Posts Tagged non-lender appraisals

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Top 10 Things Appraisers Wish Real Estate Agents Understood

McKissock Survey

Excerpts: Survey question: “What’s one thing you wish real estate agents knew about the appraisal process?”

Based on the answers we received, appraisers wish that agents knew the following:

The appraisal process is complex and takes time
Appraisers do not assign value
Appraisers are unbiased and must follow guidelines
Appraisers need their input and cooperation
How to select appropriate sales comps
The importance of providing accurate and detailed info in their listings
How to determine correct GLA (gross living area)
How renovations and upgrades affect value
How to prepare for the appraisal appointment
FHA/VA/USDA guidelines

Sample appraiser answers:

“How complex it really is. We don’t just pull numbers out of the air—they are market supported adjustments backed by ‘many angles“

Some brokers regard the appraiser as an adversary, who potentially can ruin their deal and end up without commission. They should learn that the appraiser is neutral and cooperating can be a benefit.”’ of research.”

“Entering an occupied home without agent or home owner present is a liability issue for appraisers—[we] need someone present to observe what we do.”

To read more, Click Here

My comments: Read the blog post and maybe get some good ideas for answering agent questions!

Many years ago a top local agent asked me why I was driving around taking photos. I explained they were similar homes (comps) I may be using in an appraisal. I realized she did not know much about what appraisers do.

When I started my appraisal business in 1986 I did presentations at all the local real estate offices, usually during their marketing meetings. I explained what appraisers do and how agents and appraisers can work together. They liked the information.

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Carmel’s Iconic and Artistic ‘Owl House’ $3,750,000

Excerpts: 3 bedroom, 3 bath, 1,700 sq.ft., 8,100 sq.ft. lot, built in 1976

This architecturally significant home known as The Owl House was the only house in Carmel-by-the-Sea designed by renowned architect, Mickey Muennig, offering a terrific downtown location with Muennig’s unmistakable Big Sur style. The nautilus-influenced redwood structure bears elements of his emergent style that can be seen in his work that followed, including Post Ranch Inn.

The circular windows, unique shaped doorways, and meticulous handmade detailing throughout the interior is an impressive work of art from every angle.

The Owl House was recently acquired by acclaimed landscape architect Bernard Trainor of Ground Studio Landscape Architects and has undergone an extensive restoration.

To see the listing with very interesting 37 photos and virtual tour plus a 3D tour, Click Here

My comments: I have been to Carmel By The Sea many times. A Very Special City, with no street numbers and many homes with names.

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Housing Market Update: August 2024

By Kevin Hecht

Excerpts:

Mortgage rate trends

Mortgage rates have been on a downward trend, with the 30-year fixed-rate mortgage averaging 6.35% as of late August 2024, the lowest level in 16 months (Realtor.com). This decline is largely attributed to the anticipated rate cuts by the Federal Reserve, which are expected to further reduce borrowing costs in the coming months. However, while lower rates are encouraging, many buyers are still waiting for more significant reductions before re-entering the market.

Summary and focus for real estate appraisers

As the real estate market navigates through these challenging times, real estate appraisers must stay informed about the latest trends in home sales, prices, and economic indicators. The fluctuations in the market underscore the importance of thorough and up-to-date appraisals.

Appraisers should focus on understanding regional market dynamics, the impact of employment trends on housing demand, and the potential influence of mortgage rate movements on buyer behavior. Additionally, it is crucial to keep a close watch on the Federal Reserve’s actions, as their decisions on interest rates will significantly influence the broader economic environment and the housing market.

By staying ahead of these trends, appraisers can provide valuable insights that help their clients make informed decisions in a volatile market.

To read more, Click Here

My comments: Short and worth reading. Written by a very knowledgeable appraiser who is also an economics instructor.

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How to use less gasoline and save money today!

In the 9-24 issue of Appraisal Today

Excerpts:

Summary of ways to decrease your fuel consumption

• First step: (and most important) step: Start recording your gas mileage. Easiest

way? Use your trip odometer. Calculate to check your your Miles per Gallon

(MPG).

• Second step: Do you drive aggressively and not know it?

