Appraisal Scoop

Real Estate Demographics: Identifying and capitalizing on market trends

Real estate in your market area is affected by influences outside of your own region. For example, when I sold real estate in Portland, Oregon, what was happening in terms of inventory, appreciation, and activity in Seattle, Washington had an effect on my own marketplace. The two metropolitan areas are less than 200 miles apart, and one influences the other due to the easy and frequent population movement between the two cities.

The largest regional influence for my market, however, was California. There was a massive influx of people from California to Oregon, particularly from the bay area of San Francisco and the greater Los Angeles area. These geographic areas drove tens of thousands of people into the Portland metro area annually, increasing the demand for homes and raising values and prices as a result.

The population exodus started because the difference in price between the Portland market and the California market triggered the law of cause and effect. The appeal of Oregon’s lower real estate prices caused California residents to want to move, either to cash out of expensive California properties and apply the profits to better homes at lower prices in Oregon, or to relocate to an area where they could finally achieve first-time home ownership.

To determine how neighboring regional markets are affecting your market area, study migratory patterns and then research the reasons behind the population movements you discover.

Studying population migration patterns

To quantify population migration trends that affect the buyer and seller pool in your market area, determine the answers to these questions:

• Is your marketplace growing in population or losing population?
• Are people migrating into your area or leaving your area?
• Where are new residents coming from geographically?
• Where are current residents going when they move away?
• At what rate are people arriving or leaving your area?
• What are the economic factors that are driving population changes (i.e. jobs, unemployment, business growth) in your marketplace?

If your answers lead you to believe that a population boom is pending, prepare yourself and your clients to take advantage of a seller’s market and the positive affects of a high demand, low supply market situation.

Conversely, if your answers lead you to believe that a population exodus is beginning to take place, you can steer buyer and seller decisions with that knowledge in mind.

Identifying and capitalizing on market trends

To understand your marketplace and its economic condition, compare current market activity with correlating statistics from the previous year, using the following questions as your guide:

Click here to continue reading . . .

Zaio - Expert Confirms Zaio's USPAP Compliance

Zaio disclosed it had retained Danny Wiley, former Chair of the Appraisal Standards Board (ASB) to conduct an independent evaluation of the technology, processes, and appraisal report outputs to determine the overall USPAP compliance when Zaio technology is used by properly licensed and certified appraisers to develop and report appraisal results.

• Download ZAIO USPAP Compliance Letter.pdf (25.3K)
• Download Danny Wiley's USPAP Compliance.doc (39.5K)

Mr. Wiley stated: “After a thorough Zaio review conducted over the past several months, I confirm that if used properly by the licensed appraiser, that the work performed by the appraiser along with the information contained within the report will fully comply with all USPAP appraisal standards, including USPAP STANDARD 1 and STANDARD 2.”

“Since Zaio appraisers inspect large volumes of homes, some have incorrectly assumed that that the reports should be classified as “Mass Appraisals” and be governed under STANDARD 6 of USPAP.   However, that is not correct.  My evaluation concluded that the objective is for Zaio appraisers to arrive at a defensible, independently supported USPAP compliant appraisal for each individual property, rather than valuing an entire universe of properties, and thus STANDARD 6 does not apply."

  For the complete versions click below:

Download ZAIO USPAP Compliance Letter.pdf (25.3K)

Download Danny Wiley's USPAP Compliance.doc (39.5K)

Video: Runt Rants - Sub Prime and Alt-A, The Market Revealed

I spend time trying to understand the nuances of  the now Global currents that affect my business and yours, so that we may both guide our companies to prosperity. Hopefully you follow my efforts and hopefully we both will profit. 

Occasionally I come across an analysis so concise, so on target, that I have nothing to add.  This is one example.  Don't click on the link below until you have nine minutes to spend learning, and at least five minutes to recover.

This video takes a humorous look (from a British point of view) of our economy from basic sub-prime borrowers, to brokers, to how the hedge fund market works. 

