Arm’s-Length Transaction for Appraisals

Arm’s-Length Transaction for Appraisals

By Dustin Harris
Excerpt: USPAP does not define the term arm’s-length transaction. Fannie Mae also lacks such a definition. Yet, both of them call for the appraiser to use only arm’s-length transactions as comparable sales…

How often do we appraisers get into the mode where we think we know it all? Occasionally, do we need to step back and look at the way we do things, just to make sure we are not missing something? Is what we know to be true and correct really true and correct? I raise this issue relative to the concept of what an arm’s-length transaction is. Are we truly aware of its definition and its application?
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My comment: There are too many phrases widely used without definitions!!

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$1 Billion Appraisal Error

Bad News: Dropped Phone Causes Utah Home to be Valued at Nearly $1B

A Very Strange Story!!

Excerpt: The 1,570-square-foot house built in 1978 on 2 acres in an unincorporated area of the county was recorded in 2019 tax rolls with a market rate value of more than $987 million and an overestimate of about $543 million in taxable value. In reality, the property should have only had a 2019 taxable value of $302,000, according to county property records.

That error — which the Wasatch County assessor explained possibly occurred when a staff member may have dropped their phone on their keyboard — has resulted in a countywide overvaluation of more than $6 million and revenue shortfalls in five different Wasatch County taxing entities.

To read lots more, click here

My comment: Wow!! Makes AMC and client complaints (and appraiser typos) fade away in comparison!! $1 Billion Appraisal Error

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

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Appraisal Neighborhood Analysis

What is so Important About the Damn Neighborhood Analysis that the Reviewer Nicked me for it?

By Tim Andersen, MAI

Excerpt: Question: in a recent review of one of my appraisal reports, the reviewer said my neighborhood analysis was poor. I asked what that meant and she indicated I should familiarize myself with Fannie Mae’s requirements for a NEIGHBORHOOD ANALYSIS. She also indicated what I had in my report was just a recitation of facts, but (a) lacked any analysis of neighborhood trends and (b) therefore I did not analyze the neighborhood sufficiently to reconcile my conclusions of the neighborhood trends and its effect on both my highest and best use conclusion and my final value opinion. I came in just over the contract price. What does the reviewer want from me? I did what I always do in an appraisal! Help me!

For the answer, click here

My comment: Tim always has great answers for appraiser questions! He is a regular contributor to the paid Appraisal Today, with articles on USPAP 2020-2021, state board problems, etc.

Appraisal Business Tips 

Humor for Appraisers

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

Covid-19 Residential Appraisers Tips on Staying Safe

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Previous Career Before Appraising

What Was Your Previous Career Before You Got Into Appraisal?

Excerpts:

The Top 3

  • Real estate sales (14%)
  • Mortgage lending (8%)
  • Insurance (5%)
  • Assistant or admin work (5%)
  • Banking (1%)
  • Others: 63%

To read more, click here Check out the respondent comments and a list of some of the many previous careers

My comment: I was a chemist before I started appraising. Really liked learning about science in school, but 7 years of lab work was too boring. I felt trapped inside. Saw an ad for “appraiser assistant” at the local county offices. “Work in the field.” I had never heard of it, so read a book about it at the library (1974). I got the job and still love appraising!! I didn’t see many science careers on the “Other” list. But, I think it prepared me well for appraising as I was trained to be very objective and analytical.

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

The future of residential appraising(Opens in a new browser tab)

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Angle Measurements for Appraisers

Accurate Measurements with Odd Angles

Excerpt: Imagine a 2,100 square foot, one and a half story house with an attached garage, porch, and deck. You probably imagined the typical bungalow. Now, imagine that house having 48 corners and only 4 of them are 90 degrees. I recently had an experience with just that house. Some architect, thinking they were Frank Lloyd Wright reincarnated, decided to build this house on a high bank cliff overlooking the Puget Sound. Don’t get me wrong, it was a pretty cool design, but I knew right away when I received the order for that appraisal that I was going to need some help.

To read more, click here Lots of reviews of the product, plus other similar products.

My comment: $19.95. An inexpensive product we all need!! They have been around for awhile, but most appraisers did not know about them. I appraise a lot of Victorians. Very useful!!

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

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Statute of Limitations for Suing an Appraiser

What’s the Statute of Limitations for Suing a Real Estate Appraiser?

by Peter Christensen

Excerpt: This is a common question that I’m asked because many lawsuits against appraisers are filed years after the appraisal was performed by the appraiser, sometimes 10 or more years later.

