Appraisal News and Business Tips

Posts Tagged weird properties

10-18-19 Newz: What is Risk? – Fascinating Islands – Fees – Data Standards

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…

To read more, click here

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!

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9-27-19 Newz: Bifurcated Appraisals and Inspections; Abandoned Resorts – New CA Independent Contractor Law

Crowdsourcing Appraiser Data

By Jerin Harper, IFA, ASA, CREA

Excerpt: Just imagine the possibilities of having a hyper-local database…

If you are not in the business of data you will be out of business. I’m not sure if I heard this somewhere or not, but this mantra has been in my head for a while now. Being in the data business is essential for every business today. We see it across all industries where the companies that embrace data are still in business, and the companies that didn’t make that pivot are out. In our profession we saw Fannie Mae get into the big data business with the creation of CU. CoreLogic took their data business to a whole new level when they bought Alamode. One of my favorite examples is sports: just in the last several years data & analytics have completely changed the way football, basketball, and baseball is played— and those sports have been around for 100 years. It doesn’t matter what business you’re in, you have to be able to capture the right data and communicate it effectively.

I suggest that appraisers start crowdfunding their data.

To read more, click here, plus the many comments,

My comment: A never ending idea… Who “owns” the appraisal data? I remember the days of the CMDC (California Market Data Cooperative) where appraisers, including myself, shared their appraisal data, long before the Internet. It still exists and is owned by FNC. Their historic data is available.

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9-6-19 Newz: Bidding Wars – Dumb Mistakes – U.S. Abandoned Places

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.

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

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8-23-19 Newz: Deminimus = $400,000 – Highest and Best Use – Fannie Cost Approach

Highest and Best Use – Residential Appraisers Need To Understand It!

Excerpt: There are many valuation products out there. CMA’s, BPO’s and AVM’s to name a few. What you will likely not see in those kinds of valuations, is the specific zoning class for the property being valued. Why?

With these types of valuations, a highest & best use (HBU) analysis is generally not made. However, if you hire an appraiser to value your home, we will perform this analysis. What is a highest & best use analysis? Why is it important in the development of an opinion of value? How is zoning involved?

To read more and see the fun animated gifs click here

My comments: My Most Frequent Residential Appraisal Rant!! I started at an assessor’s office in 1975. The First, and Most Important, Question was “What is the highest and best use?” In 1986 I started doing residential lender work. The form was just a check box for HBU. If you checked No, it was a big problem for the lender. Many residential appraisers don’t check the zoning, general plan, etc. One good way is to just drive around and see what is happening. For example, lots of small homes being torn down and McMansions being built. Or, lots of houses on a busy street converted to office uses. Or, a small house on a big lot with apartments all around it. A common residential issue is a possible lot split.

Don’t forget the General (Or Specific) Plan. It tells you what the city wants today and in the future for land use, which is not discussed in this article.

I have appraised a lot of older commercial properties for lenders, which often had a HBU different than the current use. I discussed it in my appraisals.

When there is a big difference in value between two appraisals, it is often due to a difference in opinion of HBU. Don’t get into trouble. Be sure to think about HBU!! If you’re not sure, contact an experienced appraiser, particularly one who does a lot of non-lender work and/or commercial appraisals.

In the Feb. 2017 issue there is an excellent article written for residential appraisers by Denis Desaix, “Residential Highest and Best Use Analysis: more than Just a “Check box” available to paid subscribers. See below.

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8-2-19 Newz: Frank Lloyd Wright Fixer- Spreadsheet Shackles – Homes under $100,000

Spreadsheets: A Shackle to the Appraisal Profession? 

Excerpts: How can spreadsheet software hinder the profession? A Wall Street Journal article, and a presentation at the Appraisal Institute National Conference have similar stories. One addresses accountants, the other is about appraisers.

The 2015 AI meetings presentation: Will Appraisers Have to Learn to Use Real Analytics Software? was given by George Dell. The main point was that accountant’s software was primarily developed for record-keeping, mimicking paper columns and rows, with analysis a later goal. Other points are:

  • Validating and tracking data is difficult.
  • No built-in audit trails, nor tracking of changes.
  • Regulatory compliance is difficult to accomplish.
  • Susceptible to trivial human errors ETC.

To read more, click here

My comment: Read this article. I totally agree. I started using spreadsheets in 1981 for financial analysis. When I started my appraisal business in 1986, commercial appraisers were using spreadsheets for Discounted Cash Flow. I knew the many problems with spreadsheets’ reliability.

