Appraisal Sq. Ft. Appraisal vs. Assessor/Public Records

Newz: Sq. Ft. Appraisal vs. Assessor, The “R” Word, HUD Appraiser Complaints

March 14, 2025

What’s in This Newsletter (In Order, Scroll Down)

    1. LIA AD: Navigating value revisions in appraisals
    2. Why Is the Square Footage in Public Records Different from the Appraisal?
    3. 5 Properties With ADUs or In-Law Suites
    4. Open Letter to Government Efficiency Commission on HUD’s Appraiser Complaints
    5. The “R” word in real estate – Recession
    6. Going In-Depth on a Delicate Issue: The Invisible Fence of Racial Discrimination
    7. Mortgage applications increased 11.2 percent from one week earlier

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Why Is the Square Footage in Public Records Different from the Appraisal?

By Tom Horn

Excerpts:

Why Accuracy Matters

Square footage is one of the most critical factors in determining a home’s value, yet it is often misunderstood. Many homeowners and real estate agents assume that the square footage listed in public records is accurate, but that’s not always the case. When an appraiser measures a home, their calculation often differs from what’s in tax records. These discrepancies can lead to confusion, mispricing, and even appraisal challenges.

Why Square Footage Discrepancies Occur

Public Records vs. Appraisal Measurements

The square footage listed in public records typically comes from the county tax assessor’s office. Assessors determine square footage based on:

Builder-reported figures:…

Estimates or outdated records:…

Conversions and Additions

Another common reason for discrepancies is home modifications. If a homeowner adds square footage without the proper permits, tax records may not reflect the change. Examples include:

Unpermitted additions:…

Incorrect classifications:…

To read more, Click Here

My comments: Worth reading. Written for non-appraisers but the best explanations I have ever read about this topic. I worked for an assessor’s office for my first 4 years of appraising, starting in 1975. I was given a geographic area and appraised every residential in it. Fantastic experience. I learned a lot. I was very lucky. Very different than lender appraising, where you only appraise properties that are suitable for mortgage loans.

The March 2025 issue of Appraisal Today has a very comprehensive article for appraisers: Can you use the assessor’s assessment values for site valuation, by Tim Andersen, MAI.

Read more!!

Climate Change and Home Values

Newz: Waivers Increasing, The New URAR: Markets vs. Neighborhoods , Climate Change and Home Values

February 7, 2025

What’s in This Newsletter (In Order, Scroll Down)

  • LIA AD: Should I consider this an actual claim?

  • How Climate Change Could Upend the American Dream – Declining Home Values

  • A Sporty Paradise in Your Own Backyard: 5 Homes With Awe-Inspiring Athletic Amenities – From Hockey Rinks to Boxing Rings

  • Trump’s War on DEI: Immediate Effects for Appraisers

  • The Full Measure: January 2025 Housing Market Insights for Appraisers

  • Waivers Increasing and Trends Over Time

  • There Goes the Neighborhood…The New URAR: Markets vs. Neighborhoods

  • Mortgage applications increased 2.2 percent from one week earlier.

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How Climate Change Could Upend the American Dream

Declining Home Values

Excerpts: Americans have long accumulated wealth by owning their homes, but a new study predicts that spiking insurance rates and climate disasters now herald an era of widespread losses.

One little-discussed result is that soaring home prices in the United States may have peaked in the places most at risk, leaving the nation on the precipice of a generational decline. That’s the finding of a new analysis by the First Street, a research firm that studies climate threats to housing and provides some of the best climate adaptation data available, both freely and commercially. The analysis predicts an extraordinary reversal in housing fortunes for Americans — nearly $1.5 trillion in asset losses over the next 30 years.

Climate change is upending the basic assumption that Americans can continue to build wealth and financial security by owning their own home. In a sense, it is upending the American dream.