• Third step: How long are you sitting still at red lights?

• Fourth step: Keeping moving in traffic congestion.

• Fifth step: Slowly accelerate after stops.

• Sixth step: Your cruise control saves gas (but not by using it the way you might think).

Hang with the trucks

Ever notice how, in bad traffic jams cars seem to constantly speed up and

slow down while trucks tend to roll along at the same leisurely pace? A constant speed keeps shifting to a minimum – important to those who have to wrangle with those ten speed truck transmissions. But it also aids economy, as it takes much more fuel to get a vehicle moving than it does to keep it moving.

Rolling with the big rigs saves fuel (and aggravation) and is safer than going

in and out of lanes, speeding up and slowing down.

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Please! Not Another Highest and Best Use Question?!

By Timothy Andersen, MAI, MSc., CDEI, MNAA

Excerpts: QUESTION: When it comes to the highest and best use of an existing single-family residence, how do I go about supporting my conclusion that it is financially feasible? It’s already built, so what difference does it make about the feasibility of its construction as if new!? Is not highest and best use a jaywalking-thing when state appraisal boards should be going after bank robbers!? This all seems silly to me!

You are right! It is silly to worry about the financial feasibility of new house when the subject improvements are already up and seasoned. And the reason such an analysis is silly is because, in the context of USPAP SR1-3, or financially feasible in the context of highest and best use in the 15th ed of The Appraisal of Real Estate, that is not what financial feasibility means in the context of an already-existing house.

To read more, Click Here

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Appraisal Regulation Compliance Council (ARCC) Exposes Disturbing AMC Violations

ARCC recently published a detailed breakdown to the Consumer Financial Protection Bureau, which showed the median average AMC fee being charged to borrowers amounted to a staggering 65% of the total appraisal fee, with one AMC extracting as much as 84% in pure profit.

Below is an excerpt from full list, available in full with larger font on Page 14 (last page) of the Document sent to CFBC. In the blog post.

$AMC $appraiser $AMC Profit %Profit Tech feeAppraisal Regulation Compliance Council (ARCC) Exposes Disturbing AMC Violationsisal Regulation Compliance Council (ARCC) Exposes Disturbing AMC Violations

Excerpts: Driven by a non-partisan mission, ARCC has spent the last two years diligently collecting, vetting, and organizing comprehensive data on lender appraisals conducted by Appraisal Management Companies (AMCs).

Their meticulous research has uncovered a disturbing pattern of violations of key regulations intended to protect consumers, including the Appraiser Independence Rules (AIR), the Uniform Standards of Professional Appraisal Practice (USPAP), the Truth in Lending Act (TILA), and Title XIV of the Dodd-Frank Act. Alarmingly, these violations are often disguised under the pretense of a so-called “firewall” that is meant to safeguard appraiser independence.

To substantiate these concerns, ARCC recently published a detailed breakdown to the Consumer Financial Protection Bureau, which showed the median average AMC fee being charged to borrowers amounted to a staggering 65% of the total appraisal fee, with one AMC extracting as much as 84% in pure profit.

The Appraisal Regulation Compliance Council (ARCC) is a crucial non-profit organization that specializes in providing fact-based research and expertise on the complex web of appraisal regulations and compliance issues. Driven by a non-partisan mission, ARCC has spent the last two years diligently collecting, vetting, and organizing comprehensive data on lender appraisals conducted by Appraisal Management Companies (AMCs).

To read more of this blog post and over 70 appraiser comments, Click Here

To read more about ARCC, Click Here

Note: There is limited info now on their website, but worth checking out.

My comments: If you work for AMCs or want more “insider” info, read/skim the the full 14-page document with many very interesting details and other documents sent to CFPB in the blog post, which includes a fascinating view of AMCs. Letters to and from appraisers and within the AMC, etc.

The table above has been online for a few weeks, thanks to Dave Towne. I did not know much about ARCC except a from a few people who knew the Chairman.

Why would a lenders care about AMCs and do all this research? Lenders are paying very high fees to AMCs shopping for the lowest appraisal fee, assuming all appraisers are equal.

