Why is the Appraisal Under Sales Price?

Top Ways to Defend Your Work When the Appraised Value Comes in Under Sales Price

Excerpt: As a real estate appraiser, you’ve likely encountered assignments in which the purchase price is not supported by the available comps. So, what are the best ways to address complaints and requests in these situations? To find out, we (McKissock) asked appraisers, “What’s your top tip for defending your work when the appraised value comes in under sales price?” Here’s what they said…
How to prevent and prepare for complaints and requests
Many survey respondents emphasized the importance of making sure your work is as detailed and well-supported as possible—by means of careful comparable selection and analysis, thorough documentation, and clear explanation of why the available comps do not support the contract price…
To read more, click here
My comments: Lots of good ideas. Worth reading
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The Last Remaining Flying Saucer Homes

All the 1960s Futuro Houses left in the world
Excerpt: The Futuro was a product of its times: when Finnish architect Matti Suuronen designed the little alien-looking abodes in 1968, the postwar economic boom was in full swing, time-saving home gadgets promised a leisure-filled vision of the future, and society was transfixed by the Space Race.
Spaceship architecture was in vogue, but nothing hit the nail on the head quite like these UFO houses. Ironically, that may be what ultimately led to the Futuro’s failure.
To read more and see more photos, click here
My comment: Good to see there are still some of these very unique homes to see! There are a few left in the U.S. See the map at the bottom of the post.
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Frank Lloyd Wright’s Freeman House Listed in Hollywood Hills for $4.25M

Excerpts: Two-bedroom, 2,884-square-foot home built in 1928 on a steep hillside with excellent views.
Key tenets of Wright’s designs visible in the Freeman House include an open floor plan, a floor-to-ceiling hearth, and the concrete-block detailing. Over the years, the owners hosted notable Hollywood types as well as numerous political and social salons. The legendary actor Clark Gable was reportedly a tenant at one time.
“There is going to be a conservation easement,” says the listing agent, “so it has to be conserved in the original condition. The new owner has to be passionate about architecture and committed to the restoration.”
My comment: Lots of photos, including unusual wall coverings and exteriors. Very unique, of course!! It will be fascinating to see who buys it, how many offers there are, and what it sells for. Of course, Beverly Hills is a good place for expensive, unusual homes with a Hollywood connection. In my city, a semi-decrepit waterfront home where Jack London stayed (maybe) is semi-famous ;>
To read more and see lots of very interesting photos, click here
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Increasing Diversity in Appraisal Profession

By Robert Murphy
Excerpt: The Urban Institute recently released a blog post entitled – Increasing Diversity in the Appraisal Profession Combined with Short-Term Solutions Can Help Address Valuation Bias for Homeowners of Color.
This article addresses several issues with the real estate appraisal profession that are worthy of further examination and comment.
The article accurately notes the lack of diversity in the appraisal profession. This comes as no surprise, especially when considering the article also notes an overall lack of diversity in the real estate sector.
To read more, click here
My comments: This post discusses issues in the Urban Institute article. The author, Bob Murphy, was the Director, Property Valuation and Eligibility, for Fannie Mae from Oct 2000 – Sep 2015 and is very experienced and knowledgeable.
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Appraisals in Rapidly Changing Markets

By Scott Reuter, Single-Family Chief Appraisal Officer, Freddie Mac
Excerpts: Our ongoing oversight routines reveal data that indicates the current trend in appraised values coming in below contract price has risen from an annual average of 7-9% (2013-2019) to 20% nationwide in April and May 2021. And the peak that we typically see in the late spring (generally the result of seasonal upward swings in price coupled with use of “winter sales”) has only increased in the summer months.
Our data also indicates a conservative trend in the overall net adjustments, suggesting appraiser behavior that is designed to not appear overly aggressive or excessive. For example, a market conditions adjustment might be offset by under-adjusting elsewhere. Recognizing and adjusting for increases in any amount is perfectly acceptable, provided the appraiser has developed adequate market support using a recognized method (e.g., analysis of repeat sales, market trend analysis, etc.).
To read more, click here
My comments: The article is worth reading, with good summaries of techniques for appraisers. The author, Scott Reuter, is Freddie Mac’s Single-Family chief appraiser and director of valuation. He is a certified general appraiser with over 30 years of experience in valuation, appraisal and collateral risk management concerns. Thanks to subscriber Joe Lynch for this link.
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Have home prices started to crest this year?

