Posts Tagged real estate market

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

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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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If you are a paid subscriber and did not receive the September 2024 issue emailed on Tuesday, September 3, 2024, please email info@appraisaltoday.com, and we will send it to you. Be sure to include a comment requesting it.

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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

Appraisal Reviews – Who and What

By Ann O'Rourke on August 23, 2024 / appraisal, appraisal reviews, real estate market / Leave a comment

Tags: bias, real estate market

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 Reviews – The Good and The Bad(Opens in a new browser tab)

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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.

Value of a Pool

By Ann O'Rourke on July 5, 2024 / adjustments, appraisal, appraisal business, appraisal how to, forecast, real estate market, zillow / Leave a comment

Tags: adjustments, appraisal business, appraisal how to, forecast, real estate market

What is a pool worth? It depends.

By Ryan Lundquist June 26, 2024

Excerpts: With and Without Pools (Big Difference)

There’s a huge difference in the stats when we compare homes with and without pools. The properties with pools are larger in square footage and lot size, higher in price, and they’ve taken slightly less time to sell too.

In short, the higher the price, the greater chance there is a pool. This likely has to do with the cost of building a pool, cost of maintaining a pool, and even larger parcels at higher ranges – not to mention buyers at higher price points expecting a pool more often.

The rhythm of pool sales basically follows the pattern we see in the entire market. More sales as the year unfolds, and they typically peak around June. Some smaller areas could be slightly different.

Seriously though, What is a pool worth?

It depends. Different price points and locations come with different expectations. There isn’t a one-size-fits-all answer for the value of a pool. In other words, we can’t just apply one figure to a property because that number isn’t going to make sense everywhere. This is where we have to study the comps. With that said, my observation is pool adjustments have generally gone up since the pandemic as buyers are more in tune with the importance of a backyard. Have you seen that also?

To read more, Click Here

My comments: Check out Ryan’s tables to see his data analysis, which is not difficult to set up.

When I first started appraising in suburban Bay Area cities in the mid-1980s, homes with pools sold for more in some neighborhoods with higher-priced homes. MLS always said a pool was there, which is a good way to check it out. At that time, MLS data analysis was much more limited than it is today. I saw this in a particular neighborhood with very hot summers. This is still the same now.

In contrast, where I live, about 15 miles west, on an island on San Francisco Bay, pools have never been a plus or a minus. Weather is “Mediterranean” weather without hot summers. Often sellers said they would remove the pool, but the buyers never requested it.

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NOTE: Please scroll down to read the other topics in this long blog post on HOA Horror Stories, Zillow and Redfin lawsuits Videos and Privacy, Residential to commercial transition, real estate market, unusual homes, mortgage origination stats, etc

AVM Accuracy?

By Ann O'Rourke on June 28, 2024 / AI, AMCs, appraisal business, appraisal reviews, Fannie, Freddie, liability / Leave a comment

Tags: AI, AMC, mortgage lending, real estate market

Bank AVMs Are As Wildly Inaccurate As A Zestimate – But Will Be Regulated As Legitimate Values

By Jonathan Miller

June 24, 2024

Excerpts:

AVMs are incredibly inaccurate and are being misused in property valuation
AVMs don’t consider the condition of a home
The mortgage industry’s push toward automation has reduced valuation accuracy

AVM or Automated Valuation Models have been incorrectly seen as the human-less way to value property. The technology has been drifting into mortgage lending reliance for more than a decade because it has been marketed as having the ease of “pushing a button.”

The Zestimate product by Zillow introduced the consumer to the concept nearly twenty years ago…

The recent ruling to regulate the credibility of AVMs by the OCC and FDIC essentially legitimized the use of AVMs in lending. The driver behind this final rule was to eliminate potential bias in valuations by replacing appraisers with AVMS. Yet the Urban Institute study Revisiting Automated Valuation Model Disparities in Majority-Black Neighborhoods said: But even with data improvement and artificial intelligence, we still find evidence that the percentage magnitude of AVM error is greater in majority-Black neighborhoods. This finding indicates that we cannot reject the role historic discrimination has played in the evaluation of home values.

AVM software is built by humans who have inherent biases. The void in representation by the appraisal industry over the past decade on the AVM issue, to talk about those 200 feral cats living in the house being valued, has enabled AVMs to be legitimized by the federal government.

During my career, I have observed that valuation accuracy has become weaker as technology has expanded in the mortgage process. The wiz-bang concept that the appraisal of a property can be completed at the push of a button is missing the realities of valuation.