Of course, AMCs do not always have so much profit on an appraisal. Sometimes they lose money.

My opinion: AMCs are destroying residential lender appraising.

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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, Click Here.

Note: I publish a graph of this data every month in my paid monthly newsletter, Appraisal Today. For more information or get a FREE sample go to www.appraisaltoday.com/order Or call 510-865-8041, MTW, 7 AM to noon, Pacific time.

My comments: Rates are going up and down. Many appraisers are not busy. Some are busy, usually with non-lender appraisals.

WE ARE ALL WATING FOR MORTGAGE RATES TO DROP AND REFIS GO WAY UP!

Mortgage applications increased 1.6 percent from one week earlier

WASHINGTON, D.C. (September 4, 2024) — Mortgage applications increased 1.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending August 30, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 1.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 0.2 percent compared with the previous week. The Refinance Index decreased 0.3 percent from the previous week and was 94 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 4 percent lower than the same week one year ago.

“Most mortgage rates moved lower last week, with the 30-year fixed rate edging down slightly to 6.43 percent. Purchase applications increased more than 3 percent over the week and are inching closer to last year’s levels, with government purchase applications leading the increase,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Refinance applications were slightly down but continued to show strong annual gains as borrowers with higher rates have been refinancing to lower their monthly payments. Similar to purchase activity, refinance activity has picked up across the various loan types.”

Added Kan, “The refinance share of applications averaged almost 46 percent in August, the highest monthly average since March 2022.”

The refinance share of mortgage activity decreased to 46.4 percent of total applications from 46.6 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.5 percent of total applications.

The FHA share of total applications decreased to 14.6 percent from 15.3 percent the week prior. The VA share of total applications increased to 16.7 percent from 15.9 percent the week prior. The USDA share of total applications remained unchanged at 0.4 percent from the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.43 percent from 6.44 percent, with points increasing to 0.56 from 0.54 (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 $766,550) decreased to 6.73 percent from 6.75 percent, with points decreasing to 0.35 from 0.39 (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 6.30 percent from 6.36 percent, with points remaining unchanged at 0.80 (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 increased to 5.98 percent from 5.88 percent, with points decreasing to 0.64 from 0.68 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 5/1 ARMs remained unchanged at 5.98 percent, with points increasing to 0.76 from 0.65 (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

Email: ann@appraisaltoday.com

Online: www.appraisaltoday.com

Tools To Support Appraisal Adjustments

By Ann O'Rourke on May 17, 2024 / data, liability, real estate market, state appraiser regulators / Leave a comment

Tags: adjustments, appraisal how to, non-lender appraisals, real estate market

What Tools Do You Use to Support Your Appraisal Adjustments?

By McKissock

As part of our monthly survey series, we asked our community of real estate appraisers, “What tool(s) do you use to support your appraisal adjustments?” Respondents were allowed to make multiple selections and write in their own answers as well.

Popular tools include Synapse by Spark, Solomon Adjustment Calculator, and Redstone by Bradford Technologies. The majority of respondents said they use a combination of various tools and methods, such as paired sales analysis.

We’ve included “paired sales/matched pair analysis” in the list as well, even though it’s a method rather than a digital or appraisal software tool, because it was mentioned by so many appraisers.

A few sample appraiser comments:

“I am capable of determining the adjustments without any software. I look at the MLS data and am able to determine appropriate adjustments. I would need to know all of the assumptions the software takes into consideration before I would trust the adjustment with my signature.”

“I use Synapse by Spark for typical property adjustments and Solomon for more complex properties.”

In addition to the top answers, we received many other write-in responses. Sample responses:

Allocation method

Depreciation

Cost to build

Sample appraiser comments

“Due to rural location, there are no algorithmic tools to be utilized for adjustment data. I utilize paired and grouped data analysis and experience and knowledge.”

To read more, Click Here

My comments: Short, well written, and Very Interesting, especially the appraiser’s comments! I quit doing adjustments a while ago. I always do market conditions adjustments (or explain why not) and for views and other factors that significantly add to value.

