99.99% price drop from $1 billion. Appraisal Challenge

Once listed for $1 billion. Sold for $100,000. What just happened?

Excerpt: A heated court battle, a last-second offer and a sparsely attended auction behind a fountain in Pomona — this chapter of the famed Mountain of Beverly Hills ends not with a princely sum but a sale price more like that of a sports car. 99.99% price drop from $1 billion. Appraisal Challenge.

Touted as the city’s finest undeveloped piece of land, the 157-acre property redefined the luxury market when it listed for a record $1 billion last year. On Tuesday, it sold for a mere $100,000 at a foreclosure auction, a fraction of the $200-million loan outstanding on the property.

A markdown of 99.99%, of course, comes with some fine print. Any other buyer would have been on the hook to repay that loan — and this buyer has to eat that loss

To read more, click here

My comment: Quite a story!! Only in LA, of course!! FYI, I am in Northern CA… very different here. We think we are superior to LA ;>

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

Appraising Weird Stuff is Challenging!

Appraisal Process Challenges

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Measuring Bi-level homes square footage

 

GLA Issues When Appraising Split & Bi-Levels… Where The Ground Meets the Wall

Excerpt: When it comes to appraising split-level and bi-level dwellings, trying to calculate the gross living area (GLA) can be tricky. If you’re trying to figure out what the gross living area of one of these types of homes is, there are some important things to consider. For example, where the ground meets the exterior wall of a particular level. Measuring Bi-level homes square footage is tricky.

In real estate, the line at which the ground intersects with the foundation of a home, is called a grade or grade line. Did you know that where the ground meets the exterior wall of a level, can have a direct impact on value? How so? Let’s get down to the nitty gritty of it, shall we?…

To read more, click here

My comment: Very comprehensive, well written, article. Don’t miss the fun “split” video at the end. Hint: be sure to watch until 1 minute mark.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 issue go to https://www.appraisaltoday.com/products.htm or send an email to info@appraisaltoday.com . Or call 800-839-0227, MTW 7AM to noon, Pacific time.

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Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

Why Don’t Real Estate Agents Measure Houses?  Humor

What is Included in Appraisal Square Footage?

Tax records and Square Footage in Appraisals

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Property inspection issues for appraisers

Nothing New Under the Sun: The Varied Face of Appraisal Property Inspections

By Joshua Walitt

This article focuses on property inspections, which – to an outsider – might seem to be a straight-forward topic. However, given current changes in the valuation space, nothing is further from the truth: valuation, specifically the collection of data that supports a valuation method, has never been one-size-fits-all. There are many property inspection issues for appraisers

Excerpt: Sample of the questions about data sources:

The appraiser determines physical characteristics of the subject structure from limited-data county records, recent family photos showing two rooms, and a 15-year old appraisal.

A determination must be made whether appliances and utilities are functional and/or whether the property meets local codes

An appraiser performs an Exterior-from-street appraisal and reports a value opinion of $500,000; the next week, she performs a Exterior-and-Interior appraisal on the same property and reports a value opinion of $630,000.

To get the answers and more questions click here

My comments: Worth reading. Summary of a recent presentation by Walit. Lots of different scenarios presented. Note: I publish a graph of mortgage orgination data every month in my paid monthly newsletter, Appraisal Today. For more information or get a FREE sample issue go to https://www.appraisaltoday.com/products.htm or send an email to info@appraisaltoday.com . Or call 800-839-0227, MTW 7AM to noon, Pacific time.

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Humor for Appraisers

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Neighborhood Names and Appraisals

How much is a neighborhood name worth?

Excerpt: Despite some anecdotal examples, there’s little statistical evidence supporting the notion that a neighborhood’s brand or name contributes to a higher sales volume or a premium on price, according to Jonathan Miller, chief executive of the appraisal firm Miller Samuel.

“You’ll see buildings trying to hook into adjacent, better-known neighborhoods as a marketing ploy, but we don’t see that translate into a premium or more sales for doing that,” Mr. Miller said.

To read more, click here

My comment: Some interesting stories. I’m not sure if “renaming” works, but I do know that in some older established neighborhoods in the Bay Area, including my city, the name does make a difference in value.

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

Appraisal Neighborhood Analysis

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Zillow uses home photos for “appraisals”

Zillow – the past and the future

Zillow’s new photo algorithm

Zillow’s New algorithm uses photos of your home to check quality and curb appeal plus a look back at when Zillow started, and info on their ibuyer service

Excerpt: “We’ve taught the Zestimate to discern quality by training convolutional neural networks with millions of photos of homes on Zillow, and asking them to learn the visual cues that signal a home feature’s quality,” Stan Humphries, Zillow’s chief analytics officer & chief economist, said in a Medium post announcing the new algorithm. “For instance, if a kitchen has granite countertops, the Zestimate now knows — based on the granite countertop’s pixels in the home photo — that the home is likely going to sell for a little more.”

To read more, click here

My comment: I am trying not to think about this…… Maybe North Dakota can try using Zillow on their rural properties….

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Zillow – tales from when it started plus ibuyer

Excerpt: Every night for five months before the launch of Zillow’s website in February 2006, employees gathered their Dell desktops on Ping-Pong tables, connected them to harness their combined processing power, and strung together extension cords to get them all running. To avoid overloading the circuits, they unplugged the office refrigerator and banned Christmas lights. Then, while most of them slept, this jury-rigged supercomputer analyzed a decade of property records and American housing market data in order to spit out price estimates for 43 million homes.

To read more, click here

My comment: Published in Forbes. Well written and researched. I liked Zillow’s history plus a good analysis of their ibuyer service – the new wave of purchasing homes and selling them later.