To read more, Click Here

My comments: Worth reading. Miller was involved in AVM history and, as usual, has some very interesting stories plus lots of Zillow comments.

For pro-AVM information from AV Metrics and to see how they test AVM accuracy, Click Here I have been following them for many years.

Miller used to send out a very long post once a week. I often just scrolled fast through most of it to get to the appraisal section, but I missed a lot that was worth reading. Now, he has divided it into daily posts.

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NOTE: Please scroll down to read the other topics in this long blog post on Mortgage appraisal reviews, AI and ChatGPT, freddie and fannie mortgage forecast, unusual homes, mortgage origination stats, etc

Appraisers Riding the Waves of Up and Down Mortgage Rates

What is a Complex Residential Property?

By Ann O'Rourke on June 21, 2024 / AMCs, appraisal, Appraisal fees, liability / Leave a comment

Tags: AMC, appraisal, real estate market

How to Identify a Complex Residential Property

By Dan Bradley

Excerpts: A complex one-to-four family residential property is defined as a property that meets at least one of the following criteria:

The property to be appraised is atypical
The form of ownership is atypical
The market conditions are atypical

Some of the key physical features that can make an appraisal assignment complex include:

Size (significantly larger or smaller than typical for market)
Floor plan (there may be functional obsolescence)
Unique custom features
Quality of workmanship or construction (higher or lower than the norm)
Architectural design
Adequacy of HVAC, electrical systems, well and/or septic
Additional living unit(s)
Non-conforming zoning
Mixed-use property (for example, it is used as both a business and residence)
Waterfront properties

Keep in mind that what is considered a complex residential property in one market might not be considered complex in another market. For example:

A mansion in Beverly Hills is not atypical; a mansion located somewhere in rural America might be
A log cabin in the mountains of Virginia is common; a beach-front log cabin in VA, not so much
Manufactured or mobile homes with additions are common in rural areas, but generally not in cities

To read more, Click Here

My comments: Read this short article and keep it available. Very good lists of the factors.

Why do you want to know about this topic? Business is slow now, which is a good time to try appraising unusual homes. But, a fast turn time is not a good idea unless you are very familiar with the subject’s complexities. Do you have another appraiser who can help you? Don’t risk your appraisal license by getting in “over your head”. I get regular calls from appraisers who said “yes” but did not have anyone to advise them.

Very few appraisers, if any, would have experience on all these types of properties. For example, I have appraised many life estates, but no homes with a leasehold (ground lease) in a market area where such interests are uncommon. I have only appraised homes where the subject and all the nearby homes are leaseholds. I get advice for appraising it.

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NOTE: Please scroll down to read the other topics in this long blog post overpriced homes, appraising 3,000 years ago, AMCs good bad ugly, unusual homes, mortgage origination stats, etc

Appraisers Riding the Waves of Up and Down Mortgage Rates

Low Appraisal Fees in 2024

By Ann O'Rourke on June 7, 2024 / appraisal business, liability, real estate market, state appraiser regulators / Leave a comment

Tags: appraisal business, appraisal fees, appraisal management company, liability, real estate market, state appraiser regulators

CFPB Crackdown: Unfair Practices Hurting Consumers

This includes Appraisal payments to appraisers by AMCs

by Josh Tucker, June 5, 2024

Comments must be received on or before August 2, 2024

Excerpts: As we all know many AMCs are not paying Customary & Reasonable fee as required by TILA. They have consistently pushed down the pay of Appraisers while making undisclosed profit off consumers and prioritizing cheapest and fastest over quality and competency. The CFPB has been in communication with individuals behind the scenes and are concerned with what has been shown enough to include AMCs in their data collection process.

Now is the time to send them everything we have. To drive legitimate change, we must encourage as many appraisers as possible to submit all relevant information to the contact details provided below.

CONSUMER FINANCIAL PROTECTION BUREAU

[Docket No. CFPB-2024-0021] NOTE: USE THIS LINK TO READ THE DOCUMENT AND THIS NAME TO USE THE COMMENTS PORTAL BELOW.

Request for Information Regarding Fees Imposed in Residential Mortgage Transactions AGENCY: Consumer Financial Protection Bureau.

ADDRESSES: You may submit comments identified by Docket No. CFPB-2024-0021, by any of the following methods:

Federal eRulemaking Portal: http://www.regulations.gov . Follow the instructions for submitting comments. NOTE: THE SEARCH WAS NOT WORKING ON JUNE 6. MAY WORK LATER. CAN USE EMAIL.