To read more, Click Here

My comments: I hear about, and see, more listings that are including climate risk levels. I have not seen discussions on the future of home values in risky areas. I live 10 miles from a very risky area – Oakland CA hills. I am too far away to be at risk. My insurance company, State Farm, is requesting a 22% increase in homeowner’s insurance. Insurers have been not renewing individual homes for various reasons. Will I have to pay the same rates as the Oakland hills, which is very high risk and had a major fire in 2001?

I quit doing appraisals in the Oakland hills about 15 years ago due to high personal risk if a fire starts while I am there. Narrow, winding, one lane roads. Very difficult to escape from fire. Most of my city has risks from sea level rise and some parts have flooding risks, but my home is not included fortunately.

How will appraisers make adjustments for risky homes?

Read more!!

Appraisals and the Cost Approach

Newz: DEI and Appraisers, New GSE Market Analysis Deadline Feb. 4

January 31, 2025

What’s in This Newsletter (In Order, Scroll Down)

  • LIA AD: Weather Impact
  • What is the Cost Approach to Real Estate Appraisal?
  • ‘Unparalleled’ 3-Mansion Compound on Miami’s Exclusive Palm Island Splashes Onto the Market for $150 Million
  • DEI and Appraisers
  • Fannie and Freddie Forecasts

  • Fannie, Freddie: New Market Analysis Requirements February 4th

  • Mortgage applications decreased 2.0 percent from one week earlier

 

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What is the Cost Approach to Real Estate Appraisal?

By Kevin Hecht

Excerpts: When to Use the Cost Approach

There are circumstances when it’s necessary to use the cost approach, for example, unique properties and new construction. The cost approach can also be used to support the sales comparison approach.

Fannie Mae only accepts the sales comparison approach as its primary valuation tool. However, that does not preclude an appraiser from also using the cost approach to substantiate their findings. And there are other lenders who may accept the cost approach over other real estate appraisal methods for certain properties or situations…

Some Disadvantages of Using the Cost Approach

There are inherent benefits of using the cost approach, especially when you’re tasked with challenging properties that have little or no comps. But there are also some downsides.

One of the primary disadvantages is the assumption that land is available for purchase to build an identical property. Land is a scarce resource. When comparable land sales are not available, the value must be estimated.

The bigger issue here is undervaluing the land costs based on scarcity. In real estate, location is everything. A small ocean-front cottage has its value because of the land it sits on, not necessarily its four walls…

Other disadvantages include how to depreciate an older property or find costs for similar building materials. This can be particularly tricky when using the reproduction method of the cost approach or appraising a historic home.

Appraisers should consider whether the cost approach is the best tool to use. In many situations, it’s best used in tandem with the sales comparison approach.

Tips for Using the Cost Approach

As part of our monthly survey series, we asked our community of real estate appraisers, “What’s your best tip for using the cost approach to appraise?” They shared many helpful comments, including common pitfalls to avoid as well as general advice and recommendations. Here’s what they said:

“Use and research valuable comps and educate yourself on the surrounding market.”

“Call local developers for better support on cost estimates. Make friends with builders.”…

To read more, Click Here

My comments: When I saw the article topic I thought it would be boring. Not! When I read it I realized it was one of the best on the Cost Approach I have read! If you only do GSE appraisals, you probably don’t use the Cost Approach very often, except for new construction. This article explains when and why. It also includes “basic” info such as reproduction vs. replacement. Keep it as a reference for the future when you may need to use the Cost Approach.

When I first started appraising in a Northern CA assessor’s office in 1975, the Cost Approach was the only approached used for decades for all properties. My supervisor devised a table based on square footage for homes which we used.

In the Oakland CA firestorm in 2021, many of the homes had reproduction replacement in their insurance policies. Many were historic homes with features that were very difficult to reproduce, assuming you could find anyone who still knew how to build them. The home owners with reproduction costs got very large payments from their insurance companies. Many had larger homes built with sometimes very unusual designs. The insurance companies learned their mistake and never offered reproduction again.

