Appraisal Scoop

Fair FHA Appraisals Act of 2007 Introduced - "Blind Draw" Selection System

Ohio Congressman introduces "Fair FHA Appraisals Act" to ensure the American Dream of Home  Ownership   doesn't become a nightmare.  With a focus on bringing fairness to how the homes of millions  of Americans are valued, Congressman Charlie Wilson (OH-6) introduced his first bill as a member of the 110^th Congress, the “Fair FHA Appraisals Act of 2007.”

“The American dream of home ownership is in danger of turning into a nightmare for so many families,” said Congressman  Wilson. “Homes are being foreclosed at record rates, and that’s especially true in Ohio. Anything we can do to bring fairness to the system is a step in the right direction. This bill will provide much-needed relief to our hard-working families.”

The “Fair FHA Appraisals Act of 2007” takes two important steps to ensure homes insured under the FHA Single Family Mortgage  Insurance Program are accurately valued. Congressman Wilson’s bill:

• clearly outlines unacceptable practices that could be used in an attempt to influence an appraisal
• puts in place a “blind draw” system that randomly selects an appraiser to conduct the analysis, virtually eliminating direct contact with the requester and reducing the risk of influence-peddling.

The “Fair FHA Appraisals Act of 2007” is expected to be referred to the Housing and Community Opportunity Subcommittee of the House Committee on Financial Services. Congressman Wilson is a member of the House Committee on Financial Services.

Full Text:

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Appraising In Declining Markets

The euphoria that gripped the residential real estate circles over the last six years appears to have finally been extinguished as of yesterday. Now even NAR admits that housing prices are going down.  Prices are going down, even in nominal terms, let-alone in terms of cash to the seller. In terms of the USPAP definition of Market Value.

As recently as 30 days ago, NAR, and CAR were still beating the boosterism drum for their members. Now they are teaching them how to handle Short Sales and Foreclosure properties. Appraisers were being beat up over the Declining Value check box issue.

Nominal sales prices are now declining in half of the metro market areas and by the end of the year are expected to be declining in all of them. Moody's, through their www.economy.com predicted in October 2006 that housing prices would decline in all metro markets for the first time in 75 years. Real Estate Editors and columnists, NAR and every State Realtor group tried to beat that notion down with the continued use of words like "Soft Landing".

Blance Evans, editor of Realty Times even wrote a book entitled Bubbles, Booms, and Busts , which I purchased and read in January. It was very dismissive regarding any possible Real Estate Recession, essentially indicating that the Boom's would simply move to other markets and the buyers would move to those markets too. ??? I guess it means that when prices stop going up rapidly or start to come down, people simply move in order to be in another rising market?

Click below to read on . . .

Runt's Rants Looks at the "Think Tank" of 800# Appraisal Industry Gorillas

I'm sensitive to creating positive impressions and positive thoughts in venues such as this. We as a profession must recognize that growth, development, and change are necessary for our businesses to survive and prosper. 

Acorn Appraisal Associates is involved in major change this year, committing our resources to new ventures, new directions. It must be so. Challenging current methods, current procedures, current relationships is essential. New ideas must be considered, and considered openly without bias. It's the only path to the future.

The Appraisal Buzz newsletter published by Joan Trice focuses on the issues of the appraisal profession, and what leaders in the profession are doing and thinking. It's good stuff. You can visit Joan's web site at http://appraisalbuzz.com/. Somewhere in there you can sign up for her newsletter.

The most recent newsletter reported an interview with Alan Hummel and John Forsythe of Forsythe Appraisals...I'm familiar with them only from an Internet friendship with Karen Oberman, one of the key execs of Forsythe. Forsythe organized a conference of AMC Chief Appraisers held recently in Florida. Forsythe is also an organizer of the coming National Appraiser Conference in Washington DC this fall, an invitation only gathering of "industry thought leaders" jointly sponsored by Forsythe, October Research, and Zaio Corp.

I'm supportive of these kind of gatherings. We need them. But I'd like to comment on three of the points made in that Buzz interview. Before I do, recognize that the interview I'm discussing was likely guided to the issues that appraisers would be interested in, since AppraisalBuzz's target market is appraisers. I assume that there were many other topics that were covered at the meeting, and overall I'm sure the gathering was a net positive. More such meetings are scheduled.

By way of clarification, the "Chief Appraiser" title of those who attended is something of a misnomer. These are smart and experienced guys and gals. I have no doubt of that. But the word "appraiser" implies that they are working appraisers. They aren't. They may have been in the past. But the past is not relevant to the subject of the "think tank get-together". I'm guessing that the only current practical experience in appraisal represented in that group was the Forsythe folks, who do in fact run a very good appraisal business.

Click below to read on. . . . .

Apex Software Releases Mobility Software for Tablet PCs

NEWS RELEASE: Today, Apex Software, the standard in sketching in the real estate valuation market, announced at the Northern Colorado Association of Real Estate Appraisers (NCAREA) conference the immediate availability of Apex Nexus™, the company’s revolutionary new mobile sketching and data collection tool.

