Real Estate Appraisal Insight From the Expert

2012 in Review- An Appraiser’s Personal Perspective

December 24, 2012 at 7:44 pm | Posted in Uncategorized | 1 Comment
Tags: advantage appraisals, appraisal, approach to value; market value, arizona, foreclosure, gilbert, maricopa county, Multiple Listing Service, pool, queen creek, short sale

In November 2011, after a long search for our next home, my family was in escrow with plans to close by Christmas. We told the kids that we wouldn’t decorate our current house but would make that the first priority in the new house- a week before Christmas. This was a resale home in a neighborhood that we had been eyeing for some time. It needed minor updates but was ideal for many reasons. As an appraiser who had been looking to move for the prior two years, this was the end of a long and painful process. You see, I’m too smart for my own good…

As an appraiser, I’d like to think I have a pretty keen sense of the real estate market (like a financial planner does…). I can quickly estimate the value range of a home and I know good neighborhoods. As the real estate market was in its nadir in 2010, we were just looking for the right deal. On top of that, besides appraising homes all over the valley, I worked for a servicer of Fannie Mae defaulted loans, doing nationwide appraisal fraud investigation- so I knew that the pipeline for distressed homes was endless- think the Sta-Puft Marshmallow man of shadow inventory. I would not overpay, and it was a buyer’s market. I have friends who buy houses at auction- fix and flippers. We weren’t looking to get in that game ourselves, just use those sorts of resources to get a home at auction. But we don’t have the cash available to buy a houe outright. We’d need traditional financing.

However, this proved to be more difficult than anticipated. At first my wife and I were very particular about neighborhoods. We’d research the homes coming to auction over the next 60 days, check them out and then put in a bid. However, so many auctions were cancelled or postponed, that the ratio of homes actually going to auction on the dates scheduled was like one in ten. So despite this arduous research and planning, we were only able to bid on four houses during a year’s span- and in every case, we lost out by just a few thousand dollars.

This process was made worse by the fact that we had previously seen short sale listings- that take forever to close, and they actually closes during the time that we had been searching through our process. A friend of mine actually put in a bid on short sale and has subsequently moved in. So with this in mind we decided to expand our search to the Multiple Listing Service. Through this process, we actually found a home that fit our criteria and placed a full price offer on a home that appeared to be slightly undervalued. Our good friend loan officer told us that we would have no problem with the loan- despite a HAMP loan mod in 2010- and we didn’t even need to rent out our current house (though we would)!

Well, as my wife worked at a bank, her in-house lender got wind of our move and asked “why don’t you do the loan through the bank? It will essentially be a free loan since you’re an employee.” At this we decided to have the in-house lender do our loan. Our friend told us that he couldn’t beat that deal and we decided that it was the best route to take to save a few bucks…

We un enrolled the kids from their schools, their classmates threw them going away parties and gave them goodbye cards, we met up with some renting friends from the neighborhood for a little celebration, got a carpeting quote and placed a down payment through Home Depot, we had the inspection done and we had the appraisal done. We even had a tenant lined up with rent several hundred above our mortgage payment. All was well- until the loan officer told us that loan wouldn’t go through because of our loan modification- despite the fact that they were already aware of it and said it wouldn’t be a problem. But not to fear she told us, she had another lender who said they could do the deal- it would just take another two weeks. A week later and now the middle of December- the day after school let out for Christmas, we were told that this second lender had also balked at our loan. We were devastated and slightly pissed off and we started venting about it with our friends. Everybody and their brother heard of our plight and assured us that they knew someone who could do our loan- even our friend lender who we were supposed to work with from the get go. He was astonished that our loan was dead and assured us that his in-house underwriter was already aware of our situation and was ready to fund our loan.

However, this would mean another three weeks minimum as we’d be starting from scratch. We’d be pushed out to mid January, school would have already started, and still, we had doubts that it would go through. The president of my wife’s bank actually approached us and offered to give us a private loan for 12 months until we could get conforming financing (they don’t keep residential loans in house). We respectfully declined. So after some praying and discussion, and insight from a local real estate expert… my wife and I decided to back out of our deal completely with the notion of starting from scratch in the new year. Total out of pocket expenses- $250 for the inspection, $400 for the carpet down payment. But we had already packed our entire house so our garage was filled with stuff- ready for the move.

Christmas was fine with a rush decorating job but we were happy nonetheless. Kids were a little confused but started up school again in our district at their old schools.

In January, we found a remodeled house in the MLS. We threw caution to the wind and placed a full price offer the day it was listed (through our original lender) and lost out to a cash bidder who offered less.

At about the same time, I appraised my first home in a brand new tract of a neighborhood that had been heavily depressed over the past several years. This house was selling for $30,000 more than resales of the same utility! I was astounded. I subsequently did about 30 houses in that subdivision and whenever I went there, people were packed in the sales office. Competitior sales offices were also packed.

In February, the loan officer from my wife’s bank WAS FIRED for INCOMPETENCE!!!!!!

We placed an offer on another MLS house- full price, lost out to a cash buyer. A friend who fixes and flips and did over 50 deals in 2011 had gone through the first quarter of 2012 wihtout finding a single house. Investors had started to pay 10 percent over “zestimate” on auction homes- simply to get the homes and in most cases rent them out immediately. Another fix and flipper had reworked his margins but was having a slower year. My wife started unpacking boxes in about April. We discovered clothes that we forgot we had. I appraised many more homes with increasing prices. We found none for ourselves. My work doing Fannie Mae Appraisal Fraud review continued robustly. There was a never ending supply of bad loans. Yet the talk of the press was “recovery” and it was legitimate. Or was it?

Sales were up, but in most cases- at least in Phoenix, it was investors, and they were paying cash. The common man (AKA me) couldn’t buy a house despite being qualified. And we couldn’t exactly overbid because of the fear of the appraisal coming in low and not having the funds to make up the difference.

In our favor was the fact that we never had to move in the first place. Our house is beautiful and big enough for us and more. We have views of two mountain ranges, are on a golf course and have a beautiful oasis pool that my wife designed herself. We have a very good (modified) loan and our payment will stay low throughout its duration. By the way, our renter friends whom we celebrated with a year ago? They literally justed moved into their new construction home last week.

Am I too cheap? Am I too conservative? Am I too “smart” for my own good- despite the countless lost opportunity costs associated with being frugal? The answer is undoubtedly YES with a little sarcasm around the quoted “smart”. The house we were in escrow with is now worth 20-percent more. There are very few homes on the market that we like and now they are listed for 30-percent more than they were a year ago, and quite frankly, we can’t afford that.

The good news is that all our moving boxes are out of the garage so we can park our cars there, we painted some rooms that needed it badly, and our home value has also gone up about 30- percent- but we’re still $60k in the hole. From a personal perspective, we ended up where we started, but from a professional perspective, I can confidently tell you that whatever reasons you use to explain this recovery, it has been legitimate in 2012. Where will things go in 2013? If you can’t figure me out already, I have faith that the combination of fiscal cliff, high unemployment, increasing entitlements and lack of “real” buyers will cause things to slow down if not reverse- sort of a dead cat bounce. But since I’ve made that proclamation, you can rest assured that we’ll continue to go up! Have a Merry Christmas and Wonderful New Year filled with happiness, and good fortune!