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3-Mansion Compound on Miami’s Exclusive Palm Island Splashes Onto the Market for $150 Million

Excerpts: 3 homes, 92,00 sq.ft. 300 linear ft. of water frontage

The pricey property, which initially debuted in 2023, was relisted in 2024 at the same price. Now, with Florida’s luxury housing market experiencing a major boom, the compound is back on the market with the same sky-high price.

“Potential buyers might include high-profile individuals like celebrities or CEOs, investors, entertainers or hosts, or luxury lifestyle seekers,” he tells Realtor.com®.

“This offering appeals to those who prioritize exclusivity and are willing to invest significantly for a unique, turnkey luxury compound.”

The trio of homes was assembled by owner Jorge Luise Garcia and the Adria, Maria, Adrian Almeida Trust. They were purchased separately over a period of 17 years.

The first of the three mansions was purchased in 2004 for $3.45 million, the second in 2019 for $13.9 million, and the third in 2021 for $17 million, for a total of $34.35 million, according to property records.

To read more, Click Here

Read more!!

Appraising Unique Properties

Unique Properties, Rocket Mortgage Sues HUD, Trump Shifts in Housing Market?

December 13, 2024

What’s in This Newsletter (In Order, Scroll Down)

    • LIA ad – Each appraisal is unique
    • The Ultimate Guide to Unique Property Appraisals
    • America’s Most Expensive Property Is Sitting in a Flood Zone—Will Anyone Buy the $295 Million Estate?
    • Rocket Mortgage Sues HUD Over Regulatory, Enforcement Discrepancies
    • Donald Trump’s Second Term Could Bring ‘Significant Shifts’ to the Housing Market
    • Report: What’s Driving the Recent Refi ‘Boom?’
    • Mortgage applications increased 5.4 percent from one week earlier
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The Ultimate Guide to Unique Property Appraisals

Excerpts: When faced with a truly unique property, the standard approach of pulling recent comparable sales from the neighborhood simply won’t cut it.

These properties require a real estate appraiser with a different mindset and a more creative approach to valuation.

Here’s a quick break down of exactly how unique property appraisals differ from traditional approaches:

Breaking Down the Time Barrier

One of the most common misconceptions is that we can only use recent sales. For unique properties, this simply isn’t true. Here’s why:

Expanding Geographic Boundaries

Location matters, but for unique properties, finding truly comparable homes often requires the appraiser to look beyond the immediate neighborhood:

The Bottom Line

Appraising unique properties requires breaking free from traditional constraints while maintaining professional standards.

To read more, Click Here

My comments: Good summary of the issues. Read the details plus a table comparing traditional and unique properties. Almost all appraisers appraise unique properties, if only occasionally. This is written for real estate agents, but very useful for appraisers.

I regularly hear about AMCs trying to find an appraiser to do one of these properties. They keep shopping for low fees and fast turn times. After a while they finally go with the appraiser who can do them at a good fee and reasonable turn times.

If you can appraise unique properties you have a substantial advantage over less experienced appraisers. Now is an excellent time to try doing one, especially if your business is slow now.

Read more!!

New URAR For Appraisals

Newz: New URAR, GSEs Update Appraisal Market Areas Requirements, Lender Redlining

November 8, 2024

What’s in This Newsletter (In Order, Scroll Down)

  • Claudia Says: Navigating Value Revisions in Appraisals

  • The New URAR: Embracing New Beginnings

  • $19.8 Million Cape Cod Estate Next to Kennedy Family’s Famed Hyannis Port Compound Hits the Market

  • CFPB and Justice Department Take Action Against Fairway for Redlining Black Neighborhoods in Birmingham, Alabama

  • October 2024 Real Estate Market Update: A Balancing Act of Hope and Hurdles

  • What can we expect for the future of the appraisal and the country?

  • GSEs Update Appraisal Market Area Requirements

  • Mortgage applications decreased 10.8 percent from one week earlier

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The New URAR: Embracing New Beginnings

By Jo Traut

Excerpts:

What’s New with the New URAR?

