Posts Tagged liability

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Appraisal Obsolete? Now or in the Future?

Appraisal Comps in Lopsided Markets

By Ann O'Rourke on February 11, 2022 / ANSI, appraisal, liability, USPAP / Leave a comment

Tags: ANSI, appraisal how to, liability, USPAP

Different colorful shapes wooden blocks on beige background, flat lay. Geometric shapes in different colors, top view. Concept of creative, logical thinking or problem solving.

Choosing comps in a lopsided market

By Ryan Lundquist

Excerpt: QUESTION: With so many listings receiving offers above list, and people having to pay the shortfall between the appraised value and the contract price, how do appraisers look at comps? If a property sold at $580,000, but it actually appraised for $547,000, and the buyer paid the difference, which number do you use? $580,000 or $547,000?

ANSWER: Here are a few things on my mind.

1) Weigh the comps:

In any market (not just today), we have to weigh the comps. Or another way to say it is, we have to appraise the comps so to speak. What I mean is if something clearly sells for too much, it’s reasonable to give that property less weight in our analysis. Likewise, if a property sells for too little, we might also give less weight to that sale. Granted, selling for too little isn’t as common lately, but in past markets we regularly considered whether short sales or bank-owned sales sold below market value.

2) One sale doesn’t make or break the market:

It’s important to note one sale doesn’t make or break the market. This means one lofty “lone ranger” sale doesn’t all of a sudden mean the rest of the market will go to that level. This would be like saying that record-breaking $7M sale in Shingle Springs from August will pull the rest of the market up. Nah, I don’t think so. Or Zillow buying a house for $40,000 more than the comps will cause the rest of the market to rise. Nope. If one sale closes at $580,000, but the rest of the market is below $550,000, we won’t arbitrarily accept $580,000 as the new neighborhood price threshold. The same would hold true if a different house sold at $450,000. This one “low ranger” (sorry) won’t automatically drag the rest of the market down.

To read more plus lots of comments, click here

My comment: Some good comments and tips for this crazee market!!

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Appraisals Obsolete Now or Later?

By Ann O'Rourke on December 3, 2021 / appraisal business, Fannie, FHA, liability, zillow / Leave a comment

Tags: appraisal business, Fannie, FHA, liability, zillow

Is Appraisal Obsolete?

By George Dell SRA, MAI, ASA, CRE

Excerpt: Obsolete! Such a harsh word. Can it be?

Is the problem convolution?

Does it mean I will soon be obsolete? Not needed? Not loved? Terrible. What can be done?

Yet all the little signs are pointing that way. “Automated” valuation models have much of the market, and continue to gain. Other valuation methods and appraisal exempted transactions continue to grow. Evaluations, desktops, hybrids, auto-measurements, non-appraiser inspections, broker opinions.

To read more, click here

My comment: Another different perspective from George Dell! Check out “Appraisal startup Aloft closes $20M Series A” above! Not the first, and not the last, appraisal-related company to get millions in funding. Who needs experienced field appraisers when we have AVMs, hybrids, etc.?

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Fannie Requiring Appraisal Floor Plans Coming?

By Ann O'Rourke on November 26, 2021 / appraisal business, george dell, humor, liability, real estate market / Leave a comment

Tags: appraisal business, George Dell, humor, liability

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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Top Ten Reasons Why It Is Great to be an Appraiser Humor

Haunted House Appraisal Adjustments

By Ann O'Rourke on October 29, 2021 / adjustments, appraisal forms, FHA, liability, real estate market / Leave a comment

Tags: adjustments, appraisal forms, Fannie forms, FHA, liability, real estate market

Inspired by Italy, a Conical Home in Indiana

Excerpt: On the market for $424,900, the home consists of two main silolike buildings with shake conical roofs. Inside the round compound is a total of 3,111 square feet of living space.

The design was inspired by the trulli homes of the Itria Valley in Puglia, Italy. They were typically built from limestone and had conical roofs. The structures were chiefly designed as temporary shelters or storage areas in the 19th century. Today, they endure as charming residences in southern Italy. Back in Indiana, this home’s architect, Evans Woollen, combined details from trulli homes into his design.

“The house is a midcentury version of a 200-year-old village in Italy,” Landrigan says.

To read more and see lots of photos, click here

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Sewer vs. Septic for Appraisers – Don’t get into trouble!

By Ann O'Rourke on October 22, 2021 / appraisal business, Fannie, Fannie Forms, Freddie, lender appraisals / Leave a comment

Tags: appraisal business, Fannie forms, liability

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NOTE: Please scroll down to read the other topics in this long blog post on unusual homes, Fannie new desktop form, GSEs to use desktops for purchases loans, Time management, Freddie Secret, Liability, mortgage origination stats, etc.

Market Decline Coming for Appraisals?

By Ann O'Rourke on September 10, 2021 / appraisal, Appraisal Subcommittee, humor, liability, real estate market, time adjustments, USPAP / Leave a comment

Tags: adjustments, humor, liability, real estate market, USPAP

Is There a Market Correction on Its Way?

by Steven W. Vehmeier

Excerpt: When will the market correction arrive?