Visit our website at http://www.advantageappraisalsllc.com, and if that doesn’t roll off the tongue, just try http://www.appraiserdude.com. Or now you can follow us on Twitter at @appraiserdude AND we just added a Facebook page for you to “like” at http://www.facebook.com/appraiserdude. Give me a call at 480-544-1217 if you have any questions. I look forward to working with you.

What Can a Homeowner do to Ensure a Better Appraisal?

September 16, 2011 at 6:11 am | Posted in Uncategorized | 4 Comments
Tags: advantage appraisals, AMC, appraisal, appraisal fees, appraisal management company, arizona, chandler, gilbert, hvcc, maricopa county, Multiple Listing Service, pinal county, queen creek

For the last few years, a divider really has been put in place that supposedly improves transparency in the appraisal process. And while it may have some supposed benefits that help to eliminate fraud and inflated values, it really has screwed things up for the consumer. Now don’t get me wrong, a home is worth what it’s worth and “better comps” are typically not “more appropriate” comps. So when the borrower truly doesn’t know his house’s worth and he relies on one of the popular real estate websites that magically estimates the value sight unseen, then a certain dollar amount is planted in that borrower’s head. Well, when they start the loan process and pay $400, or $450, or $500 for an appraisal that used to only cost $350, now they’ve gone down a road that resembles a casino in Vegas.

Why is it a gamble? Because you really never know what kind of appraisal you are going to get. First of all, most lenders utilize Appraisal Management Companies (I shudder at the idea of capitalizing that), which means a middleman who serves as the barrier between the lender and the appraiser. That appraisal fee is then paid to that AMC who then looks for the cheapest and fastest appraiser they can find. And I’m not kidding when I say that some of these AMCs would offer as little as $120 to an appraiser to do the job. So let’s estimate low on the consumer fee of $400, subtract $120 and that leaves the AMC with $280 for essentially being the barrier. Now I’m not saying that these AMCs shouldn’t make money; they do have staff and overhead and sales people. But the actual appraiser doing the work gets 30 percent of the total fee? Does that seem fair?

Well an HVAC company may charge like $60 per hour to work on your air conditioner and the technician may only get $20 per hour. So that’s a good parallel right? Actually, no, because if your AC causes a fire and burns your house down, you don’t sue the technician- you sue the company. The appraisal is still signed by the appraiser who has his state issued license and his mandatory errors and omission insurance. If you have an issue with your appraisal, the AMC doesn’t care about it at all.

Now I’m not complaining about this process except in spirit- you see the “good” appraisers don’t play this silly game. They won’t drive from one corner of a metropolitan area to the other corner simply to get some work. These good appraisers have a little more pride. They have branched out into non-lender appraisals like bankruptcies, divorce or estate settlement. They only work with small lenders who are exempt from the AMC process and thus can still get full fees. They only work with the reputable AMCs (yes there actually are reputable ones) who value the work of an appraiser. These AMCs collect $400 from the client and pay $325 to the appraiser.

But what about the (let’s not say “bad” because they’re not necessarily bad) inexperienced, desperate, low self-esteem appraisers who will do this work for less than full fee? Well, in many cases, these are the appraisers who come to appraise YOUR house… yes it’s true- not always, but often.

So if you’re buying a home, the appraiser will get a copy of the contract and will find the listing in MLS (if it’s available) At least that way he will have an idea of what value is “needed”. Now before you jump on me about hitting a value, let me explain… if your house is in a newer tract neighborhood where every other house is the same floor plan and there are lots of sales and there are no foreclosures or short sales and the economy is stable, etc. etc. then there’s an efficient market. But it’s not like that. Today you may have several sales that sell on the exact same day- a short sale that is immaculate and sells for $200,000, a bank owned plain Jane model that sells for $205,000, an investor flip that sells for $225,000 another short sale that sells for $180,000 and a fixer bank owned that also sells for $205,000. So how much is YOUR house worth? The point of knowing the contract price is to at least have a number to check your work against.

There have been PLENTY of times when I came in lower than the purchase price and guess what- a few days later, I get a revised contract with the purchase price now matching my appraised value. On the other hand I’ve also come in low and had angry Realtors, AMC underwriters and $10 per hour AMC processors getting all up in my Shiite for killing their deal- and this is AFTER HVCC which was built to eliminate pressure. Again, knowing the contract price is a good check for your work.

But with a refinance, it’s completely different. You don’t see an estimated value or loan amount- it’s just an appraisal request- it’s actually a little daunting at times because the appraiser is actually being asked to do his job without guidance. What a strange concept- I don’t mean hand holding, but actual free reign to appraise a home for what it’s worth. It’s sort of refreshing. However, I just had one last week- a refinance where the owner lived in another state so they were having their rental property appraised for refinance. The last loan amount was $250,000 and the house is now worth $180,000. Do I think that they will get their refinance? It’s none of my concern… I’m helping the bank make a decision by providing them with data. If they shouldn’t do the loan, then they shouldn’t do the loan. But then again, I do wonder what might go through that borrower’s head. How much did they pay (in this case, they paid $350 and I got $350), what gave them the idea that their home was worth more?

But refinances are such a rare bird nowadays and they make up a very small portion of my volume- I’d say less than 3 percent in 2011. So this is where I come to giving some advice to people looking to refinance.

First of all, I gave you the background on the appraisal ordering process to prove a point- you have no control over who appraises your house. However there are some precautions you can take.

Check your home value on one of the popular websites. You can actually put in your address and they will give you a value based on their own proprietary system- whether or not it’s accurate, it’s a start.
Get some perspective of your own house. EVERYONE thinks their house is the nicest one around. After all, they did pay for the lot premium and upgraded carpet padding, and upgraded vinyl flooring and they’ve got 2 extra feet in their garage and they have a soft water loop… WAKE UP!!! You’ve been sold on BS! You bought your house from a SALESperson. So if you come down from you attitude that your house is awesome:

Look at the sales in your neighborhood. See what features they have. If there is a rare open house, take a look- and then track if and when it sells and for how much.
Make friends with your neighbors- only for the sake of getting into their house so you can compare it to yours.
Find the close by neighborhoods that have homes similar to yours and see what they look like. Are the common areas nicer? Are the lots bigger? Is the builder better?

Are you ready for my pitch? Are you ready for my angle and reason for writing this blog entry in the first place? Here it is… Get some real data that an appraiser would use to appraise your house.