Nexus takes field sketching and data collection to an entirely new level by fully embracing Tablet PC technology, providing a natural approach to drawing floor plans, taking notes, and gathering data during field inspections.

“Our goal was to develop a solution that is superior to pencil and paper in every way,” said Robert Smoote, Apex Software’s Vice President of Product Development. “Nexus accomplishes this feat by truly revolutionizing the inspection process.”

Traditionally, fee appraisers use pencil, paper, tape measure and clipboard to measure a home, sketch its floor plan and annotate property details. The resulting paper documents are then redundantly transcribed back at the office into desktop software and the paper work files kept in physical file folders for a period of at least five years.

Using Nexus on Tablet PCs, appraisers simply draw on screen with a pen or stylus. Nexus takes the etch-a-sketch-like information and automatically transforms it to data. Jagged lines become straight, scrawled angles and curves convert to measurement, scribbled dimensions auto convert to exact lengths or angles and detailed room-by-room INK notes are digitized.

Click below to read on . . .

Swimming Pool Maintenance Takes Time & Money

Scott Hubbard of Homewerx, Inc, a family-owned Home Inspection firm, recently posted some great information about swimming pools to their company blog.  With Scott's permission I'm re-blogging his complete article here.  To read the article from his site - click here.

Also Read: Swimming Pools: Do They Increase or Decrease a Home's Value?

Even in Arizona, you may not use a swimming pool very much in the winter time.  But if you're considering adding a pool to your home, winter is the slow season for Arizona swimming pool companies and therefore, you may be able to negotiate a better price on a new pool.  Whether you add a pool to your existing home or buy a house that already has a pool, below is some information to consider about swimming pool maintenance.

Maintaining a swimming pool takes time and money.  Pools consist of many systems; the structure itself, as well as electrical, plumbing & mechanical systems.  So there's alot to maintain including pumps, filters, lights, valves, sometimes a heater and other features.  Each pool is different, therefore the exact cost of maintaining your pool will depend on many factors such as the pool's age, surface area, type of finish, water capacity, type of pump & cleaning system, etc.

STRUCTURE & FINISH: The pool's structure will usually last many years provided that it's built right and the finish is properly maintained.  The pool's finish may be plaster, pebble-tec or fiberglass.  All three types will require regular brushing, cleaning and chemicals.  Algae is a bigger concern with a plaster finish.  This is because algae can actually etch the plaster finish, or pit the surface and make it rough.  Also, the type of pool matters...a diving pool usually holds a lot more water than a play pool, and therefore it will probably cost more to maintain.

COST OF CHEMICALS, ETC. : Properly maintaining the chemical balance of the water is important.  If you aren't sure what to add, you can take a sample of your pool water to the local swimming pool supply store for help.  They will test it and tell you what chemicals you need and how much to add.  Pool water generally requires more chemical maintenance when the weather gets hotter and the pool is used more frequently.

For a pool that does NOT have a chlorinating or soft water system, you'll have to buy chlorine, acid and other chemicals.  The chlorine is by far the most expensive of these chemicals, which will probably cost $200 or more per year (depending on the size of the pool, the amount of water it holds, etc.).

If the pool does have a chlorinating or soft water system, you won't need to buy the chlorine but you'll need to buy salt and other chemicals.  Also, this type of system is more complex and requires more maintenance.

Click below to continue reading . . .

Runt's Rants - Dichotomy of The Appraisal Profession - Brand vs Generic

The last two weeks we’ve talked about generic versus brand products. We discussed the changes that have occurred over the last few decades in the lending industry including the consolidation of ownership of local and regional institutions into money center conglomerates on the east and west coasts [The World Is Flat! ].

One off shoot of that consolidation was the loss of the personal banking relationships which helped move lending from a brand product to a generic product, where consumers could shop for a loan among many faceless institutions, irrespective of where they were located. That development, concurrent with the development of the Information Revolution, resulted in the creation of a generic product - single family first mortgages, packaged and sold in the secondary markets as Collateralized Mortgage Obligations or CMOs (aka MBSs).

I mentioned in the introduction of this series that those specific developments created a dichotomy in the appraisal profession, not the dichotomy of commercial and residential, but between brand and generic product markets. Today we’ll try to define that dichotomy.

Those readers who do both residential and commercial appraisal work will understand when I refer to the different rhythms that result from a residential and a commercial assignment.

Typically, commercial has a longer time frame from when the order is accepted until it is to be delivered. There is more negotiation between the appraiser and the lender before the order is placed, a clear scope of work is determined...unique to that assignment. There is quite often more discussions between the appraiser and the borrower about the property, leases, etc. Phone calls are placed, the file is set aside until the call is returned, and when returned the file must be recalled and the needed discussion held. The appraiser in a commercial assignment is really not in control of the daily activity progress on a commercial assignment.