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

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Practical real estate appraisal writing tips for AMC questions

Write Like A Professional – Very Practical Writing Tips for AMC/underwriter questions

By Tim Andersen

Excerpt: QUESTION: I like to use the term, “in my professional opinion” as part of my reports. After all, I am a professional paid to express opinions. Recently, the reviewer for an AMC requested I remove that term from my report since, in her words, “…it has nothing to do with value”. Is the reviewer overreaching on this? The reviewer has the right to tell me if there is an error in my report, but not to criticize the language I use in my report. What should I do?

ANSWER: As Gertrude Stein was supposed to have said upon seeing Oakland, California for the first time: “There’s no there there!” For good or ill, the same may be said about many real estate appraisal reports and the convoluted language they insist on using…..

Excellent and practical. To read more click here

My comment: this is the best article I have ever seen for practical tips on how to reply to AMC/underwriter questions with lots of examples.

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

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Suburb not well defined for appraisals

How Should We Define the Suburbs?

Excerpt: The problem (lack of a definition) stems from the fact that U.S. statistical agencies (the Census Bureau and Office of Management and Budget) do not provide a systematic definition for suburbs. They offer classifications for metropolitan areas and micropolitan areas, a classification of urban and rural areas, and a category of principal cities, but nothing of the sort for suburbs. But, suburb not well defined for appraisals.

Very interesting with a good table To read more, click here

My comment: Appraisers have to identify on forms if a property is urban/suburban/rural. Also percent built up. Rural can affect loans sometimes. I have never seen any clear definitions. Now I know why!

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Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

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Why do appraisers hit the sales price?

Why do appraisers hit the sales price?

By George Dell

Excerpt: A recent study includes a graph which shows that some 90% of appraisals hit the sale price exactly, or were higher, while only some 10% were below the sale price (when the sale price is known).

Is this a bias on the part of appraisers, or is the bias the cause of the system? What could possibly cause this strong upside skew?

First, ignore the ongoing pressures from the entire ‘loan industry’ to make the loan, make the commission, make the quota, make the bonus, and look successful. Ignore the claimed purpose of the public trust (of our quasi-governmental standards and licensing quagmire).

The goal of protecting the public trust failed, and will fail again— this time with different excuses and blaming— but it will fail again.

Let’s look at some underlying economic truths and social/governmental policy. What economics and public policies come into play here? Three come to mind immediately:

To read the full, very interesting post click here

My comment: When I started my appraisal business in 1986, I was told by local very experienced appraisers to appraise at the sales price or I may be kicked off a lender’s approved list. Of course, since I was trained at an assessor’s office, I was shocked and refused to do this… There was always another lender client I could get.

Dell’s blog has very short posts. My June paid newsletter will have a much longer article written by him: “Old Versus New: Conflict or Opportunity?” It has a brief look into the past, including a photo of an acoustic coupler for connecting to remote sites. Plus, of course, comments on the future! I remember 30 baud transmission rates in the early 1980s connecting from my home PC to my company’s servers;>

Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

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

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Dancing and Crooked Houses for Appraisers

Krzywy Domek, The Very Crooked Little House of Sopot, Poland

Woops!! I forgot to include this in last week’s newsletter!!

Just For Fun!!

Excerpt: In 2004, the Polish architecture firm Szotynski & Zaleski built a wonderfully illusory building in Sopot, Poland that doesn’t quite look real. The design was based upon whimsical, fairy tale sketches of artist Jan Marcin Szancer and is quite aptly named “Krzywy Domek” or crooked little house. The building’s front facade is made up of crooked lines and distorted shapes that recall childhood cartoons, but the back of the building is a rather standard setup that leads to the main shopping area.

Check out the videos and fotos.

My comment: Fascinating!! I think this is the most crooked house I have ever seen. No photoshopping done on fotos!!
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The Famous Dancing House of Prague by Frank Gehry

Another Just for Fun House!!

Excerpts: The building is also affectionately known as “Fred and Ginger” due to its resemblance to a perpetually swaying couple. Like the Crooked House of Sopot, Poland, the unusual lines of the building stand out from the rest of the neighborhood.

Lots of fotos at:

Brief summary of details: http://architectuul.com/architecture/the-dancing-house  Can also google it for lots of background info.

My comments: Take a break from writing up your appraisal reports and Take a Look at the photos!! And be glad you don’t have to appraise a house that looks like this ;>

Be sure to scroll down to the bottom of the post to see photos of Ghery’s other strange buildings!!

Appraisal Business Tips 

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Residential Appraisal Errors

25 Common Errors in Appraisal Reports

A compilation of the most common errors and deficiencies found in appraisal reports by reviewers, regulators, and appraisal boards. Residential Appraisal Errors

Here are a few:
– Not providing enough analysis for the intended user or reader to understand the report properly.
– Inconsistencies between the description of the subject property in the improvements section and the photographs, sketch, sales comparison grid, and other areas in the report.
– Inappropriate use of boilerplate commentary in the appraisal report to describe the neighborhood or to explain the reconciliation of the sales comparison approach.
– Failure to summarize the analysis and rational that supports the Highest and Best Use opinion.
– Not complying with the most current USPAP.
Read the full list here:

My comments: Reminders are always good. For unknown reasons, I don’t see much CE or writing on these problems. These apply to all appraisals because we are licensed, not just lender appraisals.
It was soooo nice in the “old days” before licensing ;> Two Rules: Tell the  truth and disclose what is bad. No USPAP changing every two years, overzealous appraisal boards, renewal fees, etc.. Of course, the reason we have licensing is the lender mess in 1989, resulting in FIRREA,  regarding bad commercial property development loans by S&Ls
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Appraisal Business Tips 

Humor for Appraisers

Covid-19 Residential Appraisers Tips on Staying Safe

For Covid Updates, go to my Covid Science blog at covidscienceblog.com

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