So how do you get real data that an appraiser would use to appraise your house? Simple. Call a local appraiser. That’s right, go to Google or Bing and do a search for “your city appraiser” and you just might find a good appraiser. Try it now. Click this link and you’ll see what I’m talking about (and no it doesn’t go to porn!) And when you get there, click on Advantage Appraisals- which of course is my company. The point is that when you find that local appraiser in Cicero, Illinois or Hollywood, Florida or wherever you are, give him a call. And be honest with him. Let them know that you plan on refinancing and you want to know if you should proceed. Here’s the possible outcomes:

no answer (most common)- he’s out of business, which is an unfortunate reality of what HVCC did to my fellow appraisers across the country
reply of “I can’t do that”- he’s clueless and is one of those $120 appraisers
reply of “That’s illegal”- he thinks he knows what he’s talking about but he doesn’t. Remember, you’re asking for data, not analysis
reply of “I’d love to help you, but you’ve got to realize that regardless of what I provide for you, when you do get the actual appraisal, you might get some schmo who doesn’t know your neighborhood, drove 100 miles to get to your house and is only getting $120 to do all that work because he’s a loser appraiser” That’s probably a good appraiser 😉 because that’s the exact conversation I had today.

The homeowner told me his situation and I told him “I will pull comparable sales based on what public records shows for your home. Assuming that I am appraising your house today, I will pull comparable sales that a reasonable appraiser should find given your characteristics and typical lender guidelines for appraisal requirements (recent sales, similar style, similar age, actives, pendings, etc. How the actual appraiser (because it sure heck won’t be me) analyzes that information is up to him. If you don’t get your appraisal for another 90 days then this information will be essentially worthless. I won’t provide you with a report- just sales and listings. But with that data, you can make a more informed decision on if you should proceed with your refinance. Total cost- $55.” To which he replied “Sounds like an easy decision and you should market this service to others” After the call, the process was complete in an hour and the guy was ecstatic. Guess what, I technically did an appraisal. I created a workfile and I will keep it for the requisite number of years.

But here’s the next point of advice. The homeowner asked me if when the appraiser calls to set up the inspection appointment whether he should tell him that he has comparable sales for him. My reply was “Heck no! We appraisers are a proud bunch and if you happen to get a good appraiser and pull that line, you’ve immediately touched a nerve. The “I know how to do your job” Realtor, borrower or loan officer is considered a douchebag to an appraiser. As unprofessional as it may sound, and perhaps a generalization that is exaggerated, you don’t want to run the risk of offending an appraiser. I told him that the best course of action is this. When the appraiser calls to make the appointment, find out where he’s coming from- that’s it. If he’s within 30 miles you should be ok. But if he’s over 30 miles away, that’s a huge red flag. You might want to google his name and look him up on the state licensing website to see if his license is in good standing. Again, this applies to our world of cheap and fast appraisals. If you’ve got a bad feeling, call your lender and tell him that the appraiser gave off bad vibes and you want another who is closer, or Certified, or designated or whatever it takes to put your mind at ease. But you must do this before the appraiser actually comes to your house. Once the inspection is done, if you get that vibe, you will probably have to pay extra for a second inspection. I personally will drive over 30 miles for a full fee good client. And if I don’t know the area well enough, I will get to know it (as I am legally required to do) before I appraise that home on the opposite side of Maricopa county. Secondly, when he gets there, be cool. Make small talk, and then you can present the data that you received from your local appraiser for only $50. Stroke him first with “I don’t know how to do your job, but I’ve got some sales that you probably already have. Just figured I could save you some paper by printing it out for you. Some appraisers might refuse it, but again, the “good” appraisers will at least courteously thank you and take the information. Sure you might find it strewn across the community park later that afternoon, but the “good” appraiser will at the very least compare it to the data he already has. Chances are he has the exact same sales, but he just might realize that you provided him with one or two good ones that he missed because the Realtor input it wrong in MLS.

Besides that, it really is a gamble. But I’d sure as heck like to play a game with better odds- like Baccarat or Blackjack, than slot machines or Roulette. Unfortunately, we live in a world with a lot of one-armed bandits- so watch out!

Appraisal Nightmare

March 14, 2011 at 7:07 pm | Posted in Uncategorized | Leave a comment
Tags: advantage appraisals, appraisal, appraisal inspection, appraiser, arizona, Mentor, Multiple Listing Service, phoenix, real estate, residential, sales

So I got an appraisal request a few months back. I don’t recall the exact date, but let’s just say that it got lost in the shuffle. I’m writing about it because the client called to check on the status about 10 days later, at which point my reaction was “ummmmm”. This is totally out of character for me as despite my “organized chaos” system, I never misplace a file in process.

Here’s a little background on this particular order. It was for an older home on the west side of town- so like 55 miles away. That’s way out of my preferred coverage area, but back in 2006 I appraised that same house for the same borrower and out of state small bank. Back then it was worth a decent amount. Large lot, nice home, horse property, well kept. Turned out that the borrower was going to cash out some of his equity to start a business- back then.

When I got the call to reappraise the home now, I instinctively accepted the work- not because I mind the drive, but because I had established a rapport with the contact at the bank- despite the fact that I never received any other business from them. Also, my business has changed since 2006. Back then I was doing triple the volume of work for a fee split. So when I’d drive across town to do an appraisal, I’d have at least 1 or maybe up to 3 others that I could knock out the same day. Today I only do full fee work and since there is no split, I actually turn down most work that is outside of a “convenient” coverage area. However, with this case, I accepted the assignment…

So when I got the call from the client, I went to look up the prior order so that I could print out the prior sketch. This is great for “redos” as you really don’t have to remeasure the property or re-enter a lot of the basic information like the neighborhood description, legal information, address, construction materials, etc.. I just bring a copy of that sketch and make notes about any changes since the last time. First problem was that sometime over the prior 4 years, I changed computers and I had to retrieve the old file. I had the work file of the property of course, but I really needed that electronic copy of the appraisal. I then pulled comparables based on the basic property characteristics and considering where the market is today, that was like pulling teeth as volume of sales has gone way down. So i got some good sales and made the trek out to the home…

When I got there I was in shock at what I saw. The house had been modified, and when I say modified, I mean the floorplan had changed. So I had to remeasure the home from scratch. No problem- I’ve got my trusty Disto laser tape measure. But of course, instead of being 1,600 square feet, now the house was 2,700 square feet. So now the comparables I brought with me are bad. I always pull comparables based on the property characteristics before I visit the home- BASED ON WHAT I THOUGHT WAS THE HOME! As a small shop, I make hay while the sun’s shining and in this case, I had no trusty internet access and no way to pull different comps. I have subsequently purchased a Droid, so that won’t happen again. I called an AMC that I’ve worked with for years so that maybe they could help- no joy as they were all out of the office. Meanwhile I’m thinking “I do not want to drive back out here! I do not want to drive back out here!”

Finally, I called up my old mentor in California- heck he’s an appraiser so he walks the walk. I have to give him the MLS website URL from memory, give him an over the phone lesson on how our MLS works and then give him what I think are good search criteria. It took half an hour but by gosh, we did it. He was able to provide me with 4 closed sales and a few pendings and actives that would help me out. I drove those homes, snapped my photos and headed on back- to the East side.