I have never used any of the appraisal software listed above. I use Excel and MLS data. I often go back in time for comps with views, etc. I also interview agents to see what they say. Not for a number, but about marketability.

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NOTE: Please scroll down to read the other topics in this long blog post on Geographic Data and Comps, effect of renovation on value, very low foreclosures now, current real estate market, unusual homes, mortgage origination stats, etc.

Basement Issues and Values

By Ann O'Rourke on May 3, 2024 / adjustments, appraisal how to, non-lender appraisals, real estate market / Leave a comment

Tags: adjustments, appraisal how to, non-lender appraisals, real estate market

Understanding Basement Contributory Value

By Jo Traut

Excerpts: Determining how a basement contributes to a residential property’s value requires an appraiser to determine what type of basement the home has, its level of finishing, and take into account common concerns, like evidence of mold or signs of structural concern.

By following best practices, including separating the basement from the above-grade finished area, understanding the intended use of the space, and completing comprehensive research, you can evaluate the basement’s contributory value more accurately.

Topics

Know your basic basement types
How is the basement finished? Determining levels
Best practices when appraising a basement
Know the intended use and client requirements
Common problems in basements
Environmental hazards: One of the most significant issues appraisers run into is mold.

To read more, Click Here

My comments: This is one of the best discussions of basements I have read. It is worth reading. In my area, there are few fully underground basements, as we have a mild climate. Most homes were built prior to 1930, and there are many types of “basements.” They are not easy to determine added value, if any. I research, check with agents, check permit histories, try to get comps with the same type of basement, etc. The type and level of finish are critical.

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NOTE: Please scroll down to read the other topics in this long blog post on non-lender appraisals and diversification of your appraisal business, home insurance problems affecting values, unusual homes, mortgage origination stats, etc.

Appraisal Institute Counters Flawed Appraiser Bias Narrative

By Ann O'Rourke on April 19, 2024 / AMCs, appraisal modernization, modernization, non-lender appraisals / Leave a comment

Tags: AMC, appraisal modernization, non-lender appraisals

Appraisal Institute Counters Flawed Appraiser Bias Narrative

Excerpts: In reality, appraisers have a great story to tell, but we have a long way to go to refocus the terribly flawed “appraiser bias” narrative onto facts and science.

Last week’s email from Cindy Chance, the CEO of the Appraisal Institute, marks an important and long overdue shift in the organization’s approach to addressing accusations of bias in the appraisal profession. For too long, appraisers have faced sweeping claims that their valuations are biased against certain groups, despite appraisers’ ethical standards, rigorous training, and lack of financial stake in transactions.

As Chance acknowledges, the Institute should have done more to advocate for appraisers and make the public aware of their professionalism. This public acknowledgement of an obligation to counter the flawed “appraiser bias” narrative is an encouraging first step. Appraisal organizations like the Appraisal Institute should advocate for appraisers, as advocacy is a key membership benefit. Industry groups should also step up to support appraisers.

Importantly, Chance points out that claims of appraiser bias contradict what appraisers actually do. Their role is to provide impartial, data-driven opinions of value. She explains how pioneering research in psychology revealed that all humans have cognitive biases, but professionals like appraisers are trained to minimize bias through rigorous methodology. In fact, appraisers’ discipline protects homebuyers and the industry from irrational biases.

Chance suggests the Institute will undertake communications grounded in facts and science to reframe the false narrative around appraiser bias. With their scientific expertise and ethical standards, appraisers have a strong basis to counter the accusations. Chance’s leadership in publicly addressing the issue and committing to advocate for appraisers represents an encouraging change of direction for the Institute.

To read more, including the full document, Click Here

My comments: Read it. Note: it can be “dense” with very long paragraphs. This is, by far, the best writing I have seen on bias related to appraisals. I have been saying for a while that all humans are biased in some way. It is human nature.

When I read it last week, I was going to put a link to it in this newsletter. Now that appraisersblogs has published the full document, you can read and make comments.

For a long time, since AI dropped out of the Appraisal Foundation, I have said, “I am a 35-year member of AI. I stay because my MAI is very, very valuable (similar to CPA).” Plus, I have an excellent local chapter.