July 26, 2021, By Ryan Lundquist
Are prices finally starting to slow? Can it really be happening? Have home prices likely started to crest for the year? The answer is YES. Here are two quick things on my mind. These trends are for the Sacramento region, but I suspect many markets across the country are starting to show similar stats (or will soon).
Four Quick Takeaways
1) Not the same: The temperature of the housing market is not the same in every price range and neighborhood. In other words, it’s possible for prices to be doing different things in different areas, so it would be a huge mistake to assume prices are dipping everywhere.
2) Not dull: The housing market is still moving very fast and it’s super competitive.
To read Takeaways 3 and 4, plus more, click here
My comments: Ryan has some good graphs to use when analyzing what is happening in your market. Written for real estate agents but very relevant for appraisers. I am hearing more about the market maybe peaking or slowing down around the country. As we all know, prices go up and down. No one really knows when the peak occurs until after prices start dropping.
For example, I sold my house in May 2008 for $1,000,000. The market was slow, and there had been some price declines in the previous year. I had no idea they would drop like a rock after that time even though I appraised in the local market every day. I was very, very lucky to sell my home before the crash!
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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. I have been following this data since 1993. 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 7 AM to noon, Pacific time.

Mortgage applications increased 5.7 percent from one week earlier

WASHINGTON, D.C. (July 28, 2021) – Mortgage applications increased 5.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 23, 2021.
The Market Composite Index, a measure of mortgage loan application volume, increased 5.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 6 percent compared with the previous week. The Refinance Index increased 9 percent from the previous week and was 10 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 18 percent lower than the same week one year ago.
“The 10-year Treasury yield fell last week, as investors grew concerned about increasing COVID-19 case counts and the downside risks to the current economic recovery. Refinance applications jumped, as the 30-year fixed mortgage rate declined to its lowest level since February 2021, and the 15-year rate fell to another record low dating back to 1990,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Refinances for conventional loans increased over 11%. With over 95% of refinance applications for fixed rate mortgages, borrowers are looking to secure a lower rate for the life of their loan.”
Added Kan, “The purchase index decreased for the second week in a row to its lowest level since May 2020, and has now declined on an annual basis for the past three months. Potential buyers continue to be put off by extremely high home prices and increased competition. The FHFA reported yesterday that May home prices were 18% higher than a year ago, continuing a seven-month trend of unprecedented home-price growth.”
The refinance share of mortgage activity increased to 67.2 percent of total applications from 64.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 3.6 percent of total applications.
The FHA share of total applications decreased to 9.1 percent from 9.6 percent the week prior. The VA share of total applications decreased to 9.8 percent from 10.5 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 ($548,250 or less) decreased to 3.01 percent from 3.11 percent, with points decreasing to 0.34 from 0.43 (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 $548,250) decreased to 3.11 percent from 3.13 percent, with points decreasing to 0.27 from 0.32 (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 3.03 percent from 3.08 percent, with points increasing to 0.35 from 0.31 (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 2.36 percent, the lowest level in the history of the survey, from 2.46 percent, with points unchanged at 0.30 (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 increased to 2.81 percent from 2.74 percent, with points increasing to 0.23 from 0.19 (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

Drainage Problems Can Damage Foundations – Appraisers Check It

Watch out for drainage problems when doing your appraisals!! 

When I first heard about the collapse of the Florida condo tower, I immediately thought about a drainage problem. Previous engineering reports revealed the problems – pool leaks, water not draining properly, etc. The condo building was constructed before building codes were changed to help avoid their problem. No one knows why the building started collapsing. Drainage Problems Can Damage Foundations

Limestone is under all of Florida. In parts of South Florida, the porous limestone is not good for foundations as there is less soil covering the limestone. I have seen many videos of saltwater intrusion flooding streets. The water came up through the limestone, caused by sea-level rise.

