8 Common Violations Made by Appraisers
Excerpt: When it comes to appraisal violations, certain minor violations are very common. In this article, I outline several examples of less serious breaches of development STANDARD 1 and reporting STANDARD 2—and a few other types of violations, too. I have compiled these based on many years of personal experience in appraisal regulation, as well as feedback I have received from other states’ enforcement agencies. Once you’re aware of these common mishaps, you should be able to avoid them more easily.
1. Use of inappropriate sales
One of the big problems is the use of inappropriate sales in a sales comparison approach….
2. Use of unsupported site value
Another common violation is the use of unsupported site value in the cost approach. That’s something that a lot of boards have cited as a prevalent deficiency or shortcoming in appraisal reports.
To read more click here
My comment: useful information. Nothing new, but good reminders. Don’t get the “violation letter” from your state board!!
South Florida Condo Covered in Beer Cans Receives Multiple Offers
Excerpt: When Kristen Kearney received a call about listing a condo in Lake Worth, FL, she said it wasn’t quite like other listing calls.
“They warned me that the home was wallpapered in beer cans,” she says. “And I thought to myself, ‘Well, I wonder where in the world they found beer-can wallpaper.’”
When she first walked through the unassuming front door, she remembers the shock of seeing the walls of the 815-square-foot abode covered in actual beer cans. In every room.
To read more and see lots of photos, click here
My comments: Adjustment? Cost to Cure? Market survey? Multiple offers?? What if it was not listed and there was no data??? Plus a short video of the (infamous) Sex dungeon house that rents for up to $2,000 per day.
Highest and Best Use and The Check Box on Fannie Forms
By Dave Towne
Excerpt: The appraiser had checked the H&BU question box on page 1 of the 1004 form as “NO”, which immediately stops the lending process.
This H&BU topic is sometimes difficult for appraisers due to many variables that need to be analyzed.
The twisted part of this situation (which influenced the appraiser’s H&BU reporting) is the property is in an area where some, not all, surrounding properties have had additional homes placed on single sites – allowed by current zoning code – while others of the surrounding properties have remained 1 dwelling per site. In other words, not all local sites have been ‘re-developed’ to increase density.
To read what Fannie says and more, click here
My comments: I appraised a small home with a very large lot for a local lender many years ago, long before AMCs took over. The neighborhood was transitioning to apartments. The lender said to complete the appraisal as it was a portfolio loan. I estimated the current use was an interim use for 5 years and did a financial analysis. Current and future values with discounting back to current value.
I also did house appraisals for this lender and other lenders where the current highest and best use was a lot split. Not lendable but a good portfolio loan.
I started appraising at an assessor’s office in 1975. The first question on every appraisal was the highest and best use. I still do it on every appraisal I do.
For commercial appraisals in my market, the current use is often not the present use. Lenders accepted my appraisal at the highest and best use, not the current use.
This is how many residential form appraisers (and other appraisers) get into Big Trouble!! Highest and best issues are not seen very often. Appraisal classes spend minimal time on it. Too many appraisers don’t know what they don’t know.
Strong Home Prices Expected to Continue Through at Least 2021, But Economic Uncertainty is Clouding Long-Term Outlook
Excerpt: Housing experts and economists have grown more bullish on the housing market in the near term, but expect economic headwinds to persist, dampening the long-term outlook, a new survey shows
— In a survey of 104 economists and real estate experts conducted by Pulsenomics and Zillow, home prices are expected to grow 3.7% in 2020. Three months ago, panelists expected a 0.3% decline.
— The panel also improved their annual forecast for next year, and are now more optimistic about 2021 home price growth than they’ve been in more than three years.
— There is more pessimism about the long-term for home prices with elevated unemployment expected to remain for the remainder of the decade.
To read more, click here
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New in the October issue of the monthly Appraisal Today newsletter
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Closing The Gap Between Yesterday’s Prices & Today’s Values
Excerpts: Sometimes my opinion of value is higher that the contract price. Why? There are numerous reasons why this might be the case. Here’s one. Typically, the effective date of my report is weeks, and sometimes months, after the contract date. Therefore, by the time I complete my appraisal, the market value of the home may have increased, since the contract was signed. It’s also good to remember that the contract price is not a target for the appraiser to aim for. The market value of a home is not always reflective of the contract price.