Think of the new URAR like upgrading from a basic flip phone to a modern smartphone. The old flip phone did its job—making calls and sending texts—but the new smartphone offers so much more. It’s customizable, adaptable to various apps and functions, and streamlines your daily tasks.

Similarly, the new URAR goes beyond a static, one-size-fits-all approach. It’s dynamic and data-driven, tailored to different property types and appraisal assignments, ultimately allowing us as appraisers to provide clearer and more comprehensive reports .

Why the Change?

The existing URAR has been dependable, much like an old-school flip phone. But as technology advances and standards evolve, the mortgage industry requires a more versatile tool. This redesign addresses current inefficiencies, meeting the rising demand for improved reports, as well as enhancing the experience for both appraisers and report readers.

To read more, Click Here

My comments: Read this blog post! Definitely the best practical appraisal advice I have read on new URAR. Includes links to relevant technical details.

No more 30-40 page appraisal SFR reports that is not what GSEs (and most appraisers) wanted. No more outdate “forms” reports that do not change fast enough to accommodate GSE (and USPAP) changes.

Both URAR and UAD acronyms are used in articles and references I have read. I like that the GSEs kept the same name for the reports (formerly “forms”)

URAR – Uniform Residential Appraisal Report

UAD – Uniform Appraisal Dataset

I will be writing more about the new URAR upcoming changes in future issues of this weekly newsletter and my monthly newsletter.

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$19.8 Million Cape Cod Estate Next to Kennedy Family’s Famed Hyannis Port Compound Hits the Market

Excerpts: 7 bedrooms, 7.5 baths, 9,629 sq.ft. 3 Acre lot, Built in 1914

Adjacent to the famed Kennedy Compound in the exclusive Hyannis Port enclave, the eight-bedroom mansion, known as Port View, has just become available “for the first time in a quarter century,” according to the listing.

The seaside, 9,629-square-foot residence sits right next to the home where President John F. Kennedy and wife Jacqueline Kennedy Onassis famously spent their summers sailing the waters of Nantucket Sound.

Some of the most impressive features found throughout the 26-room estate’s open floor plan include high ceilings, ornate architectural details, an imperial staircase, and six fireplaces.

“The whole interior views to the water,” she said. “It’s like being on a ship with front row ocean views. You are just drawn to it.”

Built in 1914, the Cape Cod mansion has been thoughtfully modernized over the years to retain its historic integrity.

Period details include exposed-beam ceilings and preserved mahogany inlay floors. French doors from the main living and dining areas give way to an enormous patio with waterfront views.

To read more, Click Here

To see the listing, with 28 photos, Click Here

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CFPB and Justice Department Take Action Against Fairway for Redlining Black Neighborhoods in Birmingham, Alabama

Top mortgage lender to pay a $1.9 million penalty and provide $7 million in loan subsidies

Oct. 15, 2024

Excerpts: Today, the Consumer Financial Protection Bureau (CFPB) and the Justice Department (DOJ) took action to end Fairway Independent Mortgage Corporation’s illegal mortgage lending discrimination against majority-Black neighborhoods in the greater Birmingham, Alabama area. The CFPB and DOJ allege that Fairway illegally redlined Black neighborhoods, including through its marketing and sales actions.

Fairway’s actions discouraged people from applying for mortgage loans in the Birmingham metropolitan area’s Black neighborhoods. If entered by the court, the settlement announced today would require Fairway to pay a $1.9 million civil penalty to the CFPB’s victims relief fund. Fairway would also be required to provide $7 million for a loan subsidy program to offer affordable home purchase, refinance, and home improvement loans in majority-Black neighborhoods.

To read more, Click Here

My comments: How much money did Fairway make vs. what an appraiser makes for an appraisal. More lenders in the news vs. “biased” appraisers!

Read more!!

