Posts Tagged appraisal business

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So Many Appraisal Cost Approach Questions

Cost Approach – When to Use in Appraisals

By Ann O'Rourke on August 26, 2022 / appraisal business, appraisal how to, bias, cost approach, Fannie, george dell, non-lender appraisals / Leave a comment

Tags: appraisal business, appraisal how to, bias, cost approach, Fannie, George Dell

Fannie Mae and the Cost Approach

Excerpt: We often receive questions from appraisers regarding Fannie Mae and the cost approach. For example: “I’m appraising a property and have been instructed to comply with Fannie Mae guidelines. I understand that Fannie Mae requires the sales comparison approach, but what if there aren’t enough good comps? Can I use the cost approach as the primary method of valuation?”

Answer: No!

In order to comply with Fannie Mae guidelines, the sales comparison approach must be the primary method used to determine the value. In fact, Fannie Mae will not purchase a mortgage on a property if the cost approach is the primary or only method of valuation used.

Quite simply, if there isn’t enough data for the appraiser to develop a reliable opinion of value by the sales comparison approach, the mortgage will not be marketable to Fannie Mae.

However…

To read more, click here

My comment: I included this article plus the one below, which both address the Cost Approach’s common appraisal questions.

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The Cost Approach: An Underutilized Approach to Value

Excerpt: In residential appraising, the cost approach and the income approach have in many cases become less utilized in favor of sole reliance on the sales comparison approach.

There are occasions when the income approach can be the primary indicator of value for residential properties, such as developments with a high percentage of homes owned by investors.

The fact that Fannie Mae won’t accept reports that rely solely on the cost approach, with a few rare exceptions, doesn’t mean that approach can’t be the primary indicator of value. It just means Fannie Mae won’t buy that loan.

To read more, click here

My comments: I started with an assessor’s office in the 1970s. At that time, my county was changing from only using the Cost Approach for decades to a sales-based approach. I never liked to use only the Cost Approach when I started doing fee appraisals.

In my area, there are very few land sales. There has not been one for over 20 years in my city. Depreciation is always iffy when appraising Victorian homes built before 1915.

But, I always use the Cost Approach for new construction to determine the financial feasibility of custom homes. I use a few land sales from other cities. If the new proposed home is on a vacant parcel, I go back to when the parcel was purchased, sometimes many years ago, and do a market condition adjustment.

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Review appraiser liability

Appraisal Reviews – The Good and The Bad

By Ann O'Rourke on August 19, 2022 / appraisal business, Mortgage applications, real estate market / Leave a comment

Tags: appraisal business, mortgage loan volume, real estate market

What to Do When Your Appraisal Is Under Review

Excerpt: Topics:

Remember that reviewers are on your side
Look out for these common points of contention
“The number one mistake is that the appraiser did not include the lender’s specific report requirements,” Nakashima confirms. “Often, the appraiser will not read the lender’s requirements—and if those requirements are not in the report, it cannot be delivered, or the lender will send it back.
Avoid future revision requests

“You can’t avoid the report being reviewed, but you can avoid revision requests,” he says. “Check your report for common mistakes. Review the specific lender requirements and make sure you covered all the bases. When you can’t meet a requirement, include a comment that explains why not.”

To read more, click here

My comments: Worth reading if you do lender appraisals. Some good tips for reviewing your non-lender appraisals. I have never had any reviews for my non-lender appraisals similar to the reviews above. When I did lender res appraisals for direct lenders before 2005, I was usually only contacted if I had a typo: address, no value, etc.

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Appraisers: How to Spend Less Time on Email

By Ann O'Rourke on August 12, 2022 / appraisal business, bias, new appraisers, non-lender appraisals, real estate market / Leave a comment

Tags: appraisal business, bias, mortgage loan volume, real estate market

Appraisers: How to spend less time on Email

Excerpts: Many appraisers report that they’d like to spend less time on email. The task of providing status emails eats up time in the workday and tends to be more complex and time-consuming than typing a quick email reply. Status requests from AMCs typically require you to log in to their system and go through the process of updating the order status on their website. Simple enough, but if you are doing this several times a day for multiple orders, it interrupts your workflow and decreases your productivity.