Now some apprasiers would simply leave and then pull data on their own later. Then they’d copy photos from the MLS and use those for their reports. And some better apprasiers would do that and then go back out and take photos of the comps. But I’m too lazy to make that second trip. And I’m an appraiser who recognizes that you need to physically see each sale in order to compare it to the subject. I’m not trying to brag too much here- just show how a little knowhow can make up for not being as prepared as you think you are.

Visit our website at http://www.advantageappraisalsllc.com, and if that doesn’t roll off the tongue, just try http://www.appraiserdude.com. Or now you can follow us on Twitter at @appraiserdude AND we just added a Facebook page at http://www.facebook.com/appraiserdude. Give me a call at 480-544-1217 if you have any questions. I look forward to working with you.

Oops!!! I Did it Again!

October 14, 2010 at 9:58 pm | Posted in Uncategorized | Leave a comment
Tags: advantage appraisals, AMC, anthony cuomo, apache junction, appraisal, Britney Spears, countrywide, gold canyon, hvcc, landsafe, lender pressure, queen creek, Realtor, rels, scottsdale, wells fargo, zillow

I’m not a fan of Britney Spears, but I do know she had a big hit called “Oops I Did it Again” and I can hum the song but don’t know the words. So despite not knowing her music, “the Brit” popped into my mind yesterday because of something I did, but at least it was appraisal related.

Back in the good ol’ days, when lender pressure was rampant, we appraisers would get assignments that would say things like “must hit $250k” or “$300k minimum”. Well the bad appraisers would hit that value no matter what, and the good appraisers would hit that value if it was warranted. But either way, future business was often dependent on how you did on your most recent appraisal. Some loan officers would put feelers out before they actually ordered an appraisal- you know, do some research on if there were supportive sales before they took their borrower head first down the refinance path.

Now when an appraiser’s client base can come and go based on your last deal, it can be a bit stressful. It used to be that whenever I’d get an order where I pulled the comps and knew before even going to the home that it wasn’t going to make their deal work I always get a lump in my stomach. If it was a COD order, I wouldn’t feel too bad because at least I’d get paid, and sure I’d feel bad for the borrower, but if it was a bill through escrow situation, I was always wondering if I’d really get paid (assuming that the deal dies because of low appraisal value). I actually had one of my longtime clients order an appraisal of a luxury home in North Scottsdale- gated, golf, gargantuan, and it took me 3 hours to measure the dang thing. As property values were proven to be declining, I marked that on the appraisal, and next thing I know, I got an email from my client’s assistant railing on why I marked “declining”. I never heard from that client again, and I was out $1,200.

So flash forward to HVCC- the Home Valuation Code of Conduct. You know, the Anthony Cuomo contrived system to protect the transparency of the system. Put in place to ensure that there was no undue pressure on appraisers from loan officers. They say that it was put in place because some of the biggest lenders in the country actually owned their own appraisal companies thus causing conflicts of interest. As a few real life examples so as not to sound biased, Countrywide/BofA owns Landsafe Appraisal, Wells Fargo owns RELS. Now the operative word is “owns”, not “owned”. So in other words, despite these changes which affected appraisers nationwide, the biggest lenders still have their appraisal companies working for them. But in the meantime, a majority of appraisers have now been subjected to a major shift in business as appraisals must now be ordered through third party AMCs- Appraisal Management Companies.

If you’ve read any of my previous articles you can see my opinions on AMCs- and in case you don’t want to read it all, I’m generally in favor of the new system. I won’t go into that here, but let’s just say that I didn’t work directly with any of those big banks, so all my clients went with AMCs that they didn’t own. Now in this shakedown I lost some clients because they went with AMCs that I couldn’t effectively become an appraiser for, but I also gained some clients that truly ordered their appraisals randomly. However, a few clients went with an alternative AMC solution- which was more of an electronic AMC. Imagine that instead of having to contact a person to order an appraisal, you could go to a website which truly and somewhat randomly and anonymously selects the appropriate appraiser based on proximity, experience, etc. I’ll talk more on that type of AMC some other time. So because a few of my clients used that sort of system, I was able to get full or pretty close to full fees with transparency and lack of pressure. Life was good.

But then one of my lenders started whining about deals that were killed because of low appraisals and their lack of control of the process. I started getting calls from loan officers… I never wavered from my value, but still- a conversation that should never happen any more. So what did they do? That’s right, since they couldn’t fire the appraiser (assuming I’m not the only one who has come in low for them, they simply decided to change the AMC they used. The new one was the human kind and guess what- it happened to have the same physical address as the lenders headquarters! So this smaller lender decided to create their own AMC with employees who are paid essentially from the same revenues as the loan officers and they are now within walking distance of each other. Does anyone see any potential problem here? Here’s kicker number one- perfectly legal. Here’s kicker number two- now that they had to go with a different AMC they claimed they had to cut the fees paid to the appraiser so that they could justify the cost of running their new AMC division. The borrower was still getting charged $425+, but now the appraiser was getting paid less.

Let’s break it down to what prompted me to write this article since I’ve already engulfed a lot of your time. If I do not hit the value needed by this AMC/lender, I inevitably get a call- but up until this point it had never been a call of value pressure. But more of a “why didn’t you call me when you knew the value was going to be low?” And as a reputable and reasonably articulate appraiser I would simply say, “I didn’t realize it was low”. But in my mind was the question of whether I’d get further business from them. And I always did. But then it got down to the dread whenever an order would come over. Before I actually accepted the order, I would look it up and do a quick search of comparables. If I knew that the value wouldn’t be there, I’d simply decline the order. That sounds pretty much like the life of an appraiser before HVCC went into effect doesn’t it. Instead of calling it like it is, I would simply avoid appraisals that would make me look bad in the end.

Smash cut to a few weeks ago. I got a request for this lender- purchase price of $350k. I pulled comps and found everything similar selling for $220ish. I was puzzled by this. So I did (I’m so ashamed) a Zillow search and found that they thought it was worth around $250ish- still way below the contract price but emphasizing that something was fishy. Since there is so little recent sales data, I did a “quick” paired sales analysis from the last time the subject sold and found that there was no reason for the home to be worth $130k more than its peers. So as oftentimes today buyers use the appraisal as a bargaining chip, I accepted the order (40 minutes of unpaid work so far). I then went and inspected the home- top of the line everything, best house on the block. But the comps I had- although in most cases inferior, were not $130k inferior. We’re not talking about a million dollar home here- we’re talking about a tract home. The Realtor actually provided me with a handful of what she felt were good sales- but they were either 600-800SF bigger or in different neighborhoods or custom/semi custom homes. I of course examined each one and realized that they were inappropriate sales. So with what little but supportive data I had, I arrived at a value closer to what Zillow figured- based on the preponderance of similar utility homes, coupled with a recent sale of a larger home to warrant some upward adjustments. I submitted my finished report and a few days later I got confirmation that my appraisal passed their QC standards and that the file was closed. Oh yeah, and I got paid on it a few days ago.