Email: 2024-RFI-ResidentialMortgageFees@CFPB.gov. Include Docket No. CFPB-2024-0021 in the subject line of the message.

Mail / Hand Delivery / Courier: Comment Intake —Residential Mortgage Fees Assessment, Consumer Financial Protection Bureau, 1700 G Street NW, Washington, DC 20552.

To read more, Click Here

My comments: DO SOMETHING. YOUR VOICE MATTERS. Let CFPB know about the amount of AMC fees for appraisers, plus other problems. In my opinion, AMCs are ruining residential lender appraising. I have never worked for an AMC, but I’ve been appraising for almost 50 years and understand the problems.

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Appraisal Fees & Value: Lessons from Picasso & Steinmetz

By “Apex Appraiser” June 3, 2024

The Appraisal Institute has been a source of frustration and criticism within the appraisal profession for quite some time. I must admit that I have also expressed my dissatisfaction with them. Nevertheless, I must acknowledge that the new CEO, Cindy Chance, appears to be a positive change and is making some valuable points about our profession from her new position. In particular, she recently discussed appraisal fees in a piece she wrote.

In this excerpt, she shares two stories that provide valuable insights. These stories, one involving art and the other science, highlight the fact that appraising is a combination of both.

First is the story about a young woman who encountered Pablo Picasso one spring day, in a park, sketching. She begged him to sketch her. He graciously agreed, and following a few moments of study and drawing, handed her a sketch of herself. When she asked what she owed him, Picasso answered “$5,000 madam.” “But it only took you five minutes.” “No, madam, it took me my whole life.”

To read more, plus many appraiser comments, Click Here

My comments: Worth reading, plus the appraisers comments. I have been following CEO Cyndi Chance since she started working for AI. It’s definitely a “breath of fresh air” for the AI!

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NOTE: Please scroll down to read the other topics in this long blog post on state appraisal boards, liability, appraiser insurance, price per sq.ft. up 50%, sea level rise, unusual homes, mortgage origination stats, etc

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.

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 Geographic Data and Comps, effect of renovation on value, very low foreclosures now, current real estate market, unusual homes, mortgage origination stats, etc.

Reconsideration of Value and Appraisers

ROV (Reconsideration of Value) Changes – FHA and GSEs

By Ann O'Rourke on May 10, 2024 / appraisal business, Economic analysis, real estate market / Leave a comment

Tags: appraisal business, Economic analysis, real estate market

ROV (Reconsideration of Value) Changes – FHA and GSEs

GSE Effective date is August 29, 2024
HUD Effective date is September 2, 2024

Editor’s note: This long section includes, In order:

McKissock/Dave Bradley post with a good summary including links to HUD and GSE documents.
Appraisersblogs with Dave Towne’s opinions plus many appraiser comments.
George Dell – his usual very interesting comments.
VA’s Tidewater Initiative written in 2021 by McKissock (Similar idea as current ROV changes), effective in 2003.

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Changes to ROVs: GSEs and HUD Announce New Reconsideration of Value Policies

By Dave Bradley, McKissock May 2, 2024

Excerpts: On May 1, 2024, Fannie Mae, Freddie Mac, and HUD announced new policies for appraisal reconsiderations of value (ROV). These policies were the result of a collaborative effort between the GSEs, the Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA).

These policies are intended to create a consistent framework for lenders to respond to a borrower-initiated reconsideration of value. Within this framework, the lender must include steps for the borrower to appeal an appraisal when they believe the value opinion:

is unsupported;
is deficient due to unacceptable appraisal practices; or
reflects discriminatory practices.

Freddie Mac’s Bulletin, announcing the new policy, states:

“Freddie Mac, in collaboration with Fannie Mae and HUD, is implementing requirements related to reconsideration of value (ROV) that promote consistency when a perceived appraisal issue and/or appraisal deficiency exists. These requirements also recognize the importance of the Borrower having the knowledge and opportunity to request an ROV.”

Several sections of HUD Handbook 4000.1 have been amended to reflect HUD’s new ROV policy.

For appraisers, Section II.D.2. of the Handbook creates new general requirements for appraisers. This section states, in part:

“In the event that the underwriter requests a Reconsideration of Value (ROV) and provides additional information material to the value of the Property, the Appraiser must: review all information and market data received from the underwriter;

and summarize the analysis of all information provided by the underwriter within a revised version of the appraisal report regardless of whether the Appraiser determines that changes are not needed to address the issues identified in the ROV.”