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I always check for any drainage problems at homes. They are relatively easy to spot and can cause significant damage. I appraise many hillside homes, which can easily have problems. I look at where the gutter water drains and how it is moved away from the foundation. Sloping floors are another indication of possible foundation problems.

When I go into an unfinished basement, I look for water problems. One good indication is that everything is raised from the floor. Also, water stains on the lower part of the concrete. The water is coming through the foundation. A sump pump can help.

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Properties I have appraised with obvious drainage problems:

– 2 story home on a hillside. Saw radiating cracks inside on both floors in the same corner. At the corner outside of the home was a small round drainage catchment about 1 ft. in diameter, without a way to drain it away from the house. The water came through the rear of the foundation because there was no drainage system.

– Home on a hillside that was moving down the hill. Standing water under the house. Unlevel floors. Big foundation cracks. Known area of problems. Relocation appraisal with two appraisers. The other appraiser did not mention anything.

Note: A good fix for hillside homes is a “french drain” in the ground that takes the water to the sides of the home, with plastic pipe to keep the water from the sides of the foundation.

– Duplex I own on a mostly level site. Tenants mentioned water coming inside the garage on one side. They had moved everything near that side of the garage off the floor. Both units were on level ground with raised foundations. The front garage was on a slight downslope. I replaced the gutters and drains so the water drained away from the foundation. I regularly check for any problems during the winter rains. No foundation damage, fortunately.

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To read an excellent article on how and why concrete fails, Click here.

Modern concrete lifespan is roughly 50-100 years. The Florida condo building is 40 years old. “Concrete is poured around steel rebar, which gives it tensile strength. But tiny cracks — found in all concrete — cause water to start rusting the steel, which then expands, cracking the concrete.”

Photos of the Surfside basement taken before the collapse show steel rebar breaking all the way through the concrete to the point at which it is fully exposed to the salty and humid Florida air.”

We definitely have a significant infrastructure problem. Replacing concrete is very expensive: building foundations, bridges, freeways, etc.

I have watched several documentaries about what happens if there are no humans to maintain buildings, roads, bridges, etc. The roofs fail first, and water comes inside. Concrete and steel are damaged by water. Roads break down. Bridges collapse. When doing appraisals, I always tell the owners to be sure their roof does not leak. When they see stains in the ceilings, the roof has already started leaking.

Read more!!

Zoning and Appraisals

The Infamous History of Zoning in the Housing Industry (Video)

Excerpts: History of zoning in the housing industry and how past practices shape the problems we are currently experienced today.

What was the purpose of zoning in the very beginning? How exactly were these practices harmful to people of color? What are some of the problems we see today because of this? These questions and much more will be answered.

To watch the video, click here

My comment: A controversial topic. Today this often involves “downzoning,” allowing for properties to have more than one unit or more density – apartments, condos and townhomes.

Experts Say Zoning Changes Are Most Effective Path to Boost Housing Supply for a More-Balanced Market

Excerpt: A Zillow survey of economists and other real estate experts finds high costs are expected to slow construction and may lower homeownership among today’s 30-somethings. Relaxing zoning rules is what the panel says would be most productive to increase new housing supply.

Other ways include:

  • Ease the land subdivision process for landowners
  • Relax local review regulations for projects of a certain size
  • Accelerate adoption of new construction technologies (e.g., modular building, 3D printing of certain components)

To read more, including details and the full list of survey suggestions, click here

Zoning in the Appraisal Process

Appraisal Business Tips 

Humor for Appraisers

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

To read more of this long blog post with many topics, click Read More Below!!

NOTE: Please scroll down to read the other topics in this long blog post on unusual homes, slowing market?, appraisal business, mortgage origination stats, etc.

Read more!!

Appraising vs. the Public Good?

Has Appraising Failed the Public Good?

by Steven R. Smith, MSREA, MAI, SRA

Excerpts: The term Public Good is in the opening paragraph of the Uniform Standards of Professional Appraisal Practice (USPAP). An appraiser friend once wrote that our regulations and guidelines are intentionally ambiguous—and that may be. But what is crystal clear to me is that the industry has put the interests of its clients before the public good.