2. Only check email twice a day, at designated times

Set aside two short time windows for email (15 or 30 minutes each). Do not read or reply to emails outside of those time windows. For the rest of the day, turn off email notifications on your phone, etc., so that incoming emails won’t interrupt your work. You can add a note to your email signature letting people know that they can reach you by phone if they need to get in touch on an urgent matter.

To read all 7 ways, click here

My comments: I regularly write about managing your emails in my monthly newsletter, including getting to Inbox Zero. This blog post is the best I have ever read, as it is specifically for practicing appraisers.

How to Manage Your Email

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Where VA loans are soaring. Are you doing VA appraisals?

VA Approves Desktops and Exterior-Only Appraisals

By Ann O'Rourke on August 5, 2022 / desktop appraisals, Fannie, hybrid appraisals, non-lender appraisals, real estate market, va / Leave a comment

Tags: appraisal business, Fannie, non-lender appraisals, real estate market, va

VA Approves Desktops and Exterior-Only Appraisals

Excerpts from the Summary: On August 1, 2022, the Veterans Affairs released Circular 26-22-13 announcing new procedures for alternative valuation methods, effective immediately.

“The use of a Desktop Appraisal may allow an appraiser from outside the market area, but with appropriate credentials for the jurisdiction of the property, to complete the assignment when no local VA fee panel appraiser is available.”

“Appraisal Assignment Waterfall. With consideration for the high demand for appraisal services and limited availability of appraisers in certain local market areas, VA is providing lenders, servicers, and appraisers with a procedural waterfall that clarifies acceptable valuation methods when certain conditions exist. Lenders and appraisers can also refer to Exhibit A for more information. VA continues to explore opportunities for expanding the use of Exterior-only Appraisals and Desktop Appraisals and will update this procedural waterfall, as appropriate.”

To read the full blog post, click here

The summary and Circular are in the blog post.

To read more about the May 2022 proposal to eliminate the fee panel, click here

I wrote about the VA in my July 8 email newsletter. To read it, click here

My comments: The big push to cut down on appraisal turn times because of the appraisal shortage is Very Old News since mortgage volume has plummeted. I always recommend VA as the best lender client for appraisers. I wrote about it in the past and interviewed VA employees, appraisers on the VA panel, and appraisers who did not want to do VA appraisals in my paid monthly newsletter.

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ANSI Z765-2021 Resources for Appraisers

Fannie’s New ANSI FAQS July 2022

By Ann O'Rourke on July 22, 2022 / ANSI, appraisal business, Fannie Forms, lender appraisals, liability / Leave a comment

Tags: appraisal business, appraisal how to, liability

Fannie’s New ANSI FAQS July 2022

Standardized Property Measuring Guidelines

Excerpts: Updated guidance, including some new and substantively revised FAQs

In response to your feedback, we’ve updated the Standardized Property Measuring Guidelines with some new and substantively revised FAQs, including clarifications on the terms “declaration” and “statement of finished sq ft.”

A few of the Q&As

Q5. When common practice in the local market differs from the ANSI standard, can the appraiser modify the subject’s GLA to conform to local custom?

Q6. The standard mentions a “statement of finished sq ft”; does Fannie Mae require appraisal reports to make an affirmative statement that the standard was followed?

Q7. The standard describes three scenarios in which a “declaration” is required. What is the difference between the statement of finished sq ft and the declarations?

Q19. Will appraiser adherence to the ANSI standard cause confusion when the subject GLA differs from other sources such as MLS or public record?

Q20. The GLA of comparables available to appraisers may not be based on the ANSI standard. How should appraisers manage this issue?

To Read this 5-page Update click here

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Bryan Reynolds speaks with Fannie Mae representative about the new ANSI FAQ. 37-minute podcast. Listen to this podcast!!

The Appraisal Update – Episode 109 | Fannie Mae’s New ANSI FAQ

Speaker: Bryan Swartwood III, Fannie Mae Credit Risk Senior Manager – Single Family Collateral Policy

Topics: The two Bryans discuss below grade, subject GLA different from MLS, comps not measured using ANSI, what happens to appraisers not following ANSI, ceiling height below 7 ft., manufactured homes, using exception code, and many more from the FAQs.

To listen to the podcast, click here

It is on the top of the web page now. scroll down the page looking for Episode 109. If possible, a copy of the ANSI Standards and the new FAQs makes it easier to follow the speakers. I subscribe to The Appraisal Update Podcast from Appraisal eLearning.