They are particularly unsuitable for statistics as they are not statistics programs. In my MBA program in 1979, I used SPSS for multiple regression analysis, connecting to a large computer.

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7-26-19 Newsletter 25th Anniversary! – Appraiser vs. Zillow – $11 Million View

25th Anniversary of These Weekly Free Email Newsletters!!

On June 17, 1994, I sent out my first weekly email update to Tracy Taplin, Bruce Hahn, Tom Cryer, and John Warr. Bruce Hahn still subscribes. The topic was FIRREA/deminimus. I missed a few weeks (computer problems, traveling) but subscribers became “hooked” on their weekly news, jokes, rumors, and tidbits! The distribution list is over 17,000 appraisers now, and growing every day.

This newsletter started with my Compuserve account, then shifted to my personal email (Eudora) after the first web browser made the internet email much easier to use. I mostly had people write down their names and email addresses when I was teaching, speaking or doing my annual conference. It is very hard to figure out hand written email addresses!

I set up my website in 1998 and had an email form to fill out to subscribe. It took a lot of time to manually enter the names and email addresses. Keeping track of email changes was a nightmare. In 2003 I started using Sparklist to help manage the addresses but it was klunky to use and was getting very expensive. I got up to about 3,500 subscribers. In 2008 I started using Constant Contact, which is very affordable and easy to use. I put a signup form on my website home page. The number of subscribers increased rapidly and is now at over 17,000.

In the early years it had just a few paragraphs. By 2003 it was up to about 3-4 pages long. Since 2008 it has been about 4-5 pages, but was formatted to be much easier to read.

The topics have changed over the years, starting with FIRREA in 1994. Mortgage loans and appraisal orders have gone up and down significantly over the years. Significant mortgage broker pressures from about 1995 to the mortgage crash in 2008, AMC takover, Fannie’s CU in 2015, etc. etc.

I started my paid newsletter in June, 1992. In 2008, I switched to PDF-only and quit printing it. Lots more flexibility in length, plus a lot less expensive! Started with 12 pages. Now typically well over 12 pages, up to about 18 pages.

Note: I somehow forgot about it last month ;>

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7-12-19 ASC Approves ND Waiver – Neighborhood Names – 27 Inspiring Bridges

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.

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7-5-19 Newz: Zillow Past and Future – Coester- Lots More Info – North Dakota Waivers

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.

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6-28-19 Newz: Coester Loses Lawsuit – Fannie Appraiser Update – Secret Stairways

What I think about bifurcated appraisals

Have you ever done a comp check for a mortgage broker or lender in the past? They are appraisals. You only have public records and maybe MLS. You may have driven by the property, but probably not.

What about drivebys? You drove by the outside, but never saw the rear or interior.

With bifurcated appraisals, at least you have photos, measurements of the exterior, descriptions of what the exterior and interior rooms look like, etc.

What about having trainees do them, under your supervision? A great way to get new appraisers started. I spoke with one appraiser who is doing this.

All appraisers rely on public records, MLS photos and descriptions, etc. We don’t know how accurate this data is.

Check out the company doing bifurcated appraisals and their forms software data handling. Do not work for one that requires that you manually fill in a 1004P, for example. How long have they been in business? Are there appraisers in management?

Whether or not you do them is a business decision. They are less risky than comp checks and drivebys. You have more information, assuming they do not make up the photos, sketch, etc.

The Bottom Line: appraisers don’t like change, just like most people. Some adapt, some decide not to change.

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6-14-19 Newz: Refis up 47% – Appraisal Hearing – Suburb Definition

Lender Overlays and FHA Appraisal Requirements

Excerpt: FHA requirements re: approaches to value

Regarding the approaches to value, the HUD Handbook states, “The Appraiser must consider and attempt all approaches to value and must develop and reconcile each approach that is relevant.”

Translation: If the appraiser determines an approach is necessary for credible assignment results, the appraiser must develop that approach. When appraising new construction or a dwelling that is one year old or less, it is likely that the appraiser will need to develop the cost approach. As in any appraisal, if the appraiser decides not to develop one or more of the approaches, he or she will need to support that decision.

For info on site requirements, etc click here

My comment: AMCs and lenders can have some strange requirements. It’s always good to know what FHA says.

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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.

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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