The Public Trust statement and the Ethics Rule have been largely ignored over the years with loan production put first…

What can an individual appraiser do to support the public good, even before they start an assignment? For me, the answer always has been to appraise the client and the appraisal assignment. There are some clients and assignments that simply should be avoided because of the wants, needs and desires of the client, with respect to the assignment results.

To read more, click here

My comments: I have known Steve Smith for a long time. To read more comments from Steve and other savvy appraisers, join the National Appraisers Forum, an email discussion group. I have been a member since it started. It is my “go-to” resource for appraisal topics. Moderated. Very different from Facebook and other appraiser online discussion groups where filling out forms and dealing with AMCs are discussed.

The future of residential appraising

Appraisal Business Tips 

Humor for Appraisers

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

To read more of this long blog post with many topics, click Read More Below!!

NOTE: Please scroll down to read the other topics in this long blog post on unusual homes, appraiser diversity, Cost Approach, liability, mortgage origination stats, etc.

Read more!!

80 ft. long train car is part of home: appraisal?

80-Foot-Long Train Car Is Part of Washington Home: appraisal?

Excerpts: The former passenger-train car is about 80 feet long, 12 feet wide, and has been incorporated into the rest of the residence.

“[The first owners] connected it to the house, so you walk from the kitchen out into this train,” Anderson explains.

“You walk past the kitchen island and into a hallway where there is stained glass—and you walk into the train.”

To read more and see lots of interesting photos click here:

My comment: Sorry, I would Just Say No on this appraisal. Too busy now is my excuse. But really the appraisal would drive me crazy!!

Appraisal Process Challenges(Opens in a new browser tab)

Appraising Weird Stuff is Challenging!(Opens in a new browser tab)

Read more!!

Terrible Real Estate Agent Photos for Appraisers

Just For Fun and Oddities!!

If M C Escher had tried interior design.

<< 4 bedrooms, 2 bathrooms, and extensive opportunities for open plan off-roading.


Inexplicably bad property photographs.

It’s that simple

Don’t miss the Very Funny Captions!!

 

To see more, click here

Appraisal Humor

Appraisal business tips

For lots more appraisal topics, Click  Read More below!

Read more!!

Urban, Suburban, Rural in Appraisals

Urban, Suburban, Rural?

By Tim Andersen, MAI

Excerpt: QUESTION: Can you help me to understand the differences between urban, suburban, and rural? Where I live and work, everything is essentially one big megalopolis for 30 miles in every direction. Therefore, in my reports, I tend to refer to everything as suburban. A reviewer called me on this, but I can’t figure out why. Please set me straight.

ANSWER: At one time, a location was urban if there were high-rise office buildings and no houses close by, suburban if there were merely low-rise office buildings and many houses nearby, and rural if there were no office buildings and lots of farms, ranches, and vacant land close by. However, that was back in the day, so we need new definitions….

To read more, click here

My comment: This is a tricky issue. This post has some good tips. Tim is a regular contributor to the paid Appraisal Today with much longer articles, focusing on USPAP, lender appraising, state board complaints, etc. He reviews lots of lender form appraisals and wants to help appraisers write better reports. More info at https://theappraisersadvocate.com/

10-20 UPDATE: For lots of Covid analysis and news, go to my new covidscienceblog.com

Appraisal Humor

Appraisal business tips

What’s the appraisal definition for suburban?(Opens in a new browser tab)

For lots more appraisal topics, Click  Read More below!

Read more!!

When 1,000 square feet doesn’t count in an appraisal

When 1,000 square feet doesn’t count

By Ryan Lundquist

Excerpts: One of the most interesting homes I’ve seen just sold. It was brand new, four stories, and a halfplex. Oh, and on paper it was 3,000 sq ft, but about 1,000 sq ft didn’t count in the square footage. This is definitely a conversation piece, so I’m thankful Realtor Brian McMartin agreed to do a Q&A. I hope this will be valuable and interesting. Any thoughts? This is an example of When 1,000 square feet doesn’t count in an appraisal

Quick points:

This house has 1,000 sq ft that is not permitted as square footage. The “non-conditioned” space looks just like square footage.