I have been reading Cyndi Chance’s emails to members and following her activities to reach out to local chapters since she started last fall.

I am so glad that AI is now taking on the bias issue. I recently took USPAP plus two California bias classes in a two week period. After I finished them, I thought of giving up my license (CA is not a mandatory state) and maybe quitting appraisal. After a rough weekend, I decided not to leave. Finally, I now see there is hope!

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NOTE: Please scroll down to read the other topics in this long blog post on non-lender appraisals, forms to reports modernization, AMCs, earthquake risk, unusual homes, mortgage origination stats, etc.

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Desktop appraisals okay for some Fannie Loans March 2022

Desktop Appraisals: Who, When, and Why

By Ann O'Rourke on April 12, 2024 / adjustments, non-lender appraisals, real estate market / Leave a comment

Tags: adjustments, non-lender appraisals, real estate market

Desktop Appraisals: Who, When, and Why

Excerpts: The ability to identify property characteristics without a personal inspection is not a new concept. Retrospective appraisals, drive-by (exterior inspection) appraisals, and valuations from plans and specifications, are all valuation assignments where an appraiser develops an appraisal opinion without personally inspecting the property.

Similarly, while not identical, appraisers generally use the cited sources above to identify the physical characteristics of comparable sales in their appraisals. Thus, it’s fair to say that identifying the physical characteristics of the subject property in a desktop appraisal is a similar process to verifying comparable sales.

While they won’t replace a full appraisal for a majority of property transactions, desktop appraisals can offer a more efficient and cost-saving alternative for all involved parties and are often used in low-risk scenarios and non-GSE appraisal assignments, such as:

Helping sellers determine a price: A desktop appraisal provides sellers with valuable insights into their property’s market value, helping them make informed decisions when determining an appropriate listing price.
Home equity lines of credit (HELOCs): When homeowners apply for HELOCs, lenders may request desktop appraisals to ascertain the property’s value and determine the credit limit without requiring a full appraisal.
Tax Appeal Support: When there is a challenge to a tax assessment, a desktop appraisal may be used to provide a current market value.
Insurance purposes: Lenders or other clients may order desktop appraisals for insurance purposes to determine the property’s replacement cost or insurable value.
Managing Investments: For investors who own multiple properties, desktop appraisals provide rapid updates on property values.

To read more, Click Here

My comments: Although the web page title includes “for new appraisers,” this post has ideas for all appraisers. The list of non-lender uses is very good. I have done drivebys for estate appraisals when the home had been sold and I had no access.

Fannie Wants Desktop Appraisals

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NOTE: Please scroll down to read the other topics in this long blog post on non-lender appraisals, using new construction comps for existing homes, master planned communities, unusual homes, mortgage origination stats, etc.

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Appraising Historical Homes

By Ann O'Rourke on February 16, 2024 / adjustments, appraisal classes, bias, non-lender appraisals / Leave a comment

Tags: adjustments, appraisal business, bias, non-lender appraisals

Historical Properties and Their Unique Appraisal Approaches

Excerpts: Appraising historical properties involves a complex interplay of factors, making it a specialized field within real estate valuation. This article provides an insight into the appraisal process of historical properties, emphasizing the role of market data, potential buyers, specialized databases, appraisal methods, and the significant impact of preservation restrictions.

The appraisal process begins with a thorough analysis of market data, focusing on sales of properties that share historical or antique characteristics. This comparative market analysis extends beyond standard parameters like size and location to include age, architectural style, and historical significance. The scarcity of historical properties often requires appraisers to expand their search to find comparable sales, both geographically and over longer time frames.

The distinction between a historic property with preservation restrictions and an old house without them is crucial in the appraisal process. Preservation restrictions, often governed by the National Register or local historical commissions, can add value by ensuring the property’s integrity. However, these restrictions may also limit modifications, potentially affecting the property’s market appeal.

To read more, Click Here

My comments: If you don’t want to appraise a historic property, be sure to check it out before accepting the assignment!

Worth reading. A good summary. I suspect that a company based in Boston, MA sees lots of historic homes!

