Posts Tagged appraisal business

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How to select appraisal comps

By Ann O'Rourke on March 22, 2024 / appraisal business, bias, climate change / Leave a comment

Tags: appraisal business, bias, climate change, Fannie

Dos and Don’ts of Selecting Appraisal Comps

Excerpts: Follow these dos and don’ts to help ensure that relevant comparable sales are established:

Here are a few topics

Do welcome relevant comparable sales from real estate agents
Don’t limit the number of comparable sales to three
Do consider objective characteristics when selecting competing neighborhoods

Don’t use appraisal comps based on price

As an appraiser, you must provide an unbiased opinion of value. Selecting comparable properties based on price may inadvertently favor properties within a predetermined price range, rather than those genuinely similar to the subject property in terms of location, size, condition, and other relevant characteristics. To maintain objectivity and credibility, you should evaluate sales based on criteria that most accurately reflect comparability, rather than focusing on price.

Do focus on characteristics of the property

Identify properties with comparable square footage (including finished basements), number of bedrooms and bathrooms, lot size, view (e.g., waterfront), and amenities. Prioritize features that are highly sought-after in the property type and market. For instance, in the subject’s market, a mountain view could significantly impact the demand and marketability of a vacation condominium home.

To read more, Click Here

My comments: Worth reading. Good analysis of factors in comp selection.

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Urban, Suburban, Rural in Appraisals

How To Appraise Rural Properties

By Ann O'Rourke on March 15, 2024 / appraisal business, appraisal how to, modernization, Uncategorized, USPAP / Leave a comment

Tags: appraisal business, appraisal how to, modernization by GSEs, USPAP

How To Appraise Rural Properties

Excerpts: Appraising residential properties in rural areas can be both challenging and rewarding. Unlike the standardized expectations of urban and suburban properties, rural properties often present unique characteristics that require a nuanced approach to valuation. Whether you’re a seasoned appraiser or new to the field, having a better understanding of rural properties is essential for providing credible appraisals. In this guide, we’ll explore what defines a rural property, the challenges appraisers face, reasons for conducting rural appraisals, strategies for finding comparables, and tips for writing a compliant appraisal report.

Defining rural properties – USDA and GSEs
Challenges of appraising rural properties
Appraising rural properties presents unique challenges due to their diverse characteristics and market dynamics.

Topics include:

Diverse property types and uses
Unique property characteristics
Limited market activity and more
Writing your rural property appraisal report – good ideas

To read more, click here

My comments: Worth reading, if only to find out about rural appraising. Well written. There are relatively few residential lender appraisals available now. This is an excellent diversification opportunity, with little competition from other appraisers or the GSEs use of other ways to get a value without human appraisers.

What if there are few rural areas near you?

You can expand your area to include rural appraisals to get more business.

When I worked for a northern California assessor’s office with rural areas I learned a lot about almond growing (the main crop) and other ag topics. It is not hard to learn the valuation factors. I had niece who had several horses for many years where she lived. There are equestrian facilities within 5 miles from my house in Oakland hills and in farther out Bay Area cities with larger lots. You may have some similar rural experience now!

The American Society of Farm Managers and Rural Appraisers www.asfmra.org has a specialty in Rural Appraising, but it requires a Certified General. There may be seminars available. Another reason for upgrading!

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Remove all bathtubs from home?

By Ann O'Rourke on March 8, 2024 / adjustments, appraisal business, BATHROOMS, Economic analysis, forecast, modernization, real estate market / Leave a comment

Tags: adjustments, appraisal business, BATHROOMS, desktop appraisals, Economic analysis, forecast

Is it a problem to remove all bathtubs in a house?

By Ryan Lundquist

Excerpts: I’ve been asked this question twice this week. Is it a problem to remove the tubs from each bathroom? People planning a remodel asked if it was a big deal or not to only have a walk-in shower in each bathroom. Here are my thoughts, and I really want to hear from you too. Anything to add?

It’s not a black and white answer: There’s not one black-and-white answer that applies to every house, price range, location, or market. Bottom line. But backing up, part of the fun of working in real estate is figuring out how to answer questions like this in a way that is balanced and hopefully reflective of the sentiment in the marketplace.

CubiCasa – Home Measurement From Inside A House

Appraising Luxury Homes

By Ann O'Rourke on March 1, 2024 / appraisal, appraisal business, bias, real estate market / Leave a comment

Tags: appraisal business, bias, real estate market

What Are the Top Luxury Markets in North America Right Now?

Excerpts: Where are the hottest high-end real estate markets? Whether you’re looking to specialize in luxury home appraisals or you’re simply reading up on the latest market trends, you may want to pay attention to areas where luxury homes are in high demand.

According to the Institute for Luxury Home Marketing’s February 2024 report¹, the single-family luxury home segment is showing promising signs of growth. Both inventory levels and new listings increased significantly in recent months, leading to an 18 percent increase in sales and a 1.6 percent increase in the median sold price. Even more telling, contract signings for homes priced at $1 million or more have increased by 11 percent over last year, and demand remains high among affluent buyers.