I have no idea, but there will be warning signs, and that’s what this blog article is about. Fluctuations in market activity are common, but unseasonal and ongoing changes of any of the signs listed below can often be red flags. Additional indicators can be some of the factors that led up to the last market bust; there are plenty of articles online with which to familiarize yourself.

What will be the early signs?

Some early warning signs of housing market correction are:

A) Listing inventory in MLS starts to climb steadily. Increasing inventory is generally a sign that buyers have stopped buying (due to prices being too high or a lack of consumer confidence), or there are just fewer ready, willing, and able buyers in the marketplace.

B) Days on Market for listings increase. This event is usually linked to item (A) above.

C) Listing prices begin to stabilize, and reductions in listing prices become more common, which is a sign the market is becoming saturated…

So many appraisers missed the early signs in the last boom’s bust that resulted in claims (valid or not) of over-valuations followed by lawsuits, E&O insurance claims, and regulatory disciplinary actions. Maybe this time, we should pay closer attention to the indicators…

To read lots more tips, click here

My comments: Most Excellent list of what to look for. Very comprehensive. I have been appraising during many up and down cycles in Northern California, starting in the late 1970s at 2%+ per month, followed by a crash in 1980 when interest rates went up to 15%+. Those were the days when lenders told appraisers not to make time adjustments!! Even though we don’t like the 1004mc, it forced lenders and appraisers to look at price changes.

No one knows when the increasing market peaks, but there are signs of a decline, listed in the blog post above. I sold my house in March 2008 and did not anticipate the market crash a few months later. I was very lucky. There had been some modest price declines for about 6 months previously.

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The future of residential appraising

Appraising vs. the Public Good?

By Ann O'Rourke on June 4, 2021 / appraisal, appraisal business, bias, cost approach, liability, trainees, USPAP / Leave a comment

Tags: adjustments, appraisal, appraisal business, appraisal how to, bias, cost approach, liability, new appraisers

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.

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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.

Appraisal Process Challenges(Opens in a new browser tab)

So Many Appraisal Cost Approach Questions

By Ann O'Rourke on August 21, 2020 / appraisal business, COVID, hybrid appraisals, Mortgage applications, Reviews, state appraiser regulators, statistics, unusual home, unusual homes, va / Leave a comment

Tags: appraisal business, Coronavirus, cost approach, liability, state appraiser regulators, unusal homes

So Many Appraisal Cost Approach Questions!
So Few Answers! Such Low Fees!

By Tim Andersen, MAI

Excerpt: It is clear most appraisers do not like to do the Cost approach. Generally, we are not too familiar with it. So, it is clear that most appraisers, because of this, do not appreciate the deep analytical power the Cost approach really has. So Many Appraisal Cost Approach Questions!

Therefore, I’m going to ask you 10 questions on the Cost approach (and stuff related to it). After you’ve finished reading them, you probably will still not like to tackle the Cost approach. Nevertheless, you just may have a better understanding of, and appreciation for, its powerful analytical capacities.

First Question: On the 1004 form is the indication that Fannie Mae does not require the Cost Approach to Value. Where does the form instruct the appraiser not to complete the analytics of the Cost approach?

To read the other questions and answers click here

My comment: Appraisers, including myself, seem to have a love/hate relationship with the Cost Approach. But, it can be useful. Tim’s much longer article “But Fannie Mae says I don’t have to do the Cost Approach!!” will be in the September issue of the paid Appraisal Today.

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

https://www.realtor.com/news/trends/couple-list-home-for-1

5-17-18 Newz//New Fannie Forms. Appraisal Waiver saves up to 2 weeks. Golden State Killer House Survey

By Ann O'Rourke on May 17, 2018 / adjustments, appraisal how to, Appraisal Qualifications Board, appraisal waivers, hybrid appraisals, real estate market, unusual home, unusual homes / Leave a comment

Tags: adjustments, appraisal how to, Appraisal Qualifications Board, appraisal waivers, Fannie forms, liability, strange house, unusal homes

Advertise with us. Very reasonable rates!

$1 listing prices

Excerpts: A $1 house listed in Edmond, OK, has stirred up a huge hubbub among home buyers, home sellers, real estate agents, and others: Come on, is that even real? There must be a catch.

In other words: After less than a week, the home is under contract. While Hukill won’t share specifics until the deal is officially done, he says, “we ended up a little bit above what the sellers initially thought they’d get.”

Which begs the question: Should more home sellers consider pricing their home at $1?

My comment: interesting discussion of the pros and cons.

Appraisal Waivers save up to 2 weeks time

From Fannie Mae’s May 15 2018 Selling News

Save your borrowers time and money with a PIW

Did you know that a property inspection waiver (PIW) can save you up to two weeks in loan cycle time while saving your borrower the expense of an appraisal? A PIW can both reduce costs and shorten the loan origination process by eliminating the need to obtain and review an appraisal, removing the chance of any appraisal-related delays.

Exercising a PIW offer will also give you Day 1 Certainty®, freedom from reps and warrants on property value, condition, and marketability. Learn more about these benefits and more on the PIW page.

Link to Selling News:

My comment: And I was thinking that Hybrid Appraisals were a big market… No way to beat No Appraisals…