What is a residential complex property?

By on December 23, 2022   /   adjustments, appraisal how to, george dell, humor   /   Leave a comment
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How to Identify a Residential Complex Property

By: McKissock December 16, 2022

Excerpts: The property to be appraised is atypical

In this case, the property is an outlier, oddball, or not common for the particular area. Of all the characteristics that can make a property complex, physical features are the ones that are most obvious. Some of the key physical features that can make an appraisal assignment complex include:

The form of ownership is atypical

In this case, circumstances involving ownership are uncommon or make the appraisal more complex. For example: The owner doesn’t own property rights on a waterfront property.

The market conditions are atypical

In this case, unique market conditions increase the complexity of the appraisal. For example:

The property is located in an area where there are no other sales.

There is no market for the house; no sales are occurring for some reason (e.g., the property is near a nuclear site cleanup).

Note: the link to the complementary post, “How to Pull Comps on a Complex Property,” is included in this blog post.

To read more, click here

My comments: Worth reading with good tips. I published “Tips for dealing with complex residential appraisals” in the November issue, much longer with many more tips and examples.

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More Crazy Appraiser Stories!

By on November 25, 2022   /   appraisal forms, appraisal how to   /   Leave a comment
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More Crazy Appraisal Stories!

Excerpt:

Restraining Orders & Appraisals – Never a Great Mix

Eric VanderWaal

The majority of my appraisal work is on divorces and estates, both of which have their fair share of crazy stories.

I was appraising a home for a divorce several years ago. The husband had contacted me for the appraisal, but it was the wife who was living in the home. We met at 9:30 am, which was an odd time that he requested. When I arrived at the home, he said that she wasn’t home and had locked all the doors, so he called a locksmith to come to open the back door. The locksmith arrived shortly and started to work on the backdoor. The husband said that his wife was aware of the appraisal appointment and should have left the home unlocked.

I started on the outside and about ten minutes later, a woman comes to the backyard where the husband, myself, and the locksmith were and starts yelling at the husband about him not being allowed to be there. I thought it was the wife, but it turned out to be a neighbor. The wife was at an appointment which is why, I figured out, that he wanted the appointment at 9:30 am rather than 10:00 am. After several minutes of the husband and neighbor yelling at each other, the locksmith got the back door open. The neighbor left and we went inside…

To read more, click here

My comments: We all have these stories ;> Divorce is the best non-lender option for residential appraisers. Very little competent competition and very high fees for expert witness testimony.

You will probably be going up against an MAI. Your attorney says to the MAI: How many house appraisals have you done this year? Answer: 4. Your answer: much more than 4! Your attorney is happy at winning the case, and you get lots more divorce work.

I will be writing about this in an upcoming issue of the monthly Appraisal Today, with lots of marketing and expert witness tips.

Many thanks to Appraisal Buzz for the image above. My favorite appraiser image ;>

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Cost Approach – When to Use in Appraisals

By on August 26, 2022   /   appraisal business, appraisal how to, bias, cost approach, Fannie, george dell, non-lender appraisals   /   Leave a comment
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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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So Many Appraisal Cost Approach Questions

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How Do Driveways Affect Appraised Value?

By on December 10, 2021   /   adjustments, appraisal, appraisal business, george dell   /   Leave a comment
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What’s The Size of Your Driveway?

By Jamie Owen
Excerpt: It really depends on how the appraiser is looking at it. Are they reporting the width of the driveway, the depth, or how many cars can fit on the driveway?
Most appraisers reflect the width of the driveway. Why? For one thing, many lenders prefer the driveway size to be reported this way. This is likely because it is less subjective. For instance, if the appraiser reports the driveway size based upon the number of cars that can fit on it, what kind of automobile are they using for their measurement? After all, a driveway may be able to accommodate a larger number of smaller cars than bigger ones.
Does it affect value? As is the case with nearly every aspect of a home, the answer is, it depends.
For instance, in high-density neighborhoods where street parking is limited, the size of the driveway could make a difference in value. On the other hand, in other high-density neighborhoods, many homeowners may use public transportation. If this is the norm for the neighborhood, the size of the driveway may not have any impact on value.
To read more and see fun animated gif, click here
My comments: Worth reading. Lots of topics are covered. Check out the fun animated gifs, etc.
In San Francisco, for example, off-street parking is at a premium in many neighborhoods. My brother bought a house 25 years ago with no off-street parking (primarily single family homes). I warned him, but he really wanted the house. It was a hassle then, but now, it is very difficult to find parking as many neighbors rent rooms to tenants with cars.
A significant issue with ADUs is where will the car(s) park? Will they take up the neighbors’ on-street parking?
I moved to San Francisco in 1968 and worked in a lab 20 miles away. The closest parking was 2-3 long blocks away when I got home from work. I moved from Tulsa, OK, where there was lots of parking everywhere. I never lived in a place without off-street parking again!
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Fannie Requiring Appraisal Floor Plans Coming?

By on November 26, 2021   /   appraisal business, george dell, humor, liability, real estate market   /   Leave a comment
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Are Floor Plans in Your Future?