So this past Sunday- two weeks later, I’m at the park with my family and my email pops up from the head reviewer at the AMC with attached comparable sales (the same ones provided by the Realtor) and a message to call or email him. So since he said call OR email, I immediately email back and ask what his concerns were so that I could answer any questions. To which he replied, “you need to call me”, to which I replied “please inform me on what you need me to call you about so that I am adequately prepared to discuss it with you”, to which he replied in all caps and red, “YOU NEED TO CALL ME”. So I’m not dumb. I know why he wants to talk. I call him on Monday morning to which he replied “you’ve got me at a disadvantage because I don’t have the file in front of me” to which I reply “if you would email me your concerns, I’ll be happy to address them professionally and promptly.” His basic concern was why I included a sale of a much larger home that sold for $380k but still arrived at a value of $250k. I explained that this sale was by the same builder and was on the same street and was used to bracket the subject’s GLA, thus justifying the appraised value coming in significantly higher than what would result in only the consideration of similar sized homes. In other words, I gave that sale some weight, but by far the least weight.

Now remember, my appraisal has already passed their QC department 2 weeks prior, and I have subsequently been paid, so why is anyone calling me in the first place? Why would this reviewer care what the value was? And how would this senior reviewer have the exact same MLS sheets as were provided to me by the Realtor with her exact handwritten notes on each one. And why would anyone at all call to argue with my comparable selection when the bottom line is that my appraisal is used to help the lender make a financial decision on whether the underlying transaction makes sense for them. I end the conversation with “Sir, I believe I understand what you want me to do, please email me your request through the proper channels and I’ll be happy to remove that sale and get the revised report back to you promptly”

Here it is, four days later, and I have yet to receive that request and I doubt I will. Are you figuring out what is going on here? Notice that this “senior reviewer” has not sent me any sort of documented request on what they want me to do? So what is my recourse? What proof do I have that I was being pressured into doing something that I didn’t want to do? That’s right, I have no proof- and that’s how they like it. Lender pressure is there, appraiser has to spend time defending his findings, dread on if further business will come from this source.

Getting back to Britney, I’ve learned my lesson. I really wish I could go after this guy/these guys, but unfortunately I have no real evidence. When my spider senses were tingling over whether I should even accept the order, I went against my better judgment based on past experience. I can’t stand Britney. And I can’t stand lender pressure- regardless of who the messenger might be.

Visit our website at www.advantageappraisalsllc.com, and if that doesn’t roll off the tongue, just try www.appraiserdude.com. Or now you can follow us on Twitter at @appraiserdude. Give me a call at 480-544-1217 if you have any questions. I look forward to working with you.

How to Prevent a Realtor-Appraiser Breakdown

July 31, 2010 at 3:36 pm | Posted in Uncategorized | Leave a comment
Tags: advantage appraisals, AMC, appraisal, appraisal inspection, appraiser, approach to value; market value, arizona, chandler, Comparable, gilbert, hvcc, influence, maricopa county, mesa, phoenix, pinal county, queen creek, real estate, value

It never ceases to amaze me that the various parties involved in a real estate transaction can have such little knowledge of what each other does and have the audacity to pull attitude with each other. I can tell you stories of Realtors who refused to unlock a home for me because it was half an hour from their office. Or how about the loan officer who told me to trim my report size- not the file size but the number of pages- and when asked which part, they said “I don’t know, it’s just too much to read- remove like 8 pages”. But today I’m not going to share war stories, but instead offer some constructive advice to my Realtor “friends”

The Home Valuation Code of Conduct (HVCC) was created to help eliminate pressure between appraisers and anyone who might try to influence them. Yay! But that’s like saying condoms protect you from pregnancy or venereal disease. I can’t tell you how many times that in the heat of passion I’ve incorrectly tried to put on a… oh wait, where was I? Ah yes, the HVCC creates more of a letter of the law vs. spirit of the law dilemma which has caused overreaction. Should Realtors interact with appraisers? If an appraisal’s value is below the contract price, should the Realtor try to fight it? And if so, what is the right way to do it? That’s what I’d like to help you with today.

When I want to inspect a home for purchase, I always call the listing agent- not to meet with them, but to ensure them that I am on task and to confirm accessibility to the home. Plus, if it’s an FHA loan, I need to make sure that utilities are on. And get ready for my taxicab confession- I do not own an electronic SUPRA key!

Now you can criticize me for that little ditty, but when the industry slowed down a few years back, I simply couldn’t justify keeping it- 90% of the homes I appraised were either on combo box, were retrospective drive by assignments or by golly, the Realtor would be more than happy to meet me at the property to let me in. My attitude was that Realtors involved in a transaction would be more than happy to help in the process. And guess what- in two years I had a total of two Realtors actually give me attitude about me not having a SUPRA key. I could have lied and said mine was broken, but I just say that I don’t have one. In fact recently, I had an assignment where the Realtor just flat out said that she couldn’t drive the 15 minutes to the home- (I hadn’t even suggested an appointment time)- and she didn’t offer an alternate solution. I could feel her “holier than thou” attitude through the phone, so when she asked why I didn’t have a SUPRA key, I was in a rare mood where I said “I’ve found that the better Realtors who care about their transaction will meet me at the property”. Too bad that she wasn’t so dense to not get what I was saying, and when she said that the assignment would have to be reassigned, I was busy enough where I simply said “ok, have a nice day”.

But let’s move on to something else. Should Realtors provide comparable sales for the appraiser? Absolutely! Print out a list, put your own notes on each one- not opinions but facts based on YOUR honest observations like “mold problem”, “similar upgrades”, etc. But please, don’t lie. Appraisers aren’t dumb. But here is why you should do this. Appraisers cover a region- for instance, I cover the Phoenix metropolitan area even though I’m based out of the Southeast Valley. That’s a pretty big area to be an expert on. I can honestly say that I have done a majority of neighborhoods in the region, but I don’t do them regularly. The Realtor is supposed to be the local expert. Also, as the local expert what about sales that were incorrectly input in MLS or were For Sale by Owner? I’ve seen plenty of sales that don’t show up in a regular search because perhaps the Realtor misspelled the city name or the mapping software doesn’t plot it properly. If the Realtor knows about relevant sales like this, they should be provided to the appraiser. And put a note on the list that says “Hi George, I’m sure you already have data on all these comps, but I figured I could save you some paper and extra phone calls to Realtors”. Worst case scenario- he throws them away.

WHAT ARE GOOD COMPS?

Now the key to understanding what “good” comps are is rooted in understanding the appraisal guidelines as set forth by Fannie Mae, HUD or specific lending institutions. How old can comps be? How far away can they be? How much different can they be? There are no definitive answers to any of these questions. Sure you might have heard “one mile” or “six months”, but it all depends on the data available. If the subject is a tract home built in 2000 and the Realtor thinks value should be based on 7 month old sales that are in a different neighborhood- but there are ten sales from a month ago in the subdivision, then that Realtor is in for a rude awakening.