Understanding permits really does matter…

Interview with selling agent plus Ryan’s (and appraisers’) comments. Worth reading.

To read more, click here

My comment: I see non-permitted areas in homes a lot in my city, typically converted basements. Fortunately, I can get the permit info easily from the city and the property owner does not “get into trouble” because of my inquiry. I am lucky.

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

What is Included in Appraisal Square Footage?

To read more of this long blog post, click Read More Below!!

Read more!!

Real Estate Appraisers Self Employment Humor

9 Very Funny Quotes for the Self-Employed Appraiser

Just For Fun!!

Some great, very funny, animated gifs ;> We All Need Real Estate Appraisers Self Employment Humor!!

Here are a few comments:

“The crappy thing about being self-employed is I never believe myself when I call in sick.”

“Things people say: ‘It’s Friday!’ Things self-employed people say: ‘It’s Friday?’”

To read more, click here

My comment: We all need some appraiser humor! Something for everyone in this blog post!! Unfortunately, animated gifs usually don’t work well in these email newsletters. You Just Gotta See Them!!

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

To read more of this long blog post, click Read More Below!!

Read more!!

What’s the difference between the Appraisal Today free weekly email newsletters in this blog and the paid monthly newsletter?

What’s the difference between the Appraisal Today free weekly email newsletters in this blog and the paid monthly newsletter?

They are very different.
To see what is in the paid Monthly newsletters, see the FREE appraisal business articles at Appraisal Business Tips
To see samples of the free weekly emails,  go to www.appraisaltoday.com and scroll down the page to see links to the last 10 newsletters are available.  
In the Free weekly emails, there is a very wide range of topics each week. They are links to online articles with brief excerpts. I write short comments. I get lots of emails with information every day plus blog posts. I look for the most interesting topics and include them. I write the newsletter on Thursday, to go out early Friday morning. I do not typically plan what is in the newsletters. It is very last minute, as I try to make the content as recent as possible, appropriate for a weekly newsletter. Weird homes and properties are typically the most popular topics. Plus business and appraisal “how to” tips. It is advertiser supported.
It is a lot of fun deciding what to put in the newsletter and finding out which topics are the most popular. Hint: weird houses are very popular. USPAP is not very popular, but I put it in so you know what is happening.
I started the free email newsletter in 1994 with 4 subscribers. Bruce Hahn still subscribes. It is advertiser supported.  One of my first advertisers was Liability Insurance Administrators, who runs an ad in every email.
The paid monthly newsletters are totally different. They are typically about a few appraisal and business topics. I sometimes work on an article idea for several years before finally writing up an article. I do the research and writing plus have guest authors. They are 12 to 17 pages long and take a long time to write up. Since they are in PDF format, the newsletters can be any length. I have never taken ads.
The paid newsletter was started in June, 1992 with 250 subscribers, starting in print and shifting to PDF in 2008. There have never been any ads.
To see what the paid newsletter is like, see the FREE appraisal business articles at Appraisal Business Tips 
The paid newsletter started as a printed newsletter in 1992. The 12-18+ pages are print style PDFs with 3 columns and wordprocessing (1 column) formats. The articles are much longer than this email, from 1 to 8 (or more) pages for each topic.
Everything is original, not just a link. Most of the articles are written by myself, but I have always had contributors. I like to write about business topics, so there are lots of marketing, etc. articles. When there are hot topics, such as CU, AMCs, etc. I write about them. Plus other appraisal related topics, mostly done by contributors.
Ever since I got my MBA in 1980, I look at everything from a business point of view. I had been appraising for 5 years at that time, but never took even a basic economics class. I needed to learn more bout business to be a better appraiser. For unknown reasons I don’t like to write about appraisal topics, although I love discussing them with other appraisers!!
I never run out of topics to write about. I regularly get ideas by communicating with other appraisers by phone or email.
If there is a topic you would like to read about, send an email to ann@appraisaltoday.com

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Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
2033 Clement Ave. Suite 105
Alameda, CA 94501 Phone 510-865-8041
Fax 510-523-1138
Email   ann@appraisaltoday.com