By Dave Towne
Excerpts: In the Selling/Servicer Guides of FNMA and Freddie Mac, both GSE’s identify a ‘sketch’ to be a diagram of the subject as measured by the appraiser which shows exterior walls, and includes the dimensions. That’s it. They don’t even say that room labels are needed, but most appraisers include those.
Including a ‘sketch’ in reports as an exhibit is an additional Assignment Condition, beyond what USPAP requires in Standard 2, per the Assumption and Limiting Conditions on the residential forms. Both GSE’s require a more detailed diagram including interior wall locations when interior design abnormalities are discovered, and reported – which they call a “Floor Plan”.
I’ve talked with representatives from both GSE’s recently. Their line of thinking, at the present time, is a “Floor Plan” should be provided as an exhibit in the appraisal report even though the report signing appraiser was not physically present at the subject property when data was gathered. Their line of thinking is also slanted to having third parties provide the subject property data, believing appraisers are more valuable as ‘analysts instead of as observers and detailers of the property characteristics.
Thus the evolution to the new 1004 (Desktop) and 1004 (Hybrid) report forms, with different Scope of Work and Assumption and Limiting Condition statements in each version. (These forms are in your software forms package now.)
To read more and watch the video, click here
My comments: Read this post, watch Danny Wiley’s remarks in a video, and read many appraiser comments. Quite a while ago, Fannie started requiring detailed floor plans. This did not last very long, but I continued doing rough floor plans manually. I still do them but do not include the floor plans in the appraisal sketch. It keeps me from missing a small room, bathroom, etc. Of course, when there are floor plan functional problems, I put the details in the appraisal sketch. In my area, tandem rooms are common (usually from additions). They cannot be included as bedrooms.
When I used to do relocation appraisals, I always included a full interior floor plan with walls and doors. This was standard practice in my area. Doing an interior floor plan with walls and doors takes a lot of time, both measuring and using my sketch software.

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What AMCs Say to Appraisers and How to Respond

By on July 9, 2021   /   adjustments, AMCs, appraisal how to, E&O, Fannie, FHA, george dell, square footage   /   Leave a comment
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What AMCs say to appraisers and How to Respond

By Steven W. Vehmeier

Excerpts: A student contacted me with the following dilemma concerning an Appraisal Management Company (AMC) request: “I told the Management Company that I cannot mark the Zoning Compliance as ‘Legal’ if the report is marked “as-is,” because this would not be true for the current “as-is” condition of the subject on the effective date of the appraisal. The AMC insists that as long as I disclose in the addendum that the zoning is currently ‘illegal,’ then I can mark on the first page as ‘Legal.’”

Taking the matter to the source can be accomplished by: 1) personal research of the appropriate documents, which is sometimes faster, or 2) emailing the controlling entity for their official answer. Notice I didn’t say to phone them. I want the answer in writing to pass on to the client/AMC.

To read more, click here

My comment: Some Most Excellent and practical tips!! My bottom-line advice: Fire the AMC! We all know there is always another AMC that is desperate for appraisers today. Now is a good time to shop for one that is easy to work for. You could check in appraisal online groups to see what they say. If they are not competitors, hopefully, you can get some good ideas. Be sure to post your location.

What to Do When Your Appraisal Is Under Review

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Bias in Housing is Not Appraisers’ Fault

By on June 25, 2021   /   george dell, rental market, statistics, USPAP   /   Leave a comment
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Racial Bias in Real Estate: Is it the Appraisers’ Fault?
The best analysis I have ever read. 

By Maureen Sweeney, SRA

Bias in Housing is Not Appraisers’ Fault

Excerpt: The appraiser must be independent, impartial, and objective. In a mortgage transaction, the appraiser evaluates the property that is to be used as collateral in a mortgage finance transaction. The appraisal is provided to the lender, who uses the appraisal as one of the many criteria used to underwrite the loan and determine if a mortgage loan will be funded or not. Contrary to what some may believe, the appraiser does not make underwriting or lending decisions.

Discrimination, including the long list of anti-cultural, anti-national, and anti-ethnic terms, is a multi-layered, multi-cultural, and multi-generational issue. The systematic, historic, and institutional causes of the various business and government policies and practices need to be addressed and cured. We do not blame the doctor for a cancer diagnosis.

We do not blame the journalist as the cause of the natural disaster that is reported on the evening news. Why is the appraiser blamed for reporting on the real estate market?

To read more, click here

My comment: By far the best, understandable analysis I have read. No whining or ranting. Many appraiser comments and forwarding. Comprehensive post with many references. I had not heard about some of the references. Appraisers are not the problem. We have been told for many decades to be knowledgeable and aware of Fair Housing issues.

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Working with difficult appraisal clients

By on July 24, 2020   /   ADUs, appraisal business, Coronavirus, george dell, Mortgage applications, square footage, unusual homes, zillow   /   Leave a comment
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Advice for Working with Difficult Appraisal Clients

Excerpt: Even if the bulk of your appraisals are fairly cut and dried, and require minimal interaction with a human client, any appraiser will occasionally have to work with a difficult client. The assignment might require you to work with a specialty property that is hard to appraise, or with a client who is personally disagreeable, or exceptionally exacting, or who has an agenda that you don’t understand or can’t go along with. Here are some tips for working with difficult clients. Three of the topics:

– Working with AMCs and banks: Time management

– Working with non-lenders: Expectations management

– Deal with complaints immediately

To read the tips, click here

My comment: Some great, practical tips!! Maybe I will try some of them instead of Firing clients, my most popular option ;>

My motto: Appraising would be great except for the darn clients!!