My comments: I listened to the podcast. The speaker was very good with practical advice. Reading the 5-page FAQs was okay, but the speaker helped me remember and understand what was written.

I received the Fannie email notice on July 19, 2022, at 10:30 Pacific time. The Appraiser eLearning podcast was available on July 19 at 2 PM. Whether or not FAQs were original, revised, or new is not indicated in the document. I did not compare it to the original Fannie FAQs.

When Fannie first announced in December 2021 that ANSI would be required on April 1, 2022, there was lots of confusion among appraisers who had never used ANSI or were not using it properly. ANSI was designed by home builders, not appraisers or lenders. Also, what Fannie wanted was not clear.

ANSI standards and Fannie requirements sometimes appeared to conflict. The forms were not designed to accommodate ANSI, such as where to put the different square footages on the form. Owners, reviewers, underwriters, real estate agents, and many others who read the appraisals are sometimes confused. These FAQs help to answer some of the questions.

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Residential Appraisals and AirBnb Income?

Appraising Short-Term Rentals/Airbnb

By Ann O'Rourke on July 15, 2022 / appraisal business, Clubhouse, cubicasa, FHA / Leave a comment

Tags: appraisal business, appraisal how to, cubicasa, FHA

Debate on Appraising Short-Term Rentals

By Julie Friess, SRA, AI-RRS, MA

Video 22 minutes. Worth Watching!

Excerpt: What can appraisers learn when it comes to short-term and long-term rentals? What role does an appraiser take when sorting between the two? What can appraisers learn when it comes to short-term and long-term rentals? What role does an appraiser take when sorting between the two? These questions and much more will be answered.

My comments: Julie is not referring to an owner-occupant renting out a spare room in their house for a short term. She is talking about an investor buying and renting many rooms in a house, sometimes changing the floor plan. The photo above is a good example: an exterior door for access to a bedroom. This is not typical for a single family home

In the video, Joan Trice and Julie disagreed on how to appraise Short Term Rentals. I have been a commercial appraiser for over 40 years. It is obvious to me that you need experience and knowledge of what to do when appraising them as commercial properties.

If the GSEs are unclear on this, that is their problem, not yours. Just Say No! Don’t Risk Your License!

Julie has lived for decades in Sedona, a popular vacation location. Many homes were changed to investor-purchased Airbnbs with few home rentals available for local residents. Julie and a group of other concerned residents are now preparing for August 5, 2022, when there is an election for new city council members.

Julie and I are co-hosts every Thursday at 2 PM Pacific Time in our Clubhouse group (Real Estate Appraisal Questions). To attend, download the Clubhouse app on your smartphone. All sessions are recorded and available. Recent topics include Water rights, views, location, and more. Short-term Rentals. Zoning, Highest, and Best Use. Past, Present, and Future of Residential Appraising.

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Two articles by Julie on my website:

Residential Appraisals and Airbnb Income?

Click here to read

Excerpts from the article: Don’t get caught like a deer in the headlights! State appraisal boards ARE disciplining appraisers across the country for improperly using the business income (Short term Rental – STR) from AirBnBs on the residential 1007 Fannie Mae form.

Lenders and AMCs want residential appraisers to value these properties as both the real estate and the business values of these properties – Wrong!!

Tales of a Trainee at Appraisal Camp Sedona

Click here to read

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Non-lender Appraisals Good fees and few hassles
Purchase vs. refi appraisals

Too many appraisers?

By Ann O'Rourke on June 10, 2022 / appraisal business, george dell, mortgage loan volume, real estate market / Leave a comment

Tags: appraisal business, mortgage loan volume, real estate market

How can we fix the excess of appraisers?

Too many appraisers?

By George Dell, SRA, MAI

Easy — we do what we have always done, each time . . .

Excerpts: 1) We will raise the standards (“cost of entry”). 2) We will make it harder to become an appraiser; 3) Let the lower fees discourage newcomer appraisers.

In past issues of the Analogue Blog, we have considered the “five forces of friction” on the advancement of appraisal. Here we consider how these “frictions” will behave as appraisal demand has dropped, just as each of the five forces have found ways to reduce or “eliminate” the need for valuation expertise. Recall the five forces of friction: practices, standards, education, regulation, and client expectation.

This blog considers how each friction will respond to this “excess” of appraisers.