Top list of luxury home markets in 2024. You may be surprised!

To read more, Click Here

My comments: In this newsletter, I always know what are hot topics. Constant Contact gives me the number of clicks. Most popular is usually Claudia’s advice at the top of every email. Also popular are large luxury homes with a photo.

I have been thinking for a while about including appraising luxury homes, since my subscribers like to read about them. Maybe a possible specialization? There were not many where I worked, so I did not specialized in them But, I see my area, East Bay California is listed now! The median home price in the Bay Area is around $1,300,000.

Check out the list of areas in the article to see if any are close to you.

Lenders have always had special, very small lists of appraisers who can appraise these homes. I assume the AMCs have these types of lists. Some may not have them. You definitely must get a higher fee for them.

I know several appraisers who have been doing them in my area for a long time. To do them, it is best to work in an area with many luxury homes. You need to network with the brokers that sell them.

The post above is also a promo for McKissock’s Certified Luxury Home Appraiser Program. 14 hours of CE for $650. I have not taken it, but I don’t know of many other types of diversification with a certificate. Might be interesting even if you don’t know if you want to do them.

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Appraising Historical Homes

By Ann O'Rourke on February 16, 2024 / adjustments, appraisal classes, bias, non-lender appraisals / Leave a comment

Tags: adjustments, appraisal business, bias, non-lender appraisals

Historical Properties and Their Unique Appraisal Approaches

Excerpts: Appraising historical properties involves a complex interplay of factors, making it a specialized field within real estate valuation. This article provides an insight into the appraisal process of historical properties, emphasizing the role of market data, potential buyers, specialized databases, appraisal methods, and the significant impact of preservation restrictions.

The appraisal process begins with a thorough analysis of market data, focusing on sales of properties that share historical or antique characteristics. This comparative market analysis extends beyond standard parameters like size and location to include age, architectural style, and historical significance. The scarcity of historical properties often requires appraisers to expand their search to find comparable sales, both geographically and over longer time frames.

The distinction between a historic property with preservation restrictions and an old house without them is crucial in the appraisal process. Preservation restrictions, often governed by the National Register or local historical commissions, can add value by ensuring the property’s integrity. However, these restrictions may also limit modifications, potentially affecting the property’s market appeal.

To read more, Click Here

My comments: If you don’t want to appraise a historic property, be sure to check it out before accepting the assignment!

Worth reading. A good summary. I suspect that a company based in Boston, MA sees lots of historic homes!

For many years I appraised in the nearby city of Berkeley, CA. There were definitely adjustments for homes built by famous, widely known, architects. Fortunately, their names were listed in the MLS.

In my small city, there are a few homes by famous architects. One was sold about 20 years ago by a famous architect, Julia Morgan. She designed more than 700 buildings in California during a long and prolific career. She is best known for her work on Hearst Castle in San Simeon, California. No effect on value. I was surprised. If it was in Berkeley, there would be a substantial adjustment.

Some cities have large historic buildings, such as the City Hall in my city, built in 1895, twenty years after the city charter in 1872. The Gold Rush in California started in 1848, which brought many people to Northern California.

But, in my city, there are many restrictions on what can be done with older homes, such as Victorians. For example, window replacements must replicate the original windows, plus some other restrictions on exterior modifications. Restrictions are from the city, the county, and the state. In my city of 78,000 population, there are over 10,000 buildings constructed prior to 1930, including many classic Victorians.

Many downtown mixed-use buildings (retail and apartments) are in my city. I appraised many of them, but never noticed any effect, plus or minus, for historic designation.

Knowing what modifications are allowed is very important for the appraiser. Many people don’t like them. You need to know the market. Sometimes buyers like them and sometimes not.

See how many historic homes and buildings are where you do appraisals and where you live. You may be surprised!

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2024 USPAP For Appraisers

USPAP Myths for Appraisers

By Ann O'Rourke on January 5, 2024 / appraisal, appraisal business, bias, humor / Leave a comment

Tags: appraisal business, bias, humor

Five USPAP Myths Dispelled in 2024 USPAP

By Daniel A. Bradley, SRA, CDEI, McKissock Learning

On May 5, 2023, the Appraisal Standards Board (ASB) voted to adopt changes to the Uniform Standards of Professional Appraisal Practice (USPAP), which will become effective January 1, 2024. These represent the first changes to USPAP in four years. Many of the changes will not have a significant impact on the way appraisers practice but are nevertheless important for public trust.

Appraisers and the public have traditionally held several misconceptions about USPAP, and these changes should help to dispel some of those myths. There are five myths and misconceptions that are addressed in the changes to the 2024 USPAP.