Appraisers – Protect against Being Sued

Newz: Protect Against Being Sued, DOJ Sues Rocket Mortgage, Solidifi AMC and Appraiser, Scary Places

October 25, 2024

What’s in This Newsletter (In Order, Scroll Down)

  • Dealing with Unhappy Buyers as an Appraiser (LIA ad)
  • Protect Against Any Grounds for Suing an Appraiser with Defensible Reports
  • A Billionaire Built a Cliffside Version of Versailles. Now It’s Asking $108 Million
  • DOJ Sues Rocket Mortgage, Solidifi AMC and appraiser – Bias
  • Halloween: Paranormal/Haunted places where I live and How to find what is near you. You may be surprised!
  • Very funny Halloween appraiser cartoon
  • Ghosts Are Scary, but 95% of Americans Are More Afraid of Home Repairs (2024 Data)
  • How to Avoid Unexpectedly Buying a Haunted House—Because It Could Happen to You
  • 32 of the most haunted places in America
  • White House Ghost Stories
  • Mortgage applications decreased 6.7 percent from one week earlier
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  • Appraisal Business Tips 
    Humor for Appraisers


Protect Against Any Grounds for Suing an Appraiser with Defensible Reports

Excerpts: … appraisers can be sued for several reasons, including negligence, errors and oversight, failure to notice underlying issues, or even fraud. While lawsuits against appraisers can be serious, they are rare when compared to the number of complaints to the state appraisal boards, which are much more commonplace and can also have serious consequences.

Therefore, the best defense for a real estate appraiser against a lawsuit or an appraisal board complaint is an accurate, defensible appraisal report.

Topics include:

1. Why is it important to create a highly defensible appraisal report? Mel Black: Real estate appraisers need to be prepared when the bright spotlight comes shining down on their work. They need to be prepared for issues that arise in a board complaint or civil lawsuit…

2. To ensure their report is defensible, what should real estate appraisers focus on at the beginning of an assignment? MB: There are a number of things to consider at the beginning of an assignment. As an appraiser, you want to look at assignment selection. You want to look at your competency to handle the assignment. You want to make sure you are able to define the problem and create an appropriate scope of work.

3. Once you’ve accepted the assignment, what are some things to focus on when developing the appraisal?

4. While you’re developing the appraisal, how do you find the best comparable sales information to include to ensure it’s highly defensible?

5. How can you prepare your workfile or appraisal report for a question about adjustments for the differences between the comparable and the subject property?

To read lots more about all 8 suggestions, Click Here

My comments: Information in the blog post is from Mel Black, a Certified Residential Appraiser, licensed real estate broker, and a practicing attorney who provides regular counsel on compliance matters and other industry-related law for appraisers and brokerage services, about creating defensible appraisal reports and why they are necessary in fighting legal battles or against appraisal board complaints.

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Appraisal Reviews – Who and What

August 23, 2024

What’s in This Newsletter (in Order, Scroll Down)

  • Construction Progress Reports: ADUs & Remodels
  • What Is an Appraisal Review and Who Can Be a Reviewer?
  • Billionaire Getty Heir Puts Extraordinary Greek Temple (Temple of Wings) on the Market for $5 Million
  • Redfin Reports Investor Home Purchases Post Biggest Increase in Two Years
  • The Biggest Home in Each State
  • Objectionable Valuations Become Hate Speech, Inflating Home Prices
  • Mortgage applications decreased 10.1 percent from one week earlier

Appraisal Business Tips 

Humor for Appraisers

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What Is an Appraisal Review and Who Can Be a Reviewer?

Excerpts:

Topics:

  • What is an appraisal review?
  • Fact-checking vs appraisal review
  • Types of appraisal review reports
  • Why are appraisal reviews needed?
  • Who requests a property appraisal review?
  • Who can review a property appraisal?

The client base for appraisal reviews is vast and diverse, encompassing a wide range of sectors and needs.

  • Lenders rely on reviews to ensure the accuracy and reliability of appraisals before making lending decisions.
  • Investors use them to evaluate the value and risk of potential investments.
  • Attorneys order reviews to support legal matters involving property valuation, including disputes and condemnation cases.
  • Insurance companies use them for verifying property values in underwriting and claims.
  • Government agencies may request reviews for regulatory purposes, tax purposes, or right-of-way acquisitions.