But what about when the appraisal is already completed and the value is “killed”. Well first of all, a Realtor needs to take on the attitude that the appraisal is now evidence that the home might be overpriced. Perhaps the best course of action would be to try to negotiate a lower contract price- after all, you can now confidently say “an appraiser expert has proven that the home is overpriced, so you’ll never sell it for that much.”

However, if the deal is potentially lost, then of course the Realtor might be upset but how should it be handled? First and foremost, one must know what they are talking about so if you can see a copy of the appraisal, then look at the sales used and the property details. Did the appraiser forget anything that significantly adds to value? Maybe they forgot to mention the in-ground swimming pool, or maybe they didn’t notice the upgraded padding. Now of course the pool is a glaring thing but let’s talk real quick about “upgrades”. We’ve all seen the articles that tell you what home improvements add the most value to a home and guess what- most of them, don’t add dollar for dollar value. So sunscreens, extended garages, updated carpet padding, 2 inch blinds, etc. don’t really matter in the grand scheme of things. When Realtors tell their clients to make business decisions instead of emotional decisions, oftentimes they are just as guilty of thinking too much of their own listing.

Next, look at the comparable sales used. Are they really similar properties? Are they recent sales? If you have three “better” sales but they’re older sales, or further away, or newer homes, then you’re fighting a losing battle. Now put yourself in the shoes of an underwriter who sits in a cube in some high rise in Chicago. When that decision maker looks at the data (whether it’s the appraiser’s or the Realtor’s), what will make more sense to them? Remember, this isn’t 2005 anymore. Some lenders are actually looking to make good business decisions instead of simply rubber stamping loans.

So if you really feel that the appraiser did something wrong, or ignored more appropriate comparables, how do you proceed? I’ll tell you right now, that we appraisers are a proud race and we don’t like to be told that we are wrong, so you need to present this information in a loving, caring manner – I’m totally serious. Write a letter- thank the appraiser for all his hard work, and mention that it was a pleasure meeting him. Pat his back for his integrity and quality and admit that what you’re asking is not normal. And then present your comparable sales. Ask him if he wouldn’t mind helping you be a better Realtor so that you can do better on your next transaction. Literally ask him to explain why he didn’t consider your “better” sales. Maybe you’ll paint him into corner and he’ll understand that he screwed up- and that you know it. But don’t get all accusatory. Make it clear that you are not trying to influence value but that you want to make sure he has the necessary data. You might even want to ask him what he’d recommend you do at this point- “should I request a second appraisal?”. Thank him for his consideration and respect his response, and CC the loan officer as well… What you’re doing is planting seeds of doubt in the appraiser’s head.

Now remember, I’M an appraiser!!! So why am I trying to teach you how to get your way with an appraiser? Well that’s a perception issue. I’m not trying to teach you to influence, I’m trying to explain how you can tactfully and ethically present your case and perhaps get an appraiser to reconsider his value. There’s nothing wrong with that as long as your argument is based on fact. But guess what? He probably won’t do anything… but he might if you present a strong case. If he ignores your letter, then you really have no recourse. If you really do know that the appraiser was completely negligent or that he lied about something, then of course you can file a complaint with the state appraiser board. But unless the complaint is about fraud, it’ll get dismissed. Remember, above all else an appraisal is an opinion of value and it should be rooted in factual data, and if the appraiser presented his data clearly and accurately, you can’t dispute an opinion- you can only dispute facts.

Appraisal Humor

April 20, 2010 at 4:12 am | Posted in Uncategorized | Leave a comment
Tags: humor

A woman in a hot air balloon realized she was lost. She lowered her altitude and spotted a man in a boat below. She shouted to him, “Excuse me, can you help me? I promised a friend I would meet him an hour ago, but I don’t know where I am.”

The man consulted his portable GPS and replied, “You’re in a hot air balloon, approximately 30 feet above a ground elevation of 2,346 feet above sea level. You are at 31 degree, 14.97 minutes north latitude and 100 degrees, 49.09 minutes west longitude.

“She rolled her eyes and said, ‘You must be an appraiser.”

“I am,” replied the man. “How did you know?”

“Well,” answered the balloonist, “everything you told me is technically correct. But I have no idea what to do with your information, and I’m still lost. Frankly, you’ve not been much help to me.”

The man smiled and responded, “You must be a loan officer.”

“I am,” replied the balloonist.. “How did you know?”

“Well,” said the man, “you don’t know where you are or where you are going. You’ve risen to where you are, due to a large quantity of hot air.. You made a promise you have no idea how to keep, and you expect me to solve your problem. You’re in exactly the same position you were in before we met, but somehow, now it’s my fault.”

Life Cycle of a Home’s Value (2005-2009)

November 12, 2009 at 6:18 pm | Posted in Uncategorized | 3 Comments
Tags: advantage appraisals, appraisal, appraisal inspection, appraiser, county assessor, maricopa county, Multiple Listing Service, queen creek, short sale

As we all know, the real estate boom of the past decade is over as we knew it. Like many, I was fortunate to have bought my first house in 1999. And 2005/2006 was the beginning of the end. I mean, we all knew that things were out of control, but like dot coms and tulips, you just had to buy or you were labeled an idiot by those who were already making loads of money.

And similar to buying, people were able to custom build their dream homes- they’d get a construction loan from a local bank, buy a lot for a quarter million and then go nutso gonzo as they built the end all be all of custom homes- not personally for most, but we’re talking essentially a home built from step one with owner direction.

A few years ago, I was fortunate enough to work with a few local banks that were helping people build their dream homes. And what they’d do is get an appraisal based on the finished product. This is called a “proposed construction” appraisal. And essentially it’s the same thing as a normal one, but it’s based on the hypothetical assumption that the home will be built as described in the blueprints and any other documentation that shows the finish of the home. So even though the home wasn’t even started, I’d use current comparables to estimate the value of the finished product.

Now when it takes a year to build a home, the assumption (and bank business decision) is that the market values will stay the same or continue to go up…

Case in point: I got an assignment to do an appraisal on a home that was just completed- this was in July of 2007. It was a custom home on an acre in Queen Creek. I go out there, do the normal appraisal and based on the closed sales from July 2007 or thereabouts, the home was worth $875,000. Now the original construction appraisal had it pegged at right around a million dollars, so losing $125k in value is a big chunk of money. Either way, based on what the owners put down, the loan went through. And please keep in mind, I don’t know if every deal goes through. It’s not the Appraiser’s job to care if a deal goes through. This was more of a curiosity thing and I was friends with the loan officer.

Custom home I appraised July 2007

Literally 3 months after this- we’re talking October 2007, the same loan officer called and said that they owners now wanted to take out a home equity line so that they could do their yard, put in their pool, etc. Ironically, the owner owns a landscaping company so I figured he’d have an in- at least with the landscaping. But anyway, I did the new appraisal and unfortunately, all the now new comparables painted a different picture. Let’s describe this era as “the beginning of the end” or the “world of wishful thinking”. Now, only 3 months later, the home appraised for $780k- that’s right, almost $100k lost in 3 months. Needless to say, the homeowners did not get their home equity line.