Due to bidding wars, sometimes, my opinion of value is less than the contract price, because the price has been bid up above market value… You can see this in my chart below, which clearly demonstrates that many buyers are paying more than the list price.
To read more, click here
My comments: Written for buyers and sellers but good for appraisers to see the market from the participants’ point of view. Some excellent graphs that you can include in your appraisals.
By George Dell, SRA, MAI, ASA
Excerpt: …first heard the word unlearning at an Appraisal Institute national conference. The speaker said that unlearning was as important as learning. Perhaps more so.
We human beings tend to want to maintain the status-quo, unless somehow compelled to change. Change is not easy they say.
Psychological inertia involves inhibiting any action, just because it causes the stress of change. Status-quo bias avoids any change which might involve the thought of loss. The loss does not have to be real. Worse yet, even when the gain might be a great reward, we tend to stick with the old and proven.
To read more, click here
My comment: Short, with good ideas. No statistics…
COVID-19 recent posts at covidscienceblog.com
Get a flu shot by the end of October at the latest!!
Many are worried about overwhelming the hospitals with both Covid and flu. Do you want to risk getting the flu and having to go to a hospital with a lot of sick Covid patients? 410,000 flu hospitalizations in 2019-2020.
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Dr. Fauci answers questions many people have in a humorous interview with Fauci and a comedian. Lots of smiling and laughter.
If you, or someone you know, want understandable explanations from a widely recognized expert for questions that a lot of people have, email the link to them. 34 minutes and Fauci has time to answer the questions.
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When can we get fast cheap Covid-19 saliva testing at home?
The best podcast I have ever listened to on this topic! A scientist and the person who helped set up the NBA saliva testing system. I want to get fast, cheap Covid-19 testing at my home now so I can go out anytime, anywhere, with anyone I want!! I can test every day or several times a day.
To listen to the podcast, click here
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, go to www.mbaa.org 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 firstname.lastname@example.org . Or call 800-839-0227, MTW 7AM to noon, Pacific time.
Mortgage applications increased 6.8 percent from one week earlier
WASHINGTON, D.C. (September 23, 2020) – Mortgage applications increased 6.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 18, 2020. The previous week’s results included an adjustment for the Labor Day holiday.
The Market Composite Index, a measure of mortgage loan application volume, increased 6.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 18 percent compared with the previous week. The Refinance Index increased 9 percent from the previous week and was 86 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 13 percent compared with the previous week and was 25 percent higher than the same week one year ago.
“Mortgage applications activity remained strong last week, even as the 30-year fixed-rate mortgage and 15-year fixed-rate mortgage increased to their highest levels since late August. Purchase applications were up over 25 percent from a year ago, and the demand for higher-balance loans pushed the average purchase loan size to another record high. The strong interest in home buying observed this summer has carried over to the fall,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Despite the uptick in rates, refinance applications increased around 9 percent and were almost 86 percent higher than last year. Both conventional and government refinance activity, and in particular FHA refinances, picked up last week.”
The refinance share of mortgage activity increased to 64.3 percent of total applications from 62.8 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 2.2 percent of total applications.
The FHA share of total applications increased to 10.1 percent from 9.7 percent the week prior. The VA share of total applications decreased to 12.0 percent from 12.3 percent the week prior. The USDA share of total applications increased to 0.6 percent from 0.5 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased to 3.10 percent from 3.07 percent, with points increasing to 0.46 from 0.32 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) decreased to 3.35 percent from 3.41 percent, with points increasing to 0.42 from 0.27 (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 increased to 3.23 percent from 3.16 percent, with points increasing to 0.37 from 0.35 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 15-year fixed-rate mortgages increased to 2.64 percent from 2.61 percent, with points increasing to 0.47 from 0.35 (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 decreased to 3.19 percent from 3.20 percent, with points increasing to 0.64 from 0.58 (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.
Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
1826 Clement Ave. Suite 203 Alameda, CA 94501