Have a wonderful day!

The author is the owner of Acorn Appraisal Associates, a 22 year old firm offering a wide range of quality appraisal services to the Financial and Business Communities. [email protected]

I have the right to remain silent. Anything I say will be misquoted and used against me

Runt Rants - Sub Prime and Alt-A, and You and I

Did the down market ruin a good year? Was the drop in volume so precipitous that there's no way you'll recover your objectives for the year? Well, you are not alone......

Come join the crowd around the bar. It's not a pity party, and you are only allowed one Rob Roy. No drowning your troubles in booze. We are here to learn and to prosper!  We wrote about the Sub Prime problems in a series beginning here. If you missed it, read it. A neat three part series.

Now let's update things.

I knew the Sub Prime problem was coming thanks to Joan Trice, owner of AppraisalBuzz.com, organizer of the annual Valuation 200X conferences. Valuation 2007 is coming up in a couple of weeks in Las Vegas.

A true Oracle is Joan! She learned of  the problem from her good buddies circle, mostly Chief Appraisers of large national and international lenders. Many of them will be at Valuation 2007.

They were worried in the Fall of 2006. Those friends of Joan's came to the conclusion that the Subprime and Alt A portfolios were the equivalent of junk bonds of the 1980's...gee, I knew that too... they had been routinely packaged as Mortgage Backed Securities and sold with ratings much higher than they should have been, resulting in huge profits along the daisy chain.

The daisy chain being from the mortgage broker who sold the borrower on a bad deal, all the way up to the investment companies who were the ultimate purchasers...investment companies who agreed to manage large capital accounts for individuals, estates, various corporations with lots of money to invest...much of it overseas.

Yeah, I knew the stuff was junk.

But I'm not smart like Joan and her friends. I thought it would be a tempest in a tea pot.  After all, Sub Prime and Alt A angst backed securities were just a fraction of the market, and only a fraction of those would wind up in default. In the over all scheme of things the market should be able to absorb it's losses and move on.  That's what I thought, that's what I argued with Joan.

I was wrong . . .click here to continue reading:

October 2007 USPAP Q&A - Are IM or Text Messages Appraisal Reports?

The ASB has just released their October 2007 Q & A.

• Client Altering the Report (follow-up)
• Are Instant Messages or Text Messages Appraisal Reports?
• Checking "Stable" vs. "Declining
• Is Compliance with STANDARD 3 Required when Submitting a Complaint

The first topic [Client Altering the Report] was previously discussed after the September Q&A: Appraisal Foundation says appraisers are NOT responsible for altered reports!  If you recall, the AQB took the position:

Once the appraisal report has been transmitted to the client, USPAP does not place further responsibility on the appraiser for the client’s use of that report.

The October Q&A attempts to clarify that position as well as:

Question:  "I perform appraisal assignments for a client who asks to be notified of my final value conclusion via instant message or text message. Is this communication to the client an appraisal report that must comply with USPAP?"

Question:  "When performing residential appraisal assignments I use “standard” preprinted appraisal software forms. The forms ask me to identify whether neighborhood property values are “increasing,” “stable,” or “declining.” I have been told that lenders won’t accept appraisal reports where “declining” is checked (even when this is an accurate analysis), so I usually check “stable” to accommodate the underwriting process. Is this a violation of USPAP?"

Question:  "I am a real property appraiser. I want to submit a complaint regarding an appraisal report to my state appraiser regulatory agency. I would like to express my opinions and comments about the quality of the appraisal report in a cover letter. Am I obligated to comply with STANDARD 3 regarding my opinions and comments regarding the appraisal? If so, who is my client?"

The first topic [Client Altering the Report] was previously discussed after the September Q&A: Appraisal Foundation says appraisers are NOT responsible for altered reports!  If you recall, the AQB took the position:

Once the appraisal report has been transmitted to the client, USPAP does not place further responsibility on the appraiser for the client’s use of that report.