For many years I appraised in the nearby city of Berkeley, CA. There were definitely adjustments for homes built by famous, widely known, architects. Fortunately, their names were listed in the MLS.

In my small city, there are a few homes by famous architects. One was sold about 20 years ago by a famous architect, Julia Morgan. She designed more than 700 buildings in California during a long and prolific career. She is best known for her work on Hearst Castle in San Simeon, California. No effect on value. I was surprised. If it was in Berkeley, there would be a substantial adjustment.

Some cities have large historic buildings, such as the City Hall in my city, built in 1895, twenty years after the city charter in 1872. The Gold Rush in California started in 1848, which brought many people to Northern California.

But, in my city, there are many restrictions on what can be done with older homes, such as Victorians. For example, window replacements must replicate the original windows, plus some other restrictions on exterior modifications. Restrictions are from the city, the county, and the state. In my city of 78,000 population, there are over 10,000 buildings constructed prior to 1930, including many classic Victorians.

Many downtown mixed-use buildings (retail and apartments) are in my city. I appraised many of them, but never noticed any effect, plus or minus, for historic designation.

Knowing what modifications are allowed is very important for the appraiser. Many people don’t like them. You need to know the market. Sometimes buyers like them and sometimes not.

See how many historic homes and buildings are where you do appraisals and where you live. You may be surprised!

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NOTE: Please scroll down to read the other topics in this long blog post on appraiser fights back against bias accusation, ok behavior when taking Zoom CE classes, estate appraisal liability issues, unusual homes, mortgage origination stats, etc.

Appraiser Has Very Big Problems With Borrower

By Ann O'Rourke on January 19, 2024 / bias, humor, non-lender appraisals / Leave a comment

Tags: bias, humor, non-lender appraisals

The Sopranos – Lupertazzi’s Rough Up Appraiser

To watch, click the video above. Opens in You Tube.

Members of the Lupertazzi Crime Family rough up an appraiser who is involved with Tony’s HUD scam.

I will never forget “I’m only the appraiser!” I use the phrase sometimes ;>

It’s one of the few times appraisers are in movies or TV series!

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NOTE: Please scroll down to read the other topics in this long blog post on non-lender appraisals, and types of bias, Scams on black homes, unusual homes, mortgage origination stats, etc.

Appraisal Adjustments Yes, No, Maybe

Appraisal Time Adjustments Underutized

By Ann O'Rourke on January 12, 2024 / adjustments, Economic analysis, forecast, non-lender appraisals, real estate market / Leave a comment

Tags: forecast, non-lender appraisals, real estate market

FHFA Report: Underutilization of Appraisal Time Adjustments

Published: 1/8/2024

Excerpts: Fannie Mae, Freddie Mac, and Federal Housing Administration appraisal guidelines require such adjustments whenever market conditions have been changing. However, this blog shows that appraisers frequently do not make time adjustments, even when they are likely to impact the appraised value substantially. This analysis also finds that the adjustments appraisers do make are typically substantially smaller than house price indexes would suggest.

The main dataset used in this blog is a 5 percent sample of single-family housing in the Uniform Appraisal Dataset (UAD) that Fannie Mae and Freddie Mac (the Enterprises) collect.5 The time period covered, the third quarter of 2018 through the fourth quarter of 2021, includes all the UAD data available to FHFA when the analysis began.

…monthly house price indexes for ZIP codes are used to walk forward the comparable sales amounts. For each comparable in the data, the price indexes are used to calculate a predicted time adjustment corresponding to the age of the comparable and local price trends.

To read more, Click Here

My comments: Check out the very good graphs. Maybe the indexes were not as reliable as actual appraisal adjustments, but overall adjustments were lower by appraisers.

When I started my business in 1986, several very experienced local appraisers said don’t make time adjustments for lender appraisals. In a significant drop in prices, in the 1990s, some appraisers who made negative adjustments lost their businesses. I always made them and never had any complaints from my lender clients. I worked for an assessor’s office in the late 1970s where we were making 2% per month time adjustments upward. Since Fannie started focusing on UAD analysis around 2015, losing business because of negative market conditions has almost stopped. They are one of the easiest adjustments to make.