Practices:

Current practice is still embedded in the concepts of 8 ½ X 14 paper forms, spreadsheets, or narrative explanation of the opinion of the person (appraiser, evaluator) or automation programmer. Practices will continue to evolve toward objective data selection and predictive models. But this evolvement will continue to stay behind the inherent potential of applied data science. Habitual practice of “comparing comps” over “measuring markets” will prevail (in the absence of change in the other “frictions”).

To read more, click here

My comments: Of course, lots of politicians, appraiser organizations, appraisers and others are complaining now about an appraiser shortage and trying to recruit trainees. This is the past. Loan applications are way down, the lowest in 22 years. What was your business like before the pandemic? Not much work probably compared with 2020-2022. The Inevitable Cyclicality of Mortgage Lending. I hope you saved up lots of money over the past few years!

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Tips on appraising new construction homes

By Ann O'Rourke on May 27, 2022 / appraisal business, appraisal how to, Fannie, liability, va / Leave a comment

Tags: appraisal business, appraisal how to, Fannie, liability, va

6 Tips for Appraising New Construction Homes

Excerpts: New construction is treated a little differently by lenders, FHA, and the GSEs. When appraising new construction homes, you must take into consideration certain features and attributes that don’t necessarily apply to re-sales. It requires more work, so you want to be sure that you are charging for your effort. However, perhaps more than that, you want to be sure you’re following the proper protocol. Stick to these best practices to ensure you cover all your bases.

3. Talk to multiple local builders You can gain valuable information from builders—as long as you talk to them now to evaluate current costs and value. Some of the best construction cost data is compiled by you as you complete new construction appraisal assignments. When appraising new proposed construction, the prior data can be reviewed for those construction projects that are most similar to the subject property in quality, size, and features and be used as cost data to support cost estimates for the current appraisal. As the cost of construction materials generally continue to spiral upwards, it may be necessary to adjust for time, depending on how old the cost data is.

To read more tips, click here

My comments: Well written and worth reading. New home construction appraisals can be tricky. I quit doing them a while ago – too many various hassles, but many appraisers like doing them. There are few new homes built in my area, except stacked condos. Land is too expensive.

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Price per square foot not very reliable for appraisals
Fannie Wants Desktop Appraisals

CubiCasa – Home Measurement From Inside A House

By Ann O'Rourke on May 20, 2022 / ANSI, appraisal business, desktop appraisals, real estate market / Leave a comment

Tags: appraisal business, desktop appraisals, real estate market

CubiCasa and a Desktop Mess – an appraiser’s experience

By Jamie Owen

Excerpts: I called the listing agent on the property I was to appraise and asked if they knew how an appraiser might go about obtaining a floor plan (for my desktop appraisal). She had no idea and had never heard of this type of thing being needed. I was really at a dead end here. I called the bank and explained the situation. They ended up converting the assignment to a traditional type of appraisal so that I could just make the inspection myself.

I called the chief appraiser of the bank that ordered the appraisal. I know him well and have worked together with him on some complex assignments. He said the whole thing is a mess. Some appraisers are submitting reports where they have the listing agent hand-draw the interior walls on copies of the county auditor’s sketch outline. This is also a no-no. Fannie Mae will accept nothing hand-drawn in terms of the sketch…

I decided to test CubiCasa. I downloaded the software to my iPhone 11… I must tell you that I was very impressed! The scan took 15 minutes to do. By the way, I measured the home also. It took about 15 minutes for me to measure the home. But it would have taken a lot longer if I had to add walls and doors!

In less than a day, the sketch was sent to me via email, and it was awesome! It was professional-looking and had all the data that I needed. Its measurements were within 15 square feet of mine on a home that was just over 2,400 square feet. It also broke down the square footage of each floor and the dimensions of each room and its gross living area calculations.

I have been using it and then comparing my measurements with its measurements. It is consistently within 1-3% of my measurements. The 3% variance is with larger homes with complex angles and tricky areas to measure. In my view, that’s pretty good!

To read more and see a fun video and animated gifs, click here

My comments: Desktop appraisals are a new type of assignment for appraisers. I wrote about CubiCasa and Desktops in recent newsletters. I tested it and spoke with knowledgeable people. I am using it. No more exterior measurements!

Appraiser Retirement?

Appraiser retirement plans?

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