The October Q&A attempts to clarify that position as well as:

Free Webinar (Recorded): Pulp Fiction – Is The “Paperless Office” A Myth?

Paper cuts! Do they HAVE to hurt?!  Last Friday (October 26th) a la mode, inc. sponsored the free webinar: Pulp Fiction – Is The “Paperless Office” A Myth?   

This recorded a la mode, inc. webinar is NOT a repeat of the PowerPoint presentation given this Summer in Las Vegas or previously recorded by a la mode. It's a live step-by-step demonstration of preparing an appraisal report in a paperless environment.  Click here to watch the recorded webinar.

I covered lots of free tools and services, available from the Internet, to assist you in creating a paperless environment.  I was working LIVE to demonstrate a paperless workflow from receiving an assignment through creating an electronic workfile.

The webinar shows how tools like FolderShare, MS OneNote, PaperPort and even DiVinci, XSites, and Tablet PCs can come into play with a paperless office.

Author: Brian J. Davis, RAA - Brian Davis & Associates - Brian has over 23 years of appraisal experience in Central, IL and hosts the Appraisal Scoop blog and the WinTOTAL Users Group an email forum for appraisers.

Appraisal and Market Analysis of Indoor Waterpark Resorts

The appraisal of an indoor waterpark resort requires analysis and expertise beyond what is required for the appraisal of a typical hotel or other commercial real estate property.

Unlike other types of appraisals, a waterpark resort appraisal requires a thorough market analysis involving a study of the economic and demographic factors as well as a review of the hotel and indoor waterpark resort markets.

It also requires a complete financial analysis which looks at various revenue categories. When appraising an indoor waterpark, the appraiser must have a full understanding of waterpark usage issues and a firm grasp on the trends in the indoor waterpark market.

Author: David J. Sangree, MAI, CPA, ISHC is President of Hotel & Leisure Advisors, a national hospitality consulting firm. He performs appraisals, feasibility studies, impact studies, and other consulting reports for hotels, resorts, waterparks, golf courses, amusement parks, conference centers, and other leisure properties. He has performed more than 1,000 hotel studies and more than 100 indoor waterpark resort market feasibility and/or appraisal studies across the United States and Canada

Click here for the complete article.

Real Estate Market Absorption Rates - A Great Way to Determine the Strength of Real Estate Markets

Precisely how does a buyer or seller know when a real estate market most favors buyers or sellers? No buyer wants to pay too much and no seller wants to leave money on the table by pricing too low. The answer is in knowing the market absorption rates.

Property absorption rates in any local real estate market are usually considered the best indicators of whether that market is a sellers’ market, a buyers’ market, or a neutral market. The market is the market and favors no one. But knowing the current real estate market cycle is essential for success as either a buyer or seller.

Sellers’ Market – Absorption Rates 1-4;
Neutral Market – Absorption Rates 5-6;
Buyers’ Market – Absorption Rates greater than 7

The easy-to-understand process of calculating absorption rates for local markets will be helpful to anyone trying to figure out the current real estate cycle and how to formulate a winning buying or selling strategy.

For instance, assume there are currently 100 Single Family Home Lots for sale in a large, single family home community. Of these, 70 are priced at, or below, $45,000. Last month, assume that 5 lots sold for $45,000 or less. The absorption rate would then be 70 divided by 5 , or 14.0. An absorption rate of 14.0 indicates a strong buyer's market and, that in an unchanged market, it will take 14 months to sell all the hypothetical 70 existing lots listed at or below $45,000.

This basic analysis can be used with most of property types including building lots, homes, condominiums, or even commercial properties. There must, however, be a high enough number of actual transactions to permit statistical analysis. The fewer the actual number of transactions the less statistically significant will be the results. Also, remember that within very broad but weak markets, narrow market segments may be showing non-typical strength.