The reason for this is that the plaintiff suing an appraiser may not have known there was a problem with the appraisal at the time it was received or may not have suffered any damages as a result of the alleged appraisal error until a loan default or other event has occurred years down the road.

This plaintiff might be a lender who recently foreclosed on a loan or might be a borrower who believes they paid too much or borrowed too much based on a deficient appraisal.

For more info, click here

My comment: Blog post includes a link to all 50 states for statues of limitation. Knowing about the Statute of Limitations for Suing an Appraiser can really help if you receive a letter from an attorney.

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

Statute of limitations for appraisals

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What is Risk for Appraisers?

What’s all this stuff about risk?

By George Dell

We seem to be hearing stuff about risk recently. Why?

Back in the old days, before internet but after the wheel – It was my challenge as a new appraiser to scratch together four or five comps, then put three of them on a form, or perhaps even all five on a table. We called the table a ‘grid,’ presumably because it looked like the grid on a bird cage.

I soon discovered I was free to fly around inside the grid cage all I wanted. I adjusted to what I had. I learned to live inside the cage.

Then flying electrons came. They flew right through the grid. There were many. Sometimes even a dozen or more. All claiming to be comp messages. It was too much. I had the five. Should be enough. Yep. That’s what my trainer said. That’s what my appraiser education said. And sure enough, it was on my test for my new appraiser license…

Now, we worry about What is Risk for Appraisers?

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My comment: Next month’s paid Appraisal Today will have a long article, “Adjust your adjustment, or adjust your attitude?  The Hype and the Reality” by George Dell. Very interesting!

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

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Most difficult to appraise home features

Three Home Features Are the Most Challenging to Appraise

From McKissock appraiser survey

Excerpt: 1. Solar panels and “green” features (37%)

“Solar panels and green features are still new in my market and require more attention to the details of the benefit these items provide to the homeowner and how they impact the subject’s marketability.”

“There are so very few homes with solar panels in our markets. The limited data makes it very difficult to find enough data to determine the market reaction.”

The other two challenges include Accessory Dwelling Units and views. Plus info on more challenges.

To read more, click here

My comment: All 3 are tricky in my area!! Very interesting survey on which Home features: the most difficult to appraise

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

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5 things to remember about “low” appraisals

Low appraisals, weed, & rent control

13516718 – white wood texture with natural patterns

By Ryan Lundquist 

Excerpt: I’ve been getting lots of phone calls and emails about low appraisals over the past couple months. Is something in the water? What’s going on? Let’s talk about this briefly. Then I have some quick thoughts on weed and rent control.

Excerpt: 5 things to remember about “low” appraisals:

1) This is common when the market slows.

2) This is even more common in a declining market.

3) It should happen if the contract is too high.

4) It can spur negotiation instead of kill a deal.

5) The value of course is too low sometimes.

To read more To read more, click here

My comment: Keep a close watch on your market. Don’t miss it when prices start going down!! But, No One Knows when the peak occurs!! I tell people that If I knew, I would be rich and probably not writing this newsletter ;>

On the other side, people ask me all the time about our very high prices (median around $900,000). I tell them to wait for the inevitable crash. I have been through three here when prices in my city dropped 30-40%. Other nearby cities were up to 80% declines. They stay down for a long time. Unfortunately, few buy then. “Herd” mentality, I guess. Do what everyone else is doing – not buying. The last property I purchased in 1995 for $375,000 I got 100% seller financing. It had been on the market for two years. I sold it in 2004 for $1,000,000. It recently resold for $1,700,000. Crazee price changes!!

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

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Appraiser Mistakes

Can Smart Appraisers Make Dumb Mistakes?

By George Dell, ASA, MAI, SRA

Excerpt: I am a smart and educated, award-winning appraiser. It is not possible for me to be irrational. Of course not. You can see that. I can see that. But appraiser mistakes are not good.

A high IQ and education won’t necessarily protect you from highly irrational behavior—and it may sometimes amplify your errors. David Robson, in an Excerpt from The Intelligence Trap

Oh No! Who is this guy!? Doesn’t he know how smart I am? Why, even my peers have said I am smart. I pride myself on my critical thinking. Even my kids say that! What more proof do you need? Let’s get this straight: I am rational, smart, of high IQ and extremely educated, especially in my chosen field!

Recently, scientists have started to measure what things go with irrationality. There is even a name for this field of study, this measure: dysrationalia. The studies roughly parallel the studies of dyslexia and dyscalculia (difficulty in dealing with number things).

Understandable, Well Written and Interesting!! To read more, click here

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

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