9-25-20 Newz: 8 Common Violations – Unlearning? – Beer Can Condo

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!!

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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.

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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.

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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

  • Appraisers Don’t “Create” Value! By Tim Andersen, MAI
  • Practical tips you can use today for getting more appraisals done and make more money
  • New appraisers need live, not “virtual” field training By Julie Friess, SRA
  • My new blog, Covid Science For Everyone! Covidscienceblog.com

To read the articles, plus 2+ years of previous issues, subscribe to the paid Appraisal Today.

If these articles gave you one good idea, it is worth the subscription price!!

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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.

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Unlearning? 

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…

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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.

Lots of info and stats, click here

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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. 

To watch the video, click here

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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

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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, 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 info@appraisaltoday.com . Or call 800-839-0227, MTW 7AM to noon, Pacific time.

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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.

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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 

www.appraisaltoday.com

 

 

Beer can house in Houston, TX(Opens in a new browser tab)

9-4-20 Newz: Humor – Castle in Ohio – Appraising Weird Stuff

How to Handle the Weird Stuff: Appraisal Methods from an Experienced Florida Appraiser

Excerpt: Going further away or back in time

One method is to go further back in time for comparable sales.. Another method is to use sales that are more distant to find data to utilize. Both of these techniques have long been available to appraisers. When using these appraisal methods, most often a comparison is made between properties with similar characteristics to the question at hand to extract a ratio/percentage which is then brought current or to the locale and applied. This could work for the above illustration with only four houses on leased land and no similar nearby sales. Most appraisers are familiar with and have utilized these techniques,

Well written and worth reading. To read more, click here

My comments: Lots of good tips. All of us are asked to appraise the “weird ones”. Of course, sometimes we don’t know a house is weird until we drive up and see it!! Very good discussion of methods. I have used all of them except depreciated cost, which is a good method. Plus, lots of tips on doing them for lenders. Of course, sometimes I just say “no” as it will take too long.

I have learned that they often are money losers due to the increased time. This is what can happen with lender UAD appraisals for AMCs due to the excessive amount of questions and trying to fit the appraisal on the form. I sometimes accept the weird ones for

non-lender work with no time pressures. They can be very interesting and challenging.

Read more!!

8-28-20 Newz: Pay to Be on AMC List – Dirty vs. Disheveled Homes – Top 10 Appraiser Blogs

Should appraisers pay to be on an AMC approved appraiser list?

By Dustin Harris

Excerpt: Should appraisers pay to be on an AMC’s approved appraiser list? Is this one way to get new clients? If an AMC solicited you, would you check it out? Now, I work for some AMCs that, frankly, you might not choose to work for. That’s fine. It’s a choice we all make. Understand that most of the areas I work are rural, so AMCs are generally willing to pay more because of this. Some AMC are very demanding. Yet, when I meet those demands, I get a lot of well-paying jobs from them.

To read more, plus lots of appraiser comments, and listen to the podcast, click here

My comment: A never ending very controversial topic ever since AMCs took over residential lender appraisals after the mortgage crash around 2008!

Read more!!

8-20-20 Newz: Glass Houses – Cost Approach Questions – Murphy Beds

So Many Cost Approach Questions! So Few Answers! Such Low Fees!

By Tim Andersen, MAI

Excerpt: It is clear most appraisers do not like to do the Cost approach. Generally, we are not too familiar with it. So, it is clear that most appraisers, because of this, do not appreciate the deep analytical power the Cost approach really has. Therefore, I’m going to ask you 10 questions on the Cost approach (and stuff related to it). After you’ve finished reading them, you probably will still not like to tackle the Cost approach. Nevertheless, you just may have a better understanding of, and appreciation for, its powerful analytical capacities.

First Question: On the 1004 form is the indication that Fannie Mae does not require the Cost Approach to Value. Where does the form instruct the appraiser not to complete the analytics of the Cost approach?

To read the other questions and answers click here

My comment: Appraisers, including myself, seem to have a love/hate relationship with the Cost Approach. But, it can be useful. Tim’s much longer article “But Fannie Mae says I don’t have to do the Cost Approach!!” will be in the September issue of the paid Appraisal Today.

Read more!!

8-14-20 Newz: Appraisers in New Movie – Appraisal Reviews – Hybrids

What to Do When Your Appraisal Is Under Review

Excerpts: Residential appraisers will often — if not just about always — have their work reviewed by another appraiser. Usually, this is a routine procedure that the original appraiser barely notices. Sometimes, the review appraiser will come back with requests for extra information, or doubts, that the original appraiser might find annoying. To be sure, the reviewer’s questions might sometimes seem nit-picky, and answering them can distract from other work. However, the issues the reviewer raises almost always turn out to be legitimate.

We asked review appraiser Doug Nakashima (Glenview, Illinois) for advice on how to make reviews as painless as possible if you’re the one being reviewed.

Topics:

  • Remember that reviewers are on your side
  • Look out for these common points of contention
  • Avoid future revision requests

To read more, click here

My comments: Sorry, no comments section for ranting, etc. ;>

If you’re doing AMC work, the tough appraisals tend to go to reviewers. The first “reviews” are from underwriters, clerks, computer software, etc.

I don’t know of any other profession where almost all reports are reviewed by clients. Personally, I think it has resulted in appraisers being overly critical of other appraisers’ work, state boards sometimes being too aggressive, etc. Worse, some appraisers try to send in reports with as as few “problems” as possible, to minimize call backs and doing whatever it takes.