To read more plus get links to FHA/GSE documents, Click Here

My comments: If you do GSE or FHA appraisals, read this post, plus the links to the documents. Many appraisers will probably not like it, but will like to have a standardized ROV method. I have never done an “official” ROV for a lender, but I did not like any lender clients objecting to my values.

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Low Value = Material Deficiencies? New FHA ROV Policy

By Dave Towne, May 3, 2024

Excerpts: Up until recently, there has never been a standardized policy for mortgage loan related Reconsideration of Value (ROV) requests after an appraisal has been submitted. Now there is, per the attached PDF HUD/FHA mortgage letter. The GSE’s have similar policies.

I’m not opposed to having a standardized ROV policy. However, these policies are in keeping with the new initiatives surrounding alleged and often unproved appraisal bias and discrimination claims.

But when one reads deeper into the reason for implementing these procedures, it is quickly evident that actually it’s focused on the perception that the appraised VALUE is wrong.

This is the statement in the HUD/FHA ML-2024-07: “This included guidance to improve the established process by which FHA program participants may request an ROV if the initial valuation is lower than expected.”

OK, so who exactly decided the value should be HIGHER than what the appraiser reported, before an appraisal was ordered? Was it the borrower? The mortgage loan officer handling the loan? A Zillow Zestimate? Maybe the underwriter at the lender?

The document also mentions many times the words “material deficiencies” in the appraisal report, which can trigger an ROV request.

My comments: I find this post’s appraiser comments most interesting, especially those from VA appraisers who have been required to use the VA’s Tidewater Initiative, which started in 2003. It was and is controversial. See the last article in this list for more info on Tidewater.

To read more, Click Here

Row, Row, Row, Part 1

By George Dell May 8, 2024

Excerpts: A better ROV! Please reconsider the direction of your boat. Try this this bigger oar. And use it only on the right side of the boat.

Appraisers have long been asked to “reconsider” their opinion. Now we have a more official “standardized process” which affects appraisers, lenders, AMCs, GSEs, and of course, the borrower.

On quick review, I see some unintended consequences, as well as some which have been anticipated. The anticipation includes the additional burden on lenders as well as appraisers. There is administrative time involved, as well as legal factors. Also, the burden on borrowers appears greater than before, including detail and reason.

First, the burden on borrowers. They start the row. Borrowers must believe the opinion of value is:

And regardless of the impact on borrowers and appraisers, the Fannie Mae Selling Guide is almost entirely focused on the responsibilities of the lender.

To read more, Click Here

My comments: Short and worth reading.

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The first “official” ROVs – VA’s Tidewater Initiative in 2003: What VA Appraisers Need to Know

By McKissock, January 8, 2021

Excerpts: The VA has a unique set of protocols, known as the Tidewater Initiative, that a VA appraiser must follow when he or she expects the appraised value of a property is going to be lower than its contract price.

This program, often known simply as “Tidewater,” initiated in—you guessed it—the Tidewater area of Virginia (i.e., the Norfolk, Chesapeake, Portsmouth, and Virginia Beach areas). It initially began as a test program in the early 2000s and was expanded to all areas of the country in 2003, as a result of VA Circular 26-03-11. This initiative was subsequently reaffirmed in the issuance of VA Circular 26-17-18 in July 2017.

If it appears to a VA appraiser that the appraised value of a property is going to come in below the pending sales price, the appraiser must contact the designated point of contact (POC) party that is specified in the appraisal order.

The appraiser is not supposed to discuss the contents of the appraisal with the POC at this point, except to explain they are asking for whatever additional information the POC may be able to provide…

To read more, Click Here

My comments: Read this Tidewater post to see why the current changes are not new. There was a precedent. I never did VA appraisals, so can’t speak from Tidewater experience. But, I remember it was very controversial when it started. Many appraisers complained about it. I was contacted many years ago by the VA to get on their panel, but I declined as the property values were way above VA limits where I lived.

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Reconsideration of Appraised Value

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NOTE: Please scroll down to read the other topics in this long blog post on staying positive with slow business, economic analysis for appraisers, current real estate market, unusual homes, mortgage origination stats, etc.

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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.

What should appraisers look for in a sales contract?

Non-Arms Length Sales for Appraisers

By Ann O'Rourke on April 26, 2024 / appraisal business, bias, GSEs, lender appraisals / Leave a comment

Tags: appraisal business, appraisal how to, bias, Fannie, real estate market

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.

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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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