My market is very volatile. The only dollar adjustments on non-lender appraisals that I make on homes are market conditions unless it has a valuable feature, such as an excellent view, that needs an adjustment.

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Online comments by a very experienced and savvy appraiser:

This (price indexing) is one thing that AVMs do quite well.

I’ve seen thousands of appraisals over the years where appraisers made no Positive or Negative Market Conditions adjustments, as though the market is always in balance and prices are always stable, even during periods of rapidly changing prices.

Ignoring market conditions adjustments makes us look incompetent to buyers, sellers, lenders, Realtors, and the general public. I purposely omitted AMCs from this group as they are order takers. It’s not good for Residential Fee Appraisers when FHFA tells the public how poorly we’re performing with regards to what most call “time adjustments”.

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NOTE: Please scroll down to read the other topics in this long blog post on 2024 forecasts for mortgage rates and originations, Private Money lending, unusual homes, mortgage origination stats, etc.

OK to average adjusted comps on appraisals?

By Ann O'Rourke on December 8, 2023 / lender appraisals, non-lender appraisals, real estate market / Leave a comment

Tags: lenders, non-lender appraisals, real estate market

OK to average adjusted comps on appraisal?
To Mean, or Not to Mean, That is the Question

By Brent Bowen

Excerpts: There seems to be a consensus among appraisal reviewers that the appraiser should not average the adjusted sales prices of their comparables in order to arrive at an indicated value of the subject from the Sales Comparison Approach. Fannie Mae is referenced as the source of this prohibition, although no such prohibition explicitly exists according to Fannie Mae’s Selling Guide.

There is a prohibition on averaging techniques, but that applies in the Reconciliation section with regards to reconciling the three approaches to value. In other words, Fannie Mae does not want you averaging the indicated values from the Sales Comparison Approach, Cost Approach, and Income Approach in order to arrive at an opinion of value. The discussion of the reconciliation of the indicated value of each comparable sale contains no such prohibition.

The conventional wisdom is that the most similar comparable be given the most weight. But that begs a question… similar how? We can fairly easily observe the comparable which is the most physically similar, but what about the one that is the most transactionally similar? In other words, which comparable deviates the least from the mean?

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My comments: Excellent analysis. One of the best I have read. Basic Appraisal, but not all appraisers know about this, especially if they “appraise to fit the form” aka form fillers. Worth reading, plus the appraiser comments.

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NOTE: Please scroll down to read the other topics in this long blog post on Non-lender appraisals, dealing with lender hassles, real estate market, unusual homes, mortgage origination stats, etc.

Why Comp Photos in Appraisals?

Appraisals: Using Comps Across a Freeway?

By Ann O'Rourke on December 1, 2023 / adjustments, appraisal business, non-lender appraisals, waivers / Leave a comment

Tags: adjustments, appraisal business, appraisal how to, non-lender appraisals, waivers

Pulling comps from the other side of the freeway

By Ryan Lundquist

Excerpts: It can be a REALLY bad idea to pull comps from the other side of the freeway, but not always. Today I have some thoughts about location, comp selection, and lenders freaking out when schools are mentioned in appraisal reports.

I don’t normally pull comps across a highway

In so many cases it’s an awful idea to cross a major road or highway to pull comps because a highway sometimes separates markets that are far different in age, square footage, lot size, architecture, price point, school district, etc….

But, crossing the highway does work here

With that said, I want to show you an example of a local neighborhood where I have zero hesitation about pulling comps from both sides of the highway. The areas north and south of Highway 50 below represent the College-Glen area…

Why it’s no biggie to pull comps like this

A) Prices are similar: Prices are similar on each side of the highway. I’ve found this when pulling comps through the years, and I’ve also shown this when making graphs. I will say the north side tends to have a slightly larger square footage than the south side (same with west vs east), which is something to consider when we compare stats. But it’s still not a major difference.

B) Buyer Behavior …

C) School System …

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NOTE: Please scroll down to read the other topics in this long blog post on time saving tips, Waivers, Non-lender appraisals, Tax savings, unusual homes, mortgage origination stats, etc.