To read more, Click Here

My comments: Comprehensive info on reviews. Short and well written. The best I have read, whether you are a reviewer or an appraiser being reviewed. Reviewing is an excellent option for fee appraisers and staff appraisers.

Personally, I quit doing lender reviews many years ago. I preferred to do the appraisal rather than reviewing an appraisal where I have to also appraise the property. Back in the “old days” I reviewed competent local appraisers I knew.

The final blow later for me was a 4 unit property where the appraiser appraised it as a home. There were 4 electrical meters and lots of cars. When I called my client, they just wanted to know if the value was the same as a house or 4 units. I did not reply. It was my last review for lending purposes. I verified with the city that it was a 4 unit property. There was no information that it had been converted to a single family home. Mortgage rates and requirements are lower for SFRs.

On the other side, many appraisers who do lender reviews say they learned a lot about how appraisers appraise.

Read more!!

Freddie Mac Appraisal Advice

Newz: Freddie Mac Insights, HUD Bias charges against Appraiser, Lender and AMC, ROV Guidance

July 26, 2024

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What’s in This Newsletter (in Order, Scroll Down)

  • Judicial Appraiser Panels
  • Appraisal Insights With Freddie Mac
  • HUD Charges Appraiser, Appraisal Management Company, and Lender with Race Discrimination
  • Agencies Finalize Interagency Guidance on Reconsiderations of Value for Residential Real Estate Valuations
  • ‘Twisters’ Begs the Question: Can You Truly Tornado-Proof a Home? A Reality Check
  • Southernmost House in Continental U.S. Is for Sale in Key West (It’s Next to the Buoy) for $18.5 million
  • Mortgage applications decreased 2.2 percent from one week earlier

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Appraisal Business Tips 

Humor for Appraisers

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Appraisal Insights With Freddie Mac

by Scott Reuter, Freddie Mac

One of the goals at Freddie Mac is to help lead the way toward a more transparent and equitable housing finance process. Across our many priorities, we’re committed to offering trends, best practices and insight to the industry. As strategies continue to develop and evolve, we believe it’s important to engage and communicate with stakeholders, so here are three key items we believe appraisers should keep top of mind in 2024.

1. More Objective Appraisals

An important component to transparency is ensuring that appraisal reports for loans sold to Freddie Mac are free of subjective or potentially biased language…

2. Market Conditions Analysis

Market conditions analysis is the backbone of an appraisal. It’s a necessary step in developing credible reports. This analysis is the study of market area conditions and the changes in price levels over time…

It’s important to note from a development perspective that market conditions must be analyzed on every appraisal assignment. Market adjustments should not be viewed as a filler adjustment. Market conditions adjustments are technically among the first modifications that should be made, before accounting for physical differences. Taking shortcuts here diminishes the reliability of the adjustments that follow and the overall credibility of the appraisal report.

3. Quality vs. Condition

While most appraisers demonstrate a solid understanding of the quality and condition ratings, Freddie Mac still sees inconsistencies in the way these are reported. As might be expected, most of the issues for reported condition fall between the definitional lines of C3 to C4 and C4 to C5.

Also, there seems to be a notion by some appraisers that a C3 condition is equal to “average.” Please be mindful that a C3 home is described as generally well-maintained and showing minimal physical depreciation from regular wear and tear. In contrast, a C4 condition applies to a home that’s adequately maintained, has slight deferred maintenance and minor physical wear and tear, and may need cosmetic or minor repairs.

The author, Scott Reuter is single-family chief appraisal officer for Freddie Mac. He is a certified general appraiser with more than 30 years of experience in valuation, appraisal and collateral risk management concerns.

To read more, Click Here

My comments: Well written and practical. Worth reading, with good tips and links for all the topics. If you do residential lender appraisals, read this article.

Read more!!