And now is where I go into the mindset of that era. Back then, I would get calls from loan officers- and I’m talking about the ones that I knew, and they would be in the process of taking a loan application for a borrower. I would do a limited desk appraisal based on county records and present the loan officer with the applicable comparables in the neighborhood and invariably, the loan officer would ask if there was anything else (as if I’d be holding out the “good comparables” just to upset them). When they realized that they couldn’t get a 80% loan, they would ALWAYS take the attitude of holding off for better comps… Now my gut- based on my insight of the market, told me that there would not be any better comps, but it’s not my job to influence or predict. So a month later when that same loan officer would call for the same property, let’s just say that my “told you so” news wasn’t always taken so well. After all, it’s the Appraiser’s fault that home values were dropping right? Shoot the messenger, etc.

So anyway, beyond seeing that deals aren’t going to happen (based on appraised value and my limited knowledge of either what they were hoping their home was worth coupled with what county records shows as their original mortgage amount), I simply move on with my life. I’ve got enough of my own things to worry about to be concerned about every homeowner- that would drive a person insane.

So, let’s flash forward to 2009- November to be exact. I just got an appraisal request for this same property that I’ve described to you above. First off, let’s just say that that is such a statistical improbability that images of being struck by lightning- twice, come to mind. Now back in the heyday of refinancing, I’d appraise the same home 3 or 4 times in a 2 year period. But that was because the homeowner was refinancing with the same loan officer while rates went down and values went up. But in today’s world of foreclosures and declining markets, it is now a statistical anomaly.

When I pulled up the county records of the home, I recognized the street name and neighborhood and wondered if by chance it was the same home, and then I saw the owner’s name and it all came back to me. As it turns out, the owners of said home couldn’t get their home equity line and have lived in the home for the past two years. But now they are short selling the home. Even though it’s not in any way my fault, I know that it was my appraisal that stopped their “progress” back in ’07. So when I called the Realtor to go see the home, of course I asked if the homeowners still lived there- and of course they do.

Long story even longer… his mother was there when I inspected the home, so no uncomfortable conversation. And at least I didn’t have to remeasure this bad boy as custom measures tend to take a little while. But as you can see by the photo, nothing has changed- in fact the house is already a tad run down and neglected with uneven pavers, some of the stone accents missing, etc.

Same Custom Home November 2009

So that’s my story. Any questions you might have are welcome… oh wait, did you want to know what the home is selling for right now? Do you really want to know what that “million dollar home” is worth today? Alright, I’ll tell you- but you need to leave me a comment!

$342,000.

Do AMCs Really Eliminate Lender Pressure?

October 14, 2009 at 10:41 pm | Posted in Uncategorized | 1 Comment
Tags: advantage appraisals, AMC, appraisal, appraisal management company, appraiser, foreclosure, hvcc, independent valuation protection institute, maricopa county, pinal county, san tan valley, short sale

When HVCC mandated the use of Appraisal Management Companies (AMCs) earlier this year, the hope was to eliminate lender pressure on Appraisers. Now as I’ve mentioned in previous posts, I’ve already worked with AMCs for a few years so the transition for my practice wasn’t as painful as it was for others who only had only done full fee work. So the AMC’s I work with know the quality of my work, I understand their quirks and we’ve accepted the relationship. I may have to work harder for less pay, but it’s something I’ve accepted as reality. I now treat them like my client and I’d like to think that they respect the quality of my work.

I just did an assignment for an AMC. This AMC provides services nationwide and their client list includes very prominant banks. I know what each of these end clients require- whether it be specific verbiage or photos or additional forms. We’ve worked together for a long time now.

So I received an appraisal request in San Tan Valley (which is a suburb of Phoenix) for the purchase of a custom home that is a short sale. In other words, the sellers are financially unable to keep their home and they have to sell or face foreclosure, and their lender is negotiating the price for them. I did the appraisal- it was beautiful custom home built by the owner. It had beautiful ornate wrough iron. It had very nice upgrades. It had a cool ramada. It had a few stables.

I found the most appropriate comparables and did the report and finished with an appraised value. The contract price was higher than the appraised value. But I shouldn’t care right? After all, I’m not in charge of making a deal happen am I? Isn’t that called fraud if I appraised it for more that it’s worth? Isn’t it lender pressure when I have to worry about future work depending on the results of current work? But with HVCC and AMC’s I’m ok right?

So a few days later, I get a call from the AMC saying that the lender wants to reopen the assignment and that I should consider two additional “closed sales” that they provided. Now some Appraisers might say “no way”, but I will NEVER be too cocky to think that I’m immune to errors. So I look at these two “closed” sales. One was a NON closed sale- in fact a home not even under contract that has been on the market for 670 days. Oh yeah, and that home was in another county with a different city name. The second one was a closed sale, was similar in size to the subject but was in a different city, wasn’t horse property and was actually part of a large tract home neighborhood. I send an email back to my contact at the AMC and they agreed that this was a stupid request. However, at their request, I filled out an addendum which explains why those two sales were not applicable for this assignment.

Fast forward to 24 hours later. I now get an email condition saying that the lender wants me to now include two more closed sales, but that these sales must NOT be distressed situations. Distressed situations include short sales, preforeclosures or bank owned. So I redo my search and find nothing new. Then I expand my search. Then I expand my search more. Here’s what I came up with:

I searched all closed sales from January 1, 2009 though October 13, 2009 with a size range of 1500 square feet smaller and 1500 square feet larger than the subject and I came up with 40 closed sales. Of those 40 closed sales, 38 were “distressed” situations. That’s right, only 2 sales were not distressed. One of those two sales indicated a value significantly lower than what my appraisal was and the other was higher than my appraisal by $120,000. This high transaction also was the highest transaction in the area by a very large amount. So any “good” Appraiser would treat this oddball high comparable as an anomaly and eliminate it from consideration.

Bottom line is that with their newly requested two additional sales, the appraised value remained the same. When all was said and done, I had now spent an additional two hours on this report. Did I receive any additional fee for my services? No comment.

But my commentary is this: If you are a bank and you want a true appraisal for a home, then you accept the results as is. If you don’t like the value because it doesn’t meet the contract purchase price, then you are not the bank- you are the specific morgtgage broker who has a vested interest in closing this specific loan. And when you ask the Appraiser (through a third party) to jump through more hoops to try to find comparables that support the deal, then that’s lender pressure and that can lead to fraud and that can lead to more of what we are seeing every day in our country with defaults and broken families and more government bailouts.