Market absorption is a very useful tool for anyone trying to best determine how to price their property and what the current market says is a reasonable time period for a sale to be concluded. The absorption rate analysis also helps buyers in that in a buyer's market a low purchase offer is often a winning strategy.

Related Article:

Absorption Rate Key to Successful Pricing

Author: E. Lee Reid is a real estate, construction, hospitality, and travel and leisure expert. http://www.eleereid.com  Article Source: http://EzineArticles.com/?expert=E._Lee_Reid

Geek's Corner - What is (and isn’t) a Tablet PC?

John Hill, TabletPCBuzz, Owner and Allegiance Technology, CEO has agreed to help guide appraisers through some of their questions with regards to what a Tablet PC is and what it isn't!  I've attended two of John's webinars for appraisers on Tablet PCs and have learned a TON both times.  Welcome John to the Appraisal Scoop blog!

Rather than talk about “feeds and speeds”, advocate or bash certain brands or advise you on what your setup should look like, I’ve decided to help set your expectations about Tablet PCs.

A Tablet PC isn’t a Swiss army knife

It isn’t a computer that weighs 1.2 pounds, has a 17” screen and 16 hours of battery life with a built in 8 megapixel camera and is Mil-spec ruggedized for drops of 30’ and submersible to a depth of 100 meters.

It is a fully capable Windows computer - You can run ALL your Windows compatible software the same as you do on your desktop or laptop computer.  It runs the same version of QuickBooks, Microsoft Office, Apex, WinTOTAL, ClickForms, ACI and any other software without requiring a special “tablet” version.  You can get a very capable tablet PC with a weight under 4 pounds with a high resolution screen and 5+ hours of battery time.  With the right case, you can protect your tablet from rain and mishaps.

A Tablet PC won’t work where I live

I know, you are in Florida where the sun is intense, or Arizona where it is 120F in the shade, or Washington where it rains six days out of five, or Vermont where it is always twenty below.  Tablet PCs, like other mobile computers, are designed to work in a variety of environments.  The outdoor viewable screens aren’t perfect, but they are way better than any standard notebook screen.  All are rated to a wide variety of temperatures. 

Treat it the way you would any expensive device - Feel free to lock it in the trunk of your car when you don’t want it stolen – just don’t leave it there for several days in the baking sun or freezing cold.  Get some rain on the screen and you can just wipe it off – but please don’t use it to complete forms while you are in the tub with your rubber duck.  Drop it off the desk onto the floor when you trip over the cord – our rule is that any fall that would injure you would probably hurt your computer too.

To continue reading, click here . . . .

Runt Rants - New additions, Outsourcing work to India, and Zaio Technology

Well, well, well...can it be eight weeks, two whole months since I've had something to contribute? By golly so it has...last post to Appraisal Scoop was Sept 10th. More than two months actually. That last post chronicled the down market we are in, the use of good accounting software to constantly analyze your business, and another view of an "insulting appraisal request".

I've been applying those general themes in MY business for the last two months. Hopefully you've been doing the same.

I'm beginning to see signs that the liquidity squeeze is easing... somewhat... but I now expect impact from the fallout from the Sub Prime crisis to linger well into next year. Acorn's volumes the last three weeks show signs of the market returning, the local market's entering a drop zone, and impact from our marketing efforts. That's two pluses, and one minus. Since I know my business pretty well as a result of utilizing my accounting software to analyze trends, I can detect each of those...hopefully you can now do the same.

Acorn is involved in several major projects this fall and my time and the Bright Horses time is devoted in significant ways to all of them. What a pleasure to see the management team that Acorn has built over the last eight years now beginning to pay off in a major way! Of course, I've chronicled our move beginning in the year 2000 from a one man operation to the vibrant business of today. In the early years we chronicled the passage on a couple of Internet forums. In the last year it's primarily been here on Appraisal Scoop. I hope you've been able to keep up with the journey.? Acorn is now a global company with global resources!

Since my last post, several major events have occurred. . .