Paperless Appraisal Office?

10 Steps to a Paperless Office

By Mike Fletcher

Excerpts: If you’ve talked to appraisers who have gone digital, you know they love not having boxes of old reports and workfiles cluttering their offices, homes, and garages and not spending money on paper, toner, and other equipment. Even better, appraisers who run a paperless office often enjoy increased productivity and efficiency.

If you’re ready to enjoy the benefits of getting rid of paper, I’m sharing 10 steps to switch to a completely paperless office. While you may need to tailor this blueprint to your preferred methods and workflows, this will help you get started.

Summary

Switching to digital files and a paperless office saves you time and offers better protection for your files. Making the shift to get rid of printed documents and handwritten notes isn’t easy at first, but by going one step at a time and relying on your appraisal software’s tools, you’ll be paperless in no time.

Topics with detailed and practical advice:

1. Why do you want a paperless office?

2. Commit to change – Be aware of wanting to stay in the familiar

3. Identify your paper and how to go paperless

4. Obtain needed equipment for your paperless office

5. Determine your storage needs in a paperless office

6. Establish a new workflow in your paperless office

7. Going paperless starts small

8. Add another paperless item

9. Get trained

10. Seek out your peers

To read more, Click Here

My comments: What appraiser does not want to go paperless? No one. Read this article with lots of good advice!

Business is slow for many appraisers. Going paperless is an excellent option to consider.

This is by far the best article I have read on going paperless. It is written for appraisers, is understandable, and is not too long. The author is a veteran residential appraiser and self-proclaimed “Data Nerd.” He is currently a Senior Data Steward at Corelogic.

I have a home garage and business office full of appraisal files, plus my business records for taxes. I keep hoping someone will come in and steal all the paper and the filing cabinets

Appraisal Business Tips 

Humor for Appraisers

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

NOTE: Please scroll down to read the other topics in this long blog post on HUD bias Complaints, E&O insurance, home fire insurance, unusual homes, mortgage origination stats, etc

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Non-Arms Length Sales for Appraisers

What Does Arm’s Length Mean in Real Estate?

The 7 Sale Types Explained

Excerpts: An arm’s length sale – a sale in which the buyers and sellers act independently and in their own self-interest is the most common type of real estate transaction. However, there are six other types of real estate transactions that you need to know about so you can specify these sale types in your appraisal report as they can affect the market value of the property.

A non-arm’s length sale in real estate is a transaction between a seller and buyer who have a connection by marriage, family, work, etc. Because of their relationship, each party may not be acting in their own best interests. Therefore, the final price may not reflect the market value of the property.

The type of sale can provide some clarity into whether the transaction was (or currently is) an arm’s length transaction, whether a comparable sale should be used, or whether an adjustment is warranted for the terms of sale for a comparable. By knowing the type of sale, you are better able to reconcile a current opinion of market value that falls above or below a current or recent transaction for the subject property.

For appraisals required to be Uniform Appraisal Dataset (UAD) compliant, you must indicate the type of sale for the transaction. You may report any other relevant information regarding the sale type in the appraisal report, including whether more than one sale type applies.

Non-arms length sales include: REO, Foreclosure, short sale, court ordered sale, estate sale and relocation sale.

To read more, Click Here

My comments: We all see comps that seem to sell below market. This post’s information can be very helpful in explaining why. It’s a good discussion of this topic.

I have done a lot of estate appraisals. Some estate sales occur when the beneficiaries just want to get rid of the property and don’t want to fix it up for sale. I always tell them that the sales price will be reduced.

I have also done many relocation appraisals, done before the home is listed. You are “graded” on how close you come to the sales price. I sometimes see low sales for various reasons.

What should appraisers look for in a sales contract?

Appraisal Business Tips 

Humor for Appraisers

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

NOTE: Please scroll down to read the other topics in this long blog post on agent concessions, History of appraisal bias back to 1930s, “one mile” rule and bias, unusual homes, mortgage origination stats, etc.

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