But what is the Appraiser to do in situations like these? Back in the day, if a loan officer pulled this sort of stuff, I could talk with him or her. And if that wasn’t getting anywhere, I could talk with the manager or whomever it took to ensure that rules were being followed. Or I could stop working with them altogether. But that’s because I can speak intelligently and defend my work. With HVCC and the new layer of AMC’s, I am now unable to speak with the client. I have to trust that the AMC understands my report and can speak intelligently about it. And quite frankly, that’s a level of trust that most Appraiser’s simply don’t have.

Sure, they’ve set up what is known as the Independent Valuation Protection Institute– sounds good eh? Well, if you visit the site you’ll see that it might as well be one of those “under construction” animated gifs.

animated construction gif

And say that with one specific deal like this, the client is now so upset about the results that they now feel that they need to take some sort of recourse. They can’t really fire the AMC in this situation since the AMC does so much work for their company as a whole, but what if the client now refuses to accept any more work from that one Appraiser. And now what if that AMC cannot assign orders to that Appraiser from that specific client? They might find that so inconvenient that they simply stop ordering appraisals through that one Appraiser- all rooted in the results of one assignment- not a sloppy report, not one fraught with errors, but one that a client was simply unhappy about because it killed their deal.

Is lender pressure eliminated by HVCC? You tell me.

What’s the Typical Appraisal Workload Nowadays?

October 1, 2009 at 5:27 pm | Posted in Uncategorized | Leave a comment
Tags: advantage appraisals, AMC, appraisal, appraisal fees, appraisal inspection, appraisal management company, appraiser, arizona, chandler, Comparable, divorce, FHA, foreclosure, hvcc, maricopa county, phoenix, pinal county, pool, queen creek, real estate, san tan valley, Trustees Deed Upon Sale

As times change, lines of appraisal work shift. Back in 2003-2004, my work was about 47% rate and term refinances, 47% purchases, 6% “other” which included review work, estate settlement, bankruptcy, divorce, and hard money (like the guy who needed to refinance so that he could raise enough money to post bail for his son)

When I moved to Phoenix in 2005, the chunk of purchases jumped up to about 60% and then starting around 3rd quarter of 2007, that ratio shifted to a lot fewer purchases and actually volume so low that I can now admit was too small to gague statistics.

But today, I can actually measure my work volume and it has shifted significantly. I went back 90 days to itemize the work I’ve done and here’s the approximate rundown:

My Trailing 90 Days Volume Breakdown

What, were you expecting actual numbers?

Anyway, keep in mind that of the refinances, a lot (I assume) ended up below what they “needed” to make their deal work, but at least now I don’t feel the lender pressure to hit some sort of value with the unspoken threat of losing future work. How do I know this? Let’s just say that if they bought the home in 2006 for $350k with a $320k first mortgage and now the home is worth $160k, I surmise that they didn’t pay down their mortgage by over $160k over those 3 years.

As you can see, I now do a lot of Review appraisals. Back in the day, these would be reviews of recently completed appraisals. I rarely get those now. What these reviews are is typically foreclosed homes that were appraised in the 2005-2007 era back when values were very high. Someone wants to know if that appraisal was inflated. And for the sake of privacy, I’ll just leave it at that. And of those that I review, I’d say 95% of them WERE inflated. At first I was a little confused on the purpose of these assignments because I would assume that some of these Appraisers are now out of business with little or no possible recourse. But in actuality, these are not for the purpose of hunting down bad Appraisers, but instead to determine the big picture of the original transaction. These assignments are pretty low stress in that I never enter the home being appraised, but it’s pretty glum work as that’s a lot of assignments where I never step out of the car. And as an aside, I often see the original appraisal from say 2006, which shows a beautiful home, and when I see it (from the street and perhaps a newer listing now that it’s foreclosed), it’s a completely thrashed home- complete with holes everywhere, nasty carpets, overgrown yards and green pools.

REO work is Real Estate Owned assignments. These are an example of how appraisal volume has increased over recent years. These assignments are essentially pre-listing reports requested by the bank that now owns a foreclosed home. Take for example the bank based in South Dakota that now owns a foreclosed home in Arizona. They don’t know the market out here. They KNOW that these free online home valuation sites are a complete waste and completely unreliable. So among other things, they order what is known as an REO appraisal. Basically, they want to know the appraised value based on closed sales, but they are very interested in what it would take to make the property truly competitive with other homes for sale, so a very detailed list of things wrong with the home is required. Also, the other available listings are paid very close attention to. Basically, the bank wants to get rid of these non-performing assets so they want to know what it will take to get these homes sold in a relatively fast time.

Estate work is on the rise. People are always dying and the estate needs assets valued. But when you add in a bad economy, you unfortunately get a lot of personal issues that require appraisals. Bankruptcy and divorce are prime reasons why homes are appraised, so that the parties know how to proceed. It’s sad but reality.

So, let me paint an image of the volume of appraisal work that I’m seeing or that can affect a single property over a relatively short period.

Family buys a home in early 2006- conventional appraisal
Family refinances their home in late 2006 to take out money for improvements- FHA appraisal
Family decides to sell home in 2008- listing appraisal (not required but often done)
Family can’t sell home by late 2008 and lowers price to point to breakeven point, spouse loses job, couple decides to divorce- estate appraisal
Owner negotiates with bank for a short sale- bank gets an offer below asking price in early 2009 and questions if it’s a good offer- REO appraisal
Short offer falls through, home is foreclosed in March 2009, bank wants to relist it- REO appraisal
Third party questions original refinance appraisal August 2009- Retrospective review appraisal
New buyer comes in and buys home September 2009- FHA appraisal

That’s right, we’re talking 8 separate appraisals on the same home within a very short period, all for different reasons or for different parties. That’s a lot of potential work for Appraisers nowadays.

Now don’t get me wrong, I don’t want anyone to get the idea that I’ve got more work than I can handle- after all, I just spent the past few hours writing this blog! More on the socialization of the appraisal industry some other time. Don’t even get me started on the 20 year veteran getting the same pay/volume as the newbie. (I’m somewhere in between- just a squirrel trying to get a nut)

What’s a Zero Lot Line Home?

September 30, 2009 at 5:17 pm | Posted in Uncategorized | Leave a comment
Tags: advantage appraisals, appraisal, appraisal inspection, maricopa county, queen creek, real estate, zero lot line

Well, since I’m doing one now and haven’t posted in a while, here’s a quickie.

Sometimes you hear of a home being referred to as a “zero lot line” home. While this might be somewhat self explanatory, I tried looking for a photo example online and came up dry.

zero lot line homes

Notice on the right side of the main home in the photo, the wall lines up with the leftmost wall of the adjacent home. These are zero lot line homes. As you can guess, the lot size is smaller (3500SF in this case). This is great for builders as they can cram more homes into an area and it’s a good option for homeowners. Typically when you are moving up the housing chain you might rent an apartment, buy a condo and then buy a single family home. But perhaps you’re not ready for a full on home with a big lot and the costs associated with maintenance. Zero lot line homes are typically a tad less expensive and have less lawn/lot to maintain. A win win for the “tweener” who is looking to buy their first single family home.

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