Which Appraisal Clients are used the most?(Opens in a new browser tab)

What to Do When Your Appraisal Is Under Review(Opens in a new browser tab)

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What is “retirement” for appraisers?

By on December 13, 2019   /   appraisal business, bifurcated appraisals, george dell, hybrid appraisals, Mortgage applications, unusual home, va   /   Leave a comment
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Appraising in Retirement

by Isaac Peck

Excerpt: According to the Appraisal Institute’s latest Valuation Professional Factsheet (Dec. 2018), over 70 percent of all licensed or credentialed appraisers across the U.S. are over 50 years old, with over 20 percent being over 66 years old. As appraiser demographics continue to shift older and grayer, some within the industry have predicted sharp declines in the number of practicing appraisers as they begin to retire. However, as the numbers show, appraising appears to be an optimal career to continue part time, in retirement.

Melvyn Wolf, a Certified Residential appraiser, licensed in Illinois and Wisconsin, is one such appraiser. Born in 1942, Wolf is 77 years old and has been a real estate appraiser for 33 years. He says he will continue appraising as long as he is physically fit and in good health. Here’s his story.

To read more, click here

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My comments: The July 2018 issue of Appraisal Today had my article: “Retirement for fee appraisers: when, why, and lots of options”. I discussed when to take social security, fixed costs, burnout, spouse retirement, etc. Also, for self employed people what does retirement mean? For appraisers, including myself, often you gradually cut back on appraisals. I am 76 and started Social Security at age 70. It is currently $3,470 per month and 85% taxable. It goes on top of my business income and puts me in a high marginal tax rate. I can’t cut back easily on my newsletter business, so I do fewer appraisals. What is “retirement” for appraisers?

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What is “retirement” for appraisers??

An Appraiser’s Full Circle

By Mike Foil

Excerpt: A couple of years ago, I asked my brother who had just closed his business, “How do you know when you are done and it’s time to retire?” He answered, “When it is time, you will know.”

There are considerations: health, finances, what to do, and the passion you still have for appraising. I’m turning 70 in a few months and enjoy good health. We see a path financially without the need for appraisal fees; however, having just received payment for the last file in accounts receivable did put a stamp of finality on the decision. I have ‘projects’ to work on: thinning trees and brush on four acres I want to split into three building sites, writing a study on “The Salvation of the Soul,” and family time (wife, kids, and 16 grandkids). As for my passion for appraising, it is gone.

To read more, click here

Appraisal Business Tips 

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Covid-19 Residential Appraisers Tips on Staying Safe

Appraiser retirement plans?(Opens in a new browser tab)

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Join the National Appraisers Online Forum

By on November 8, 2019   /   Appraisal fees, bifurcated appraisals, Fannie, fees, george dell, Mortgage applications, weird properties, zillow   /   Leave a comment
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National Appraisers Forum

By Dave Towne

Excerpt: Appraisers, if you would like to learn from highly qualified peers (other than me! :), post questions, or offer your own comments, consider joining the FREE group, National Appraisers Forum (NAF). Use this link.

This is one of the best appraiser groups as all commentary is respectful. While not everyone always agrees with certain points, the discussions are not demeaning. There is a wealth of info participants share freely on a wide number of topics. The group has several moderators who monitor the posting activity.

One key point, NAF participants are not anonymous. You must use your name (at a bare minimum) when participating, which is required when signing up… Moderators are asking that anyone who wants to join should give their name as licensed, the state they are in, and their license number.

To read more, click here

My comments: This is my favorite appraiser online group! I get many emails from various sources for this newsletter and have been a member of many online communication places. Before the internet was widely available, I hosted live chats on aol and compuserve. Since then I have watched many online places. Unfortunately, just like any other topic, sometimes the groups end up doing lots of “flaming” (attacking another participants, etc.), negative comments, off topic, politics, etc. I quit going to these places.

Of all the groups I have subscribed to, National Appraisers Forum is the best for me. I have been a member since it started, or soon after. No complaining about AMCs, off topic, trolling and flaming, etc. The founder, Steve Smith, and the moderators keep it this way. Regular contributors are “high end” appraisers with many years of experience. Hot topics are often discussed.

There are well-managed appraisal groups on Facebook, but it is too hard for me to follow the threads, so I don’t go there very often. But, it may work for you. Join the National Appraisers Online Forum!

Another major factor is that you must use your real name, so we know who is commenting. Allowing anonymous postings can easily decay into a mess.

I will be updating my article ” How to connect with other appraisers online. What’s the best group for you? ” in a future issue of the paid Appraisal Today discussing other email chat groups, how to find other groups or start your own, Facebook, etc.

Appraisal Business Tips 

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Covid-19 Residential Appraisers Tips on Staying Safe

How to communicate with appraisers online

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