Read more!!

8-7-20 Newz: What type of clients do you have? – Rotating Dome Home – Fannie Solar Panel Update

Survey: Which Appraisal Clients Make Up the Majority of Your Client Base?

Excerpt: What types of clients do property appraisers serve? Do most of their assignments come from lenders vs. non-lenders? To help answer these questions, we recently asked our real estate appraisal community, “What type of appraisal client makes up the majority of your client base?”

While most appraisers said that the majority of their work comes from lenders (most often through AMCs), some said the bulk of their client base is made up of other types of appraisal clients, such as attorneys or private individuals.

To read the results and appraiser comments click here

Read more!!

7-31-20 Newz: New Fannie Forms – 10 Most Expensive Homes – Appraisers and Epidemiologists

Interview with The “Millionaire Appraiser”, Terrence Bilodeau

Excerpt: How does one reach such a milestone? Terrence dropped out of school at what age? What advice can he offer to appraisers? These questions and much more will be answered by Terrence Bilodeau as he shares about his life’s journey and how he runs his business.

23 minute interview including a 2 minute introductory comments and a brief ad. Very good interview.

Read the appraiser comments below the video on the Vimeo website. (not many comments on Buzz web site).

I wrote about him in the June 19 issue of this email newsletter, using a recently published CNBC article. He was grossing $280,000 per year. It was very popular with my subscribers. Link to the article I used click here:

To read more, click here

My comment: This guy works way too hard!!

Read more!!

7-24-20 Newz: Difficult Clients – ANSI sq.ft. Standards Changing – 10 Private Islands

Advice for Working with Difficult Clients

Excerpt: Even if the bulk of your appraisals are fairly cut and dried, and require minimal interaction with a human client, any appraiser will occasionally have to work with a difficult client. The assignment might require you to work with a specialty property that is hard to appraise, or with a client who is personally disagreeable, or exceptionally exacting, or who has an agenda that you don’t understand or can’t go along with. Here are some tips for working with difficult clients. Three of the topics:

– Working with AMCs and banks: Time management

– Working with non-lenders: Expectations management

– Deal with complaints immediately

To read the tips, click here

My comment: Some great, practical tips!! Maybe I will try some of them instead of Firing clients, my most popular option ;>

My motto: Appraising would be great except for the darn clients!!

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Will Big Data Put Appraisers Out of Business?

By Dustin Harris

Although Zillow (and other similar companies) keep their algorithms proprietary, they do give us enough information that we can get a pretty good idea as to where the data comes from. For example, according to Zillow’s own website, “we use public and user-provided data for house attributes, and some areas report more data than others.”

As an appraiser for over two decades, I see a blaring problem here. Very few areas have accurate public information for size, quality, condition, and other important features of houses. As you know, these are features that can dramatically affect an accurate value. This is especially true in non-disclosure states where I work such as Idaho, Wyoming, and Utah. As for user-provided data? This is information coming from places like the home owner themselves. Nothing biased there. If Zillow depends on good data to provide good estimates, the phrase “garbage in – garbage out” comes to mind.

To read more, click here

My comment: Real estate data is overall poor, except for a maybe conforming newer subdivisions. No standardization for public records. MLS data provided by real estate agents. Most data not standardized. That means human appraisers will be needed.

Read more!!

7-17-20 Newz: Basement Rooms in GLA? – Toilet House – COVID Humor

What’s your favorite part of the appraisal process?

Excerpt:

Number 1. Data collection and property description (38%)

“The best part is the property review. I enjoy seeing what people have done to their properties and talking to them about their homes.”

“I enjoy viewing/observing the subject home.”

“Detective work”

“Each dwelling is different, and not every appraiser takes the time to clarify the differences in the dwellings. The quality, the construction, the egresses, and especially the correct way to calculate GLA or measure a dwelling.”

Number 2. Data analysis (27%)…

To read more about favorites, click here

My comment: I love working in the field, so my choice is Number 1. But, my very best choice is getting paid ;>

Read more!!

6-26-20 Newz: Lot Size Mistakes – Reconsideration of Value- Unusual Mailboxes

Lot size mistakes 

By Ryan Lundquist

Excerpts: I’ve seen it happen twice lately where Tax Records lists the lot size, but it’s actually incorrect. In one instance Realist showed the lot was five acres when in fact it was only two acres. In another example it said two acres when it was less than one. Yikes.

My advice? Thankfully most of the time we can trust the lot size in Tax Records, but it’s still a good idea to quickly double-check just to be sure. After all, listing the wrong lot size in MLS or an appraisal could lead to litigation, right? What we can do is view the plat map to see if there is anything abnormal as well as try to piece together the lot size (easy to do if it’s a rectangle)…

To read more, click here

Short with good map illustrations. Plus many, many appraiser comments. I guess it is a hot topic!!

My comments: Also check out Ryan’s local recent market video for some good ideas on how to show market conditions. Plus, all his graphs illustrating his local market.

When I want to know the lot dimensions to determine lot size, I always get a copy of the legal description (usually from the recorded deed). Assessor’s office maps are for assessment purposes and do not always match the legal description. Google Maps is a good way to determine parcel size if the site boundaries are clear.

When an owner asks about lot dimensions and lot line locations (usually a dispute with a neighbor), I always give the same answer: “I Always Assume the Fences Are Not on the Property Line. Hire A Surveyor! ”

Read more!!