Myth 1: USPAP Allows Discrimination as Long as the Appraiser’s Conclusions are Supported

Myth 2: The Removal of the Definition of Misleading from USPAP Reduces Liability for Appraisers

Myth 3: An Inspection of the Subject Property by a Third Party is the Equivalent of a Personal Inspection by an Appraiser

Myth 4: Appraisers are not Required to Analyze Prior Non-Sale Transfers of the Subject Property

Myth 5: The USPAP Update Course Cycle is the Same as the USPAP Publication Cycle

To read more, Click Here

My comments: It’s worth reading, especially if you do residential lender appraisals. Lender issues are a significant factor in USPAP and Myths 1 to 4. I suppose it is because most appraisals are done (now) for residential lending purposes. Many thanks to Dan Bradley for writing about the 2024 USPAP changes.

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Functional Obsolescence for Appraisers

By Ann O'Rourke on December 29, 2023 / appraisal business, bias, real estate market / Leave a comment

Tags: appraisal business, bias

Understanding Functional Obsolescence in Appraisals

By: McKissock

Excerpts: For appraisers, functional obsolescence can be a challenging concept because the elements that influence property values may not be obvious or immediately apparent. To help you better understand what it means and how to pinpoint it, we’re exploring some examples the different types of functional obsolescence, and how it can influence property values.

Functional obsolescence may or may not be caused by trends in buyer or market preferences, outdated design, or even advances in technology. Let’s look at a few examples:

A home has three bedrooms, but to reach the third bedroom, you have to walk through the other secondary bedroom. Buyers are likely to see this as a flaw in the floor plan regardless of trends.
A home has a separate formal living room, an enclosed kitchen, and a separate dining room. Today’s buyer prefers a more open, casual layout and may find the separate rooms a flaw in the floor plan, though this may change with market trends.
A home with radiator heat and window unit air conditioning may be seen as functionally obsolete, and thus less valuable, as more modern homes have forced air furnaces and central air conditioning.

Measuring functional obsolescence and its effect on a property’s value can be challenging for even experienced appraisers. To ensure accurate reports, it’s essential you stay up to date and aware of market trends, and even code and building updates, as these changes over time do determine both curable and incurable obsolescence.

To read more, Click Here

My comments: All appraisers see functional obsolescence. Making adjustments can be tough. You need to know the market reaction.

For example, there are many Victorians in my market. They were built without closets and used armoires (free standing closets). It is not considered functional obsolescence as it retains a classic feature in many Victorian homes. I always wonder about what appraisers from tract home areas think about Victorians. I assume (hope) they ask local agents. When I started appraising them, that’s what I did.

I regularly tell local agents that “tandem” rooms don’t count as bedrooms. I’m trying not to think about how many listings have an incorrect number of bedrooms!

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Market Your Appraisal Services: 59 Ways to Get More Business Now

Superadequacy Adjustments for Appraisals

By Ann O'Rourke on December 22, 2023 / adjustments, appraisal business, bias, humor, statistics / Leave a comment

Tags: adjustments, appraisal business, appraisal how to, bias, statistics

How to Account for a Superadequacy

By: McKissock

Excerpts: What is superadequacy?

Per The Dictionary of Real Estate Appraisal, 6th Ed., superadequacy is defined as “an excess in the capacity or quality of a structure or structural component; determined by market standards.” It’s a type of functional obsolescence in which the structure or one of its components is overly improved to a capacity or quality than a prudent buyer or owner would build or pay.

While we provide more detailed illustrations below, a simple example would be a 5,000 square foot luxury home built in a neighborhood comprised of two and three-bedroom mid-century ranch homes.

Example #1: Superadequate custom fireplace

Example #2: Superadequate 12-car garage

To read more, Click Here

My comments: Although the blog post references luxury homes, this can occur anywhere. Have you ever driven closer and closer to your subject and noticed that the homes are much smaller or have standard designs? You keep getting closer, hoping it is not your subject. It Is! This definitely has happened to me. Large unusual additions, two large kitchens, very extensive landscaping, etc.

Maybe you were busy and forgot to check it out in public records, MLS or speaking with the owner or agent (if a sale) when scheduling the appointment.

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The UAD and Appraisers – Past, Present, and Future

UAD and Forms Redesign Update for Appraisers

By Ann O'Rourke on December 15, 2023 / appraisal business, appraisal forms, bias, Economic analysis, forecast / Leave a comment

Tags: appraisal business, appraisal waivers, bias, Fannie, future

UAD and Forms Redesign Update

Excerpts: Improving the Quality and Consistency of Appraisal Data

Freddie Mac and Fannie Mae (the GSEs) have worked on the UAD redesign since 2018, leveraging extensive stakeholder input to update the appraisal dataset, align it with current mortgage industry data standards (MISMO® v3.6), and replace the GSE appraisal forms with a single data-driven, flexible, and dynamic appraisal report for any residential property type.

To watch the Excellent UAD and Forms Redesign Video (3 min. 47 seconds) Click Here

For more detailed information on web page Click Here

My comments: Watch the short video. On the links list on the right side of the webpage, GSE Experts Answer Your UAD Redesign Questions is short and understandable.

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