In contrast, residential first and second mortgage appraisal assignments have a much shorter time frame between acceptance and delivery, often three to five days. Generally the orders are sent out electronically over the Internet and accepted in that same medium. Multiple orders are received and multiple appraisals are often delivered each day. The scope of work, even the fee, is generally agreed upon at the initiation of the relationship, and each order is treated the same. The emphasis in residential first and second mortgage appraisal is on quick and accurate. In order to achieve those objectives the appraiser in a residential assignment must be in control of the daily, even hourly activity progress if he/she is to serve the clients needs.

But wait you might say......not all commercial and not all residential assignments fit into those two neat descriptions. I agree. Small commercial assignments....those owner occupied, or single tenant buildings are often on a shorter deadline, and resemble more and more the single family first mortgage transactions in terms of the rhythms I mentioned. Single family residential assignments for divorce purposes, or to support other litigation matters fit more into that commercial rhythm mold.

That’s why I stated at the beginning of this series that a better way to look at the appraisal profession is not in the commercial/residential distinction, but in the generic versus brand product lines.

Click below to READ ON!

Cost per square foot: a flawed way to measure value

"A bigger house means the builder must skip elsewhere" according to Katherine Salant's article for Inman News ( click here )   Ron Jones, editor of Green Builder magazine and a custom home builder for more than 25 years, said in a recent interview:

"Buyers value the dollar per square foot, and the builder responds by delivering as many square feet of conditioned space as possible for $X. If he can deliver 100 more square feet than the competition, most buyers think it's a better value.

"But the problem with this is that the more square feet that are added for a given price, the less concentration of quality per dollar for performance of the house. The quality for finishes, appliances, mechanical systems and the building envelope suffers. If the builder has set the price at $200,000 for example, he will have to dilute the quality.

"Builders concentrate their energy where their buyers will compare -- generally the kitchen, the master bathroom, bedroom count and overall square footage.

Acknowledging that the cost-per-square-foot figure is the coin of the realm, many home builders highly resent being judged by this criterion, pointing out that value depends on what is in the square foot.

If they use higher-quality materials than their competitors, they will have a higher cost per square foot, but they are also selling a better house.

Click here for the complete Inman News Article 

eppraisal.com Appraisal Network - Can you REALLY take the appraisal to the bank?

According to eppraisal.com's Realty Thoughts blog (click here), they've partnered with professional appraisers across the country to provide "drive-by" appraisals by certified appraisers.  [See also Realty Time's article "Appraisals are just a mouse-click away".]

Through their Appraisal Network product, once site visitors have taken a snapshot view of what their home is worth (the eppraisal) they can order a "FNMA 2055 Drive-By, which is a limited scope appraisal of a single-family home (including units in condominium or PUD projects). Drive-by only with no interior inspection."

eppraisal.com is trying to fill a void between online property valuation (Zillow, etc.) sites that can only give consumers a quick estimate of the value of a home and something that a consumer can actually take to the bank. [their claim]

From their blog comments, Erik Hersman, who is apparently a company spokesman says: "We sat back and really looked at what our user base was coming to eppraisal.com for and realized that many were wanting to find that first snapshot, but also wanted to get a “real” appraisal done.   Anyway, we think it’s a differentiator and puts us squarely where we want to be with our professional real estate partners.

Whether you want to remove PMI, buy a home or improve one, let one of our professional appraisers (in your neighborhood) give you the real and local market value. Our appraisers complete a drive-by appraisal, complete with picture of the home, by looking at more than just historical sales. They use their local knowledge of the area, zoning decisions, city ordinances and home/land development plans to determine a true market value of a home. Source: eppraisal.com Appraiser Network

But can they REALLY take that appraisal to the BANK?!

Click below to read on . . . .

Humor - Real Estate Analysis

I thought I'd share a few real estate related graphics and charts from a gem of a blog called Indexed

April 2007 USPAP Q&A - Appraisal Record Keeping for Expert Courtroom Testimony

The ASB has released their April 2007 Q & A.  Appraisers who specialize in providing courtroom testimony will find these questions useful, especially as they pertain to record keeping for both oral and written appraisal reports.

• Does the expectation to have a transcript or a summary apply only in assignments when an appraiser provides an oral report?
• Is a transcript of an oral report or testimony required for the workfile when an appraiser testifies about an appraisal assignment?
• Does the expectation to have a transcript or summary of testimony apply if the appraiser has a written appraisal report and testifies only to the information contained in that report?
• If an appraiser prepares a written appraisal report, is the workfile required to contain a separate signed certification for any testimony the appraiser provided in support of that report?
• Must the workfile contain a transcript or summary of an appraiser’s testimony for the entire proceeding, or only for that portion that contains the appraiser’s testimony?

  Download April 2007 USPAP Q&A (25.1K)