”

Read more!!

6-12-20 Newz: AMC Fined $2.8 Million – Terrible Agent Photos – Accuracy of Opinions

Can You Measure the Accuracy of An Opinion?

Excerpt: Two appraisals are completed on the same property. Each appraiser has a different opinion of the market value. Which one is accurate? Can they both be accurate?

Occasionally, I read articles or hear of companies that refer to the appraiser’s “accuracy rate”. I’ve always wondered how this is possible to measure. After all, an appraisal is an opinion of market value. Interestingly, if you look up the word “opinion” on www.dictionary.com, one of the definitions is, “a personal view, attitude, or appraisal.” Another is, “The formal expression of a professional judgement”. Can an opinion, or a person’s professional judgement be measured?

To read more, click here

My comment: I used to do a lot of relocation appraisals, where 2 or 3 appraisals were done on the same home. If the appraisals had the same values, it was suspicious. We were usually within 5%. Our accuracy was judged on how close we were to the sales price 60-90 days in the future. Very challenging appraisals!!

Read more!!

6-5-20 Newz: Waivers; Wavy House; Unemployment Help For Fee Appraisers

A Very Wavy House 

Just For Fun!!

Excerpt: “Everyone basically has this ‘Wow!’ reaction, and it’s pretty polarizing: You either love it, or you hate it,” Assemi says of the home, which is now listed for $599,000. Its roof mimics ocean waves and is covered with cedarwood shingles.

“It’s just so unconventional, but inside, it’s a regular house,” …

The home has three bedrooms and three bathrooms in 1,845 square feet, and its ceilings are 21 feet high. It comes with 6.22 wooded acres on Collins Creek at the base of the Sierras and Sequoia National Park, about 20 minutes from Fresno, CA.

Interesting article and lots of fotos: To read more, click here

My comment: Located in Sanger CA, close to Fresno in a primarily agricultural area. A very unusual home for this part of California!! The median home price in Fresno is $258,500 per Zillow. Can You say: over-improvement? In the Bay Area, our the median price is around $950,000.

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What’s the ONE thing that is most often overlooked by appraisers?

By McKissock

Excerpt: We recently asked our appraisal community, “What’s the ONE thing that is most often overlooked by appraisers?” We received a wide variety of answers ranging from big-picture oversights to specific details. The most common answer we received was “Highest and Best Use.”…

Highest and Best Use (HBU)

This was the top answer, which was written in by about 8% of survey respondents“First question when doing an appraisal is the highest and best use. If there are two very different opinions of value on a property, different HBU is often the reason.”…

Obsolescence

Obsolescence is another item mentioned by multiple survey respondents. Appraisers cited both external obsolescence and functional obsolescence as being frequently overlooked.

“External obsolescence for the subject property – When I’m reviewing appraisals, I see this more often than other oversights. When I was performing retrospective reviews for FNMA, their biggest complaint was that appraisers did not point out external obsolescence for the subject and/or its impact on marketability (if there was an impact).”

“Functional obsolescence – Appraiser focus has changed over the years as subject functionality has changed.”

To read lots